Facts of the Case

  • Petitioner Identity: M/S Maruti Enterprises, a proprietorship firm located at Maa Mathurasani Palace, G M Road, Bankipore, Patna, represented by its proprietor, Vikrant Kumar.
  • Assessing Authority Action: The Assistant Commissioner of State Tax, Patna North Circle, Patna (Respondent No. 3) passed an ex-parte assessment order dated 03.12.2021 against the petitioner under Section 73 of the CGST/BGST Act, 2017, along with a summary of the order issued in Form GST DRC-07.
  • Appellate Authority Action: The petitioner preferred an appeal under Section 107 of the CGST/BGST Act, 2017 before the Additional Commissioner of State Taxes (Appeals), East Division, Patna (Respondent No. 2) in Appeal Case No. GST/PTN-09/2022-23.
  • Appellate Dismissal: The Appellate Authority rejected the appeal via an ex-parte order dated 18.08.2022 (issued vide Memo No. 257).
  • Writ Petition: Aggrieved by both the initial assessment order and the appellate rejection order, the petitioner filed a writ petition (Civil Writ Jurisdiction Case No. 13897 of 2022) before the Patna High Court.

Issues Involved

  1. Violation of Natural Justice: Whether an ex-parte order passed under Section 73 of the CGST/BGST Act without affording sufficient time and opportunity to the taxpayer is sustainable in law.
  2. Unreasoned/Non-Speaking Orders: Whether an order that fails to record clear, decipherable reasons or facts determining the liability of the taxpayer, even if passed ex-parte, is legally valid.
  3. Maintainability of Writ Petition: Whether the High Court can exercise its writ jurisdiction under Article 226 to quash orders when alternative statutory remedies exist, specifically where principles of natural justice have been violated.

Petitioner’s Arguments

  • Lack of Opportunity: The petitioner contended that no sufficient time or adequate opportunity of being heard was provided during the assessment or appeal proceedings, making both orders ex-parte and in gross violation of the principles of natural justice.
  • Absence of Reasons: The orders passed failed to outline proper factual or legal justifications for the tax liability, interest, and penalty imposed.
  • Quashing & Relief: The petitioner prayed for a writ of certiorari to set aside the orders dated 03.12.2021 and 18.08.2022, as well as Form GST DRC-07, while requesting protection against coercive recovery measures.

Respondent’s Arguments

  • No Objection to Remand: Counsel for the Revenue stated that the Department had no objection if the matter was remanded back to the Assessing Authority for a fresh decision on merits.
  • Waiver of Limitation: The Revenue agreed that the bar of limitation should not come in the way of a fresh adjudication.
  • Interim Protection: The Revenue concurred that no coercive steps would be taken against the taxpayer during the fresh pendency of the assessment proceedings.

Court Findings & Order

  • Interference Under Writ Jurisdiction: The Division Bench (Hon'ble Chief Justice Sanjay Karol and Hon'ble Justice S. Kumar) emphasized that the existence of a statutory remedy does not prevent the High Court from exercising writ jurisdiction under Article 226 when an order is bad in law due to a clear violation of natural justice.
  • Civil Consequences of Ex-Parte Orders: The Court held that ex-parte orders passed without sufficient time, fair opportunity, or clear decipherable reasoning inflict civil consequences on taxpayers and cannot be sustained.
  • Requirement of Speaking Orders: The Court clarified that even in ex-parte proceedings, tax authorities are bound to adjudicate matters fully on facts and law by issuing a speaking order.

Directions & Relief Granted:

  1. Quashing of Orders: The Court quashed and set aside the ex-parte Appellate order dated 18.08.2022, the ex-parte Assessment order dated 03.12.2021, and the summary order in Form GST DRC-07.
  2. Pre-Deposit & Additional Deposit: The Court recorded that the 10% statutory pre-deposit for appeal had been made. Furthermore, the petitioner undertook to deposit an additional 10% of the demanded amount before the Assessing Officer within four weeks, without prejudice to its rights.
  3. De-freezing Bank Accounts: The Court directed immediate de-freezing/de-attaching of the petitioner’s bank accounts.
  4. Remand for Fresh Adjudication: The petitioner was directed to appear before the Assessing Authority on 02.11.2022 at 10:30 AM (preferably via digital mode). The Assessing Authority was ordered to pass a fresh, reasoned speaking order on merits within two months.
  5. No Coercive Steps: Protection from coercive recovery actions was granted during the pendency of the remanded proceedings.

Important Clarification

  • Pre-deposit Terms: The additional 10% deposit mandated by the Court remains subject to the final order of the Assessing Officer. If the final assessment shows that the taxpayer deposited excess funds, the excess amount must be refunded within two months from the date of the order.
  • Merits Preserved: The High Court explicitly clarified that it did not express any opinion on the merits of the case, leaving all issues of fact and law open for fresh determination by the tax authority.

Sections Involved

  • Section 73 of the CGST / BGST Act, 2017: Determination of tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilized for any reason other than fraud, wilful-misstatement, or suppression of facts.
  • Section 107 of the CGST / BGST Act, 2017: Appeals to Appellate Authority against any decision or order passed under the Act by an adjudicating authority.
  • Article 226 of the Constitution of India: Power of High Courts to issue certain writs (Certiorari) for the enforcement of fundamental rights and for any other purpose, particularly in cases involving breach of natural justice or unreasoned orders.

Link to download the order - https://mytaxexpert.co.in/uploads/1784615867_1558compressed.pdf

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