Facts of the Case

  • Petitioner's Identity: M/s. Shiv Coal Trading, represented through its Proprietor Mukesh Kumar Pankaj @ Mukesh Kumar Singh.
  • Assessment Period: 1st Quarter of F.Y. 2019–20 (April 2019 to June 2019).
  • Original Assessment Order & Demand: An ex-parte assessment order dated 24.12.2019 was passed under Section 73 of the CGST Act, 2017 by Respondent No. 7 (Assistant Commissioner of State Tax, Saran Circle, Chapra), raising a tax demand totaling Rs. 11,36,046.52.
    • Breakdown:
      • CGST: Rs. 1,59,713.45 + Interest: Rs. 12,457.65
      • SGST: Rs. 1,59,713.45 + Interest: Rs. 12,457.65
      • Cess: Rs. 7,34,419.59 + Interest: Rs. 57,284.73
  • Form DRC-07 Issuance: Summary of the order/demand was issued in Form GST DRC-07 on 24.12.2019.
  • Appellate Rejection: The Appellate Authority, Respondent No. 5 (Additional Commissioner State Tax (Appeals), Saran Division, Chapra), passed an order dated 24.02.2021 (Appeal Case No. SR/GST-01/2019-20) rejecting the appeal and affirming the assessment order and DRC-07 demand. Subsequent summary of demand in Form GST APL-04 was issued on 02.03.2021.
  • Recovery Action: A recovery letter dated 17.02.2021 in Form GST DRC-13 was issued to the petitioner’s banker (Federal Bank, Kankarbagh Housing Colony Branch, Patna) directing recovery/payment of Rs. 10,30,661/-, resulting in bank account freezing.

Issues Involved

  1. Whether an assessment order passed under Section 73 of the CGST Act without affording a fair opportunity of hearing violates the Principles of Natural Justice.
  2. Whether an assessment order lacking decipherable/sufficient reasons for determining tax liability is sustainable under law.
  3. Whether the High Court can exercise its writ jurisdiction under Article 226 despite the availability of alternative statutory remedies when ex-facie violations of natural justice occur.
  4. Whether the coercive actions (such as bank account attachment under DRC-13) can be quashed and remanded for fresh adjudication on merits.

Petitioner’s Arguments

  • Procedural Deviation: The Assessing Officer and Appellate Authority failed to follow the prescribed assessment procedure under Section 73 of the CGST Act. Sufficient opportunity to represent the case within 30 days was denied.
  • Discharge of Liability: The petitioner submitted that tax liability had already been discharged through subsequent filing/amendment of GSTR-1/3B returns for the 1st Quarter of F.Y. 2019–20.
  • Refund Request: The petitioner requested a refund of Rs. 1,05,386/- pre-deposited at the time of filing the appeal, as the liability was already satisfied.
  • Arbitrary Coercion: Freezing of bank accounts via DRC-13 dated 17.02.2021 was illegal, unjust, and severely affected the petitioner's regular business operations.

Respondent’s Arguments

  • Consent to Remand: Counsel for the Revenue conceded to the court that they had no objection if the matter was remanded to the Assessing Authority for fresh adjudication on merits.
  • Limitation & Stay: Revenue agreed that limitation issues would not bar the reassessment, and no coercive action would be undertaken during the pendency of fresh proceedings.

Court Order / Findings

  • Jurisdiction Accepted: The High Court held that notwithstanding statutory alternative remedies, writ jurisdiction can be exercised where orders suffer from ex-facie illegality, natural justice violations, and absence of reasoned decisions.
  • Core Findings:
    1. Violation of Natural Justice: Petitioner was not afforded sufficient time or a fair hearing.
    2. Non-Speaking Order: The assessment order failed to assign decipherable reasons showing how the officer computed the tax, interest, and cess liabilities.
    3. Failure to Adjudicate: Ex-parte orders must still deal with attending facts and legal principles.
  • Directions Issued:
    1. Quashed and set aside the Appellate Order dated 24.02.2021, Assessment Order dated 24.12.2019, Form DRC-07 dated 24.12.2019, and Form APL-04 dated 02.02.2021.
    2. Ordered immediate de-freezing / de-attachment of petitioner's bank account.
    3. Directed petitioner to make an additional deposit of 10% of the demanded amount within 4 weeks (over and above the statutory 10% already deposited) without prejudice.
    4. Remanded the case back to the Assessing Officer for a fresh, reasoned speaking order after granting adequate opportunity of hearing, preferably within two months.
    5. Ordered that any excess pre-deposit found post-reassessment shall be refunded within two months.

Important Clarification

  • Ex-parte proceedings do not exempt tax authorities from passing a reasoned speaking order based on facts and law.
  • High Courts maintain inherent power to quash non-speaking and unprocedural tax demands under Article 226.
  • Pre-deposits made during appeal/remand are without prejudice to the rights of the assessee and subject to full refund if liability is disproved.

Sections Involved

  • Section 73 of CGST Act, 2017: Determination of tax not paid, short paid, or erroneously refunded.
  • Rule 142 of CGST Rules / Form DRC-07: Summary of Assessment Demand.
  • Rule 145 / Form GST DRC-13: Recovery of tax by attachment of bank accounts.
  • Form GST APL-04: Summary of Appellate Order.
  • Article 226 of the Constitution of India: Writ Jurisdiction of High Court.

Link to download the order - https://mytaxexpert.co.in/uploads/1784617010_1567compressed.pdf

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