Facts of the Case

  • Assessee Details: M/s Bijay Kumar Yadav is a sole proprietorship firm situated at Kalyanpur, Ward No. 1, Supaul, Bihar - 852105, represented by its proprietor Bijay Kumar Yadav.
  • Initiation of Proceedings: Assessment proceedings were initiated against the petitioner, purportedly linked to or arising during a proceeding initiated under Section 129(4) of the BGST Act, 2017.
  • Passing of Ex-Parte Order: On June 10, 2022, the Joint Commissioner of State Taxes, Supaul Circle, Supaul (Respondent No. 2), passed an ex-parte order under Section 74 of the CGST/BGST Act, 2017, for the Assessment Year / Financial Year 2020–2021.
  • Issuance of DRC-07: A summary of the order was issued on the same date via Form GST DRC-07 (Reference No. ZD1006220068121).
  • Recovery & Bank Account Attachment: Pursuant to the impugned order, coercive recovery measures were initiated under Section 79 of the CGST Act, 2017, resulting in the attachment of the petitioner’s Electronic Credit Ledger and bank accounts.
  • Invocation of Writ Jurisdiction: Aggrieved by the absence of actual service of notices/reminders under Section 74, lack of adequate time to represent his case, and the unreasoned nature of the demand order, the petitioner filed a writ petition (CWJC No. 14230 of 2022) before the Hon'ble High Court of Judicature at Patna.

Issues Involved

  1. Whether an ex-parte assessment order passed under Section 74 of the CGST/BGST Act, 2017, without affording sufficient time or serving actual notices/reminders, violates the fundamental principles of natural justice.
  2. Whether an assessment order determining tax, interest, and penalty liabilities without assigning explicit, decipherable reasons (a non-speaking order) is sustainable in the eyes of law.
  3. Whether the High Court, under Article 226 of the Constitution, can entertain a writ petition and grant relief against an ex-parte GST order despite the availability of alternative statutory remedies (such as filing an appeal under Section 107).
  4. Whether recovery actions taken under Section 79, including attachment of bank accounts and credit ledgers, can be maintained when the underlying assessment order itself is bad in law.

Petitioner’s Arguments

  • Violation of Natural Justice: The petitioner argued that no notices or reminders under Section 74 of the BGST Act were actually served upon him, depriving him of a fair and reasonable opportunity to submit his defence, explanation, or supporting documentary evidence.
  • Absence of Jurisdiction: The petitioner contended that determining tax, interest, and penalty under Section 74 in the course of proceedings initiated under Section 129(4) without following due process was illegal and without jurisdiction.
  • Coercive & Arbitrary Recovery: Attachment of the Electronic Credit Ledger and bank accounts under Section 79 was challenged as arbitrary and premature, given that the assessment order itself was passed ex-parte without affording a hearing.
  • Prayer for Quashing & De-attachment: The petitioner prayed for certiorari to quash the impugned order dated 10.06.2022 and Form GST DRC-07, immediate de-freezing of attached ledgers/accounts, protection from coercive recovery, and remand for fresh adjudication.

Respondent’s Arguments / Submission

  • No Objection to Remand: The learned counsel appearing for the Revenue submitted that the Department had no objection if the matter was remanded to the Assessing Officer for a fresh determination on merits.
  • Interim Relief Assurance: The Revenue's counsel formally assured the Court that no coercive steps would be taken against the petitioner during the pendency of fresh proceedings.

Court Findings & Order

A. Key Findings of the Patna High Court

  1. Maintainability of Writ Petition: The High Court affirmed that despite the presence of statutory appeal remedies, the Court is not precluded from exercising writ jurisdiction where an order is ex facie bad in law.
  2. Breach of Natural Justice: The Court observed that the petitioner was not afforded sufficient time or opportunity to represent his case, constituting a clear violation of the principles of natural justice which entails severe civil consequences.
  3. Non-Speaking Order: The Court emphasized that the impugned order failed to assign any reasons—or reasons decipherable from the record—to justify how the assessing authority calculated and determined the tax liability, interest, and penalty due.
  4. Duty to Adjudicate Fully: The Court observed that tax authorities must adjudicate all issues of fact and law and pass reasoned orders, even when proceedings are conducted ex-parte.

Directives / Directions Issued by the Court

The High Court disposed of the writ petition on mutually agreed terms with the following specific directions:

  • Quashing of Orders: The ex-parte order dated 10.06.2022 and summary order in Form GST DRC-07 (Ref No. ZD1006220068121) passed by Respondent No. 2 were quashed and set aside.
  • Pre-Deposit Condition: The petitioner undertook to deposit 20% of the demanded amount before the Assessing Officer within four weeks. This deposit is without prejudice to rights and subject to final adjudication. (If prior deposits exist, they will be set off; excess deposits will be refunded within two months of adjudication).
  • Immediate Unfreezing of Bank Accounts: The Court ordered the immediate de-freezing/de-attaching of the petitioner’s bank accounts attached in connection with these proceedings.
  • Mandatory Personal Hearing & Cooperation: The petitioner undertook to appear before the Assessing Authority on 02.11.2022 at 10:30 AM (preferably through digital mode) and fully cooperate without taking unnecessary adjournments.
  • Expeditious & Speaking Order: The Assessing Authority was directed to pass a fresh, reasoned speaking order on merits within two months of the appearance, after considering all documents and evidence placed on record.
  • Protection against Coercive Steps: No coercive steps are to be taken against the petitioner during the pendency of the re-assessment.
  • Liberty Reserved: Liberty was reserved to both parties to seek appropriate legal remedies if aggrieved by the fresh order.

Sections Involved

  • Section 74 of the Central Goods and Services Tax (CGST) Act, 2017 / Bihar Goods and Services Tax (BGST) Act, 2017: Determination of tax not paid, short paid, or erroneously refunded by reason of fraud, willful misstatement, or suppression of facts.
  • Section 129(4) of the Bihar Goods and Services Tax (BGST) Act, 2017: Detention, seizure, and release of goods and conveyances in transit.
  • Section 79 of the Central Goods and Services Tax (CGST) Act, 2017: Recovery proceedings and attachment of electronic credit ledger or bank accounts.
  • Form GST DRC-07: Summary of order issued under Section 74.

Important Clarification

Key Legal Takeaway:

An ex-parte GST demand order passed without providing proper hearing opportunities or without giving detailed calculations/reasons is legally unsustainable.

  • Principles of Natural Justice are Supreme: Tax authorities cannot pass arbitrary or summary orders without allowing taxpayers reasonable time to submit evidence and present their defence.
  • Ex-Parte Orders Must Still Be Reasoned: Even if an assessee fails to appear, tax authorities are legally obligated to evaluate all material facts, apply legal principles, and pass a detailed, speaking order explaining how liabilities were computed.
  • Writ Jurisdiction when Natural Justice is Violated: Alternative statutory remedies do not bar High Courts from stepping in under Article 226 when natural justice is violated or orders lack jurisdiction.

Link to download the order - https://mytaxexpert.co.in/uploads/1784617132_1568compressed.pdf

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