Facts of the Case

  • Assessee and Registration Details: The Petitioner, M/s Gufic Biosciences Limited, is a Public Limited Company registered under the Companies Act, 1956. It operates its registered office at 37, First Floor, Kamala Bhavan II, S. Nityanand Road, Andheri (East), Mumbai, and carries out operations from its Principal Place of Business situated at 1st Floor, Vikash Kunj, Main Road, Kankarbagh, Patna, Bihar.
  • Assessment Order Under Section 73(9): On February 5, 2021 (or February 6, 2021 as referenced in the judgment), Respondent No. 6 (Deputy Commissioner of State Tax, Patna South Circle) issued an assessment order (Order No. ZD1002210050897) under Section 73(9) of the Bihar Goods and Services Tax (BGST) Act, 2017 for Financial Year 2019–20.
  • Ground of Disallowance: The Input Tax Credit (ITC) claimed by the petitioner company was disallowed/rejected primarily on the ground of a mismatch between the entries in Form GSTR-2A and Form GSTR-3B for Financial Year 2019–20.
  • Petitioner's Explanation of Mismatch: The petitioner asserted that the observed mismatch was not deliberate or fraudulent but was completely in accordance with the law. Specifically, the variance arose because ITC pertaining to Financial Year 2018–19 was validly claimed in September 2019 (within FY 2019–20), which was well within the statutory timeline permitted under the BGST Act to claim ITC up to September following the end of the relevant financial year.
  • Rejection of Appeal on Limitation: The petitioner preferred a statutory appeal under Section 107 of the BGST Act, 2017 before Respondent No. 4 (Additional Commissioner of State Tax (Appeal), West Block, Patna) in Appeal Case No. GST/PS-54/2022-23. Vide impugned order dated August 12, 2022 (Memo No. 1405), the Appellate Authority dismissed the appeal strictly on the ground of limitation without entering into or evaluating the grounds raised on merits.
  • Recovery and Pre-deposit Action: Despite the petitioner having deposited 10% of the disputed demand at the time of filing the statutory appeal under Section 107(7) of the BGST Act, 2017, the tax authorities proceeded to recover/collect the entire demanded amount. Additionally, bank accounts belonging to the writ petitioner were attached/frozen in connection with the recovery proceedings.
  • Writ Jurisdiction: Aggrieved by the procedural irregularities, rejection on limitation, and recovery actions, the petitioner filed a writ petition under Civil Writ Jurisdiction Case No. 13502 of 2022 before the High Court of Judicature at Patna.

Issues Involved

  1. Maintainability of Writ Petition vs. Statutory Remedy: Whether the High Court, exercising extraordinary jurisdiction, is precluded from interfering with lower assessment and appellate orders when statutory appeal mechanisms exist, particularly when an order is ex facie bad in law due to violations of principles of natural justice.
  2. Violation of Principles of Natural Justice: Whether the assessment order dated February 5/6, 2021, and the appellate order dated August 12, 2022, were unsustainable for failing to provide a reasonable/fair opportunity of hearing and for lacking proper reasonings/speaking grounds to substantiate the demand.
  3. Legality of ITC Disallowance based on GSTR-2A vs GSTR-3B Mismatch: Whether ITC can be summarily rejected and penalized merely due to a mismatch between GSTR-2A and GSTR-3B when the credit claimed in September 2019 relates to the preceding Financial Year (FY 2018–19) in compliance with statutory timeframes.
  4. Legality of Complete Recovery During Appeal: Whether the tax authority was justified in recovering the entire demand and attaching bank accounts when the mandatory pre-deposit of 10% under Section 107(7) was complied with.

Petitioner’s Arguments

  • Quashing of Orders: The petitioner prayed for setting aside the Appellate Order dated August 12, 2022 passed by Respondent No. 4, as well as the underlying Assessment Order dated February 5/6, 2021 passed by Respondent No. 6 under Section 73(9) of the BGST Act, 2017.
  • Justification for GSTR-2A vs GSTR-3B Mismatch: The petitioner argued that the mismatch between Form GSTR-2A and Form GSTR-3B for FY 2019–20 was legal and legitimate. The differential amount represented eligible Input Tax Credit of FY 2018–19 that was claimed in September 2019. Under the provisions of the BGST Act, taxpayers are explicitly allowed to claim unavailed ITC for a financial year up to the due date of furnishing the return for the month of September following the end of such financial year.
  • Unlawful Recovery & Bank Attachment: The petitioner submitted that recovering the full demand amount during the pendency of the appeal filed under Section 107 was unlawful, given that 10% of the demand was already pre-deposited under Section 107(7) of the BGST Act, 2017. Furthermore, coercive steps like attaching bank accounts caused severe operational hardship.
  • Lack of Fair Hearing: The petitioner contended that the lower authority failed to provide adequate time or a sufficient opportunity to represent its case, resulting in an unreasoned order entailing severe civil consequences.

Respondent’s Arguments

  • Consent to Remand for Fresh Decision: During the hearing, learned counsel appearing for the Revenue/Department stated across the bar that he had no objection if the matter was remanded back to the Assessing Authority for deciding the case afresh entirely on its merits.
  • No Coercive Steps Assurance: Counsel for the Revenue assured the Court that during the pendency of the remanded proceedings, no coercive action would be initiated or pursued against the petitioner.
  • Confirmation of Recovery: The Department confirmed that the entire amount demanded had already been recovered/deposited.

Court Order / Findings

The Division Bench comprising Hon'ble The Chief Justice Sanjay Karol and Hon'ble Mr. Justice S. Kumar delivered an oral judgment on October 12, 2022:

  1. Interference under Writ Jurisdiction: The Court held that notwithstanding the existence of an alternative statutory remedy, the High Court is not precluded from exercising its powers where an order is ex facie bad in law.
  2. Grounds for Quashing: The Court identified two principal infirmities:
    • Violation of Natural Justice: The petitioner was not given sufficient time or a fair opportunity to present its case.
    • Non-Speaking Order: The assessment order failed to assign clear, decipherable reasons detailing how the tax officer arrived at the determined liability.
    • The Court reaffirmed that orders passed in breach of natural justice entail civil consequences and cannot be sustained.
  3. Directions Issued by the Court:
    • Setting Aside Orders: The Appellate Order dated 12.08.2022 (Respondent No. 4) and Assessment Order dated 06.02.2021 (Respondent No. 6) were quashed.
    • Bank De-freezing: The Court directed immediate de-freezing and de-attachment of the writ petitioner’s bank accounts.
    • Treatment of Amount Recovered: The amount already deposited/recovered remains subject to the final order of the Assessing Officer. If found in excess after fresh adjudication, it must be refunded to the petitioner within two months of the fresh order.
    • Remand & Hearing Date: Petitioner undertook to appear before the Assessing Authority on November 2, 2022 (at 10:30 AM), with options to appear digitally.
    • Timely & Reasoned Order: The Assessing Authority was directed to pass a fresh, reasoned speaking order on merits after affording full opportunity of hearing within a period of two months from the appearance date.
    • Protection: No coercive steps are to be taken during the pendency of the remanded proceedings.

Important Clarification

  • Jurisdiction in Breach of Natural Justice: Availability of an alternative statutory remedy or dismissal of appeal on limitation does not bar the High Court from exercising writ jurisdiction if the underlying order violates principles of natural justice or lacks basic reasoning.
  • GSTR-2A vs GSTR-3B Mismatch Guidance: A mismatch between GSTR-2A and GSTR-3B cannot be treated as an automatic evasion or default without investigating if the credit pertains to permissible statutory carry-forwards (such as FY 2018–19 credit claimed within the September deadline of FY 2019–20).
  • Pre-deposit Protection: Once the statutory pre-deposit (10%) under Section 107(7) is fulfilled, full recovery or bank attachments by authorities during appeal/adjudication processes are impermissible.

Sections Involved

  • Section 73 / Section 73(9) of the Bihar Goods and Services Tax (BGST) Act, 2017: Determination of tax not paid, short paid, or erroneously refunded, or input tax credit wrongly availed or utilized for any reason other than fraud or willful misstatement.
  • Section 107 / Section 107(7) of the Bihar Goods and Services Tax (BGST) Act, 2017: Appeals to Appellate Authority and statutory provision regarding stay of recovery upon pre-deposit of 10% of the disputed tax.
  • Article 226 of the Constitution of India: Writ jurisdiction of the High Court to correct jurisdictional errors and breaches of natural justice.

Link to download the order - https://mytaxexpert.co.in/uploads/1784617674_1574compressed.pdf

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