FACTS OF THE CASE

  • Tax Compliance History: The petitioner was regularly filing GST returns and paying the resultant tax liabilities in full compliance with Section 16 of the CGST/APGST Act, 2017.
  • Inspection & Initial Demand: Following an inspection at the petitioner’s business premises, the assessing authority issued an initial notice in Form GST DRC-01A dated 31.01.2022, asserting a preliminary tax liability of ₹11,15,41,133/-.
  • Petitioner’s Initial Objections: The petitioner filed detailed written objections accompanied by documentary evidence, requesting the authority to drop the proposed proceedings.
  • Escalated Demand (Form GST DRC-01): Disregarding the preliminary objections, the assessing officer issued a formal show cause notice in Form GST DRC-01 on 07.04.2022, demanding ₹22,58,49,854/-, which included a 100% penalty and interest under Section 50.
  • Provisional Bank Attachment: On 07.05.2022, the 2nd Respondent issued an order in Form GST DRC-22 under Section 83 of the APGST Act, provisionally attaching the petitioner’s bank account.
  • Revised Summary Demand Notice: On 30.05.2022, a revised notice in Form GST DRC-01 was served, escalating the total tax demand further to ₹28,00,20,392/-.
  • Grounds Raised by Authority: The escalated demand was primarily grounded on claims that:
    1. The petitioner produced xerox copies of tax invoices instead of originals for a section of the turnover.
    2. Certain supplier dealers were allegedly fictitious or non-existent.
    3. Toll gate enquiries at Chittoor indicated that specific transport vehicles did not pass through the gates.
    4. Vehicle owners denied hiring their transport vehicles to the petitioner, and vehicle details were absent from the official transport web portal.
  • Request for Adjournment Ignored: Upon receipt of the revised notice on 30.05.2022, the petitioner formally submitted a letter on 10.06.2022 seeking a modest 15-day extension to file detailed objections. The department acknowledged receipt but issued no response.
  • Ex-Parte Assessment Order: On 20.06.2022, Respondent No. 1 passed an adverse summary order in Form GST DRC-07, stating that the petitioner had failed to respond to the revised notice.

ISSUES INVOLVED

  1. Whether an assessment order passed in Form GST DRC-07 based on third-party verification, toll gate data, and statements of transport vehicle owners—without supplying such evidence or underlying documents to the assessee—violates the principles of natural justice.
  2. Whether the failure of the department to grant or communicate an order on a written request for time to file objections invalidates the subsequent ex-parte assessment order.
  3. Whether the provisional attachment of a taxpayer's bank account under Section 83 in Form GST DRC-22 can stand when the underlying assessment proceedings suffer from procedural and constitutional illegalities.

PETITIONER’S ARGUMENTS

  • Breach of Natural Justice: The assessment order was legally unsustainable because the key documentary evidence and third-party investigation material relied upon by the assessing authority were never furnished to the petitioner, rendering it impossible to submit an effective defense.
  • Arbitrary Deprivation of Opportunity: The petitioner submitted a formal letter on 10.06.2022 requesting 15 days to file a complete reply to the revised DRC-01 notice. Passing the DRC-07 order on 20.06.2022 without rejecting or restricting the extension period was high-handed and unfair.
  • Illegality of Provisional Attachment: The provisional attachment of the bank account under Section 83 of the APGST Act was passed without authority of law, without providing a hearing/recording explanations, and was completely disproportionate.

RESPONDENT’S ARGUMENTS

  • Sufficiency of Evidence on Record: The learned Government Pleader argued that the assessing authority had evaluated the material available on record and that the assessment order was legally sound based on those findings.
  • Jurisdiction & Authority: It was submitted that the Joint Commissioner acted within jurisdiction while passing orders under Section 83 of the APGST Act, and the court ought not to interfere with the assessment at the writ stage.

COURT ORDER & FINDINGS

  1. Violation of Principles of Natural Justice Confirmed: The Division Bench observed that the revised notice and final assessment order relied heavily on third-party statements, non-existent dealer reports, vehicle transport web verification, and Chittoor toll gate records. The Court explicitly held that because these documents and reports formed the basis of the demand, non-furnishing of this material to the petitioner constituted a clear violation of natural justice.
  2. Quashing of Assessment Order (Form GST DRC-07): The High Court set aside the impugned summary assessment order dated 20.06.2022 and remanded the matter back to the assessing authority for fresh adjudication.
  3. Directions for Remand Procedure:
    • The petitioner was directed to submit an application within ten (10) days of receiving the order, specifying the documents relied upon by the department.
    • The assessing authority must supply all requested relied-upon documents within ten (10) days thereafter.
    • The authority must allow the petitioner to file additional objections and pass a fresh order strictly in accordance with law, after providing an opportunity of a personal hearing.
  4. Quashing of Bank Account Attachment (Form GST DRC-22): The provisional attachment order dated 07.05.2022 was set aside. The authority was granted liberty to issue a fresh provisional attachment order, if necessary, strictly in compliance with the statutory procedure under Section 83 of the APGST Act, 2017.

IMPORTANT CLARIFICATION

Key Takeaway for Tax Practitioners & Assessees:

Administrative agencies and GST assessing officers cannot base adverse liability orders on third-party evidence, toll gate logs, or intelligence reports without first serving copies of such documents to the assessee. Any assessment order passed in denial of relied-upon documents is void ab initio for violating natural justice principles. Furthermore, provisional attachment of bank accounts under Section 83 cannot survive when the primary assessment process itself is procedurally flawed.

SECTIONS INVOLVED

  • Article 226 of the Constitution of India: Writ jurisdiction of the High Court invoked to enforce fundamental/legal rights against arbitrary administrative actions.
  • Section 16 of the CGST / APGST Act, 2017: Eligibility, conditions, and fulfillment requirements for claiming Input Tax Credit (ITC).
  • Section 50 of the CGST / APGST Act, 2017: Interest levied on delayed payment or wrong availment/utilization of tax.
  • Section 83 of the APGST Act, 2017: Provisional attachment of bank accounts or properties to protect revenue during pending proceedings.
  • Rule 142 of the CGST / APGST Rules, 2017: Mechanism governing the issuance of summary notices (Form GST DRC-01) and assessment orders (Form GST DRC-07).

Link to download the order - https://mytaxexpert.co.in/uploads/1784626545_1864compressed.pdf

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