Facts of the Case

The petitioner, M/s Dhanvantari Medico, challenged the appellate order dated 14.05.2022 whereby the Additional Commissioner of State Taxes dismissed the appeal against the assessment order dated 26.09.2020 passed under Section 62 of the GST Act along with the summary order issued in Form GST DRC-07.

The petitioner contended that although the statutory GSTR-3B return for July 2020 had been filed, the authorities failed to consider the actual figures disclosed in the return and instead proceeded on the basis of a best judgment assessment. The petitioner further asserted that once a valid return had been filed, the assessment should have been reconsidered and that the impugned orders were passed without providing an effective opportunity of hearing.

Issues Involved

  1. Whether the best judgment assessment under Section 62 of the GST Act was sustainable despite the filing of the statutory GSTR-3B return.
  2. Whether the assessment and appellate orders violated the principles of natural justice.
  3. Whether an order passed without adequate opportunity of hearing and without assigning proper reasons could be sustained in law.
  4. Whether the matter required remand for fresh adjudication.

Petitioner’s Arguments

  • The petitioner argued that the statutory GSTR-3B return for July 2020 had already been filed and reflected the correct tax liability.
  • It was submitted that the figures contained in the statutory return should prevail over the presumptive figures adopted in the best judgment assessment.
  • The petitioner contended that the authorities failed to appreciate that filing of the return even after the due date entitled the assessee to consideration of the actual return.
  • It was argued that the assessment order was passed without granting adequate opportunity of hearing.
  • The petitioner further submitted that the impugned orders were non-speaking, arbitrary, and contrary to the principles of natural justice.

Respondent’s Arguments

  • The Revenue fairly submitted before the High Court that it had no objection if the matter was remanded to the Assessing Authority for fresh adjudication on merits.
  • It was also stated that during the pendency of the fresh proceedings, no coercive action would be taken against the petitioner.

Court Order / Findings

The Patna High Court allowed the writ petition and held that the impugned orders could not be sustained.

The Court observed that although an alternate statutory remedy ordinarily exists, the High Court may interfere where the impugned order is ex facie illegal, particularly when there is a violation of the principles of natural justice.

The Court found that:

  • The petitioner was not granted a sufficient opportunity of hearing.
  • The assessment order did not contain adequate reasons explaining how the tax liability had been determined.
  • The authorities failed to properly adjudicate the issues involved.
  • The orders suffered from procedural illegality and civil consequences had resulted from such violations.

Accordingly, the Court:

  • Quashed the appellate order dated 14.05.2022.
  • Quashed the assessment order dated 26.09.2020.
  • Quashed the consequential Form GST DRC-07.
  • Directed the petitioner to deposit an additional 10% of the disputed demand within four weeks (without prejudice to rights).
  • Directed immediate de-freezing/de-attachment of the petitioner's bank accounts, if attached.
  • Directed the Assessing Authority to provide adequate opportunity of hearing.
  • Directed that a fresh speaking order be passed after considering all relevant facts and documents.
  • Directed that no coercive steps be taken during the pendency of fresh proceedings.
  • Clarified that all issues on merits were left open.

Important Clarification

This judgment reiterates that:

  • Best judgment assessments under Section 62 must comply with the principles of natural justice.
  • Proper opportunity of hearing is mandatory before determining tax liability.
  • Every assessment order must be a reasoned and speaking order.
  • High Courts may exercise writ jurisdiction despite availability of alternate remedies where natural justice has been violated.
  • Fresh adjudication must consider all documents, submissions, and applicable legal provisions before determining tax liability.

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785403598_2393compressed.pdf

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