Facts of the Case

The petitioner, M/s Kanhaiya Singh Vision Classes, challenged the legality of an ex parte assessment order dated 20.02.2019 passed under Section 74 of the Bihar Goods and Services Tax Act, 2017, along with the summary order issued in Form GST DRC-07. The petitioner also challenged the ex parte appellate order dated 09.01.2021, whereby the statutory appeal was dismissed.

Consequent to these orders, the department initiated recovery proceedings and attached the petitioner's bank account through Form GST DRC-13 under Section 79 of the CGST/BGST Act, 2017.

The petitioner approached the Patna High Court seeking quashing of the assessment order, appellate order, recovery proceedings, and bank account attachment on the ground that all the impugned orders had been passed without granting an effective opportunity of hearing.

Issues Involved

  1. Whether an ex parte assessment order passed under Section 74 of the BGST Act, 2017 without granting adequate opportunity of hearing is legally sustainable.
  2. Whether an appellate authority can uphold an ex parte assessment order without considering the violation of principles of natural justice.
  3. Whether recovery proceedings initiated under Section 79 on the basis of such ex parte orders are valid.
  4. Whether the High Court can interfere under Article 226 despite the availability of statutory remedies where principles of natural justice have been violated.

Petitioner's Arguments

The petitioner contended that:

  • The assessment proceedings were concluded ex parte without providing sufficient opportunity to present its case.
  • The assessment order did not contain proper reasoning explaining how the tax, interest and penalty were determined.
  • The appellate authority also dismissed the appeal ex parte without adequately examining the factual and legal issues involved.
  • The attachment of the bank account under Section 79 was merely consequential to the illegal assessment order and therefore could not survive.
  • The impugned proceedings violated the settled principles of natural justice and deserved to be quashed.

Respondent's Arguments

The Revenue submitted before the High Court that it had no objection if the matter was remanded to the Assessing Authority for fresh adjudication.

The department also stated that:

  • Limitation should not come in the way of fresh adjudication.
  • The matter may be decided afresh on merits.
  • No coercive action would be taken against the petitioner during the pendency of fresh proceedings.

Court Order / Findings

The Patna High Court held that judicial interference under Article 226 is justified where the impugned orders are ex facie contrary to law due to violation of the principles of natural justice.

The Court observed that:

  • The petitioner was not granted a fair and adequate opportunity of hearing.
  • The assessment order was passed ex parte without assigning proper reasons.
  • Even in ex parte proceedings, the adjudicating authority is required to examine the facts, consider the available materials, and pass a reasoned speaking order.
  • The appellate authority also failed to address the deficiencies in the original assessment proceedings.

Accordingly, the Court:

  • Quashed the appellate order dated 09.01.2021.
  • Quashed the assessment order dated 20.02.2019 passed under Section 74.
  • Quashed the consequential DRC-07 and DRC-13 proceedings.
  • Directed immediate de-freezing of the petitioner's bank account.
  • Directed the petitioner to deposit the additional amount as directed by the Court.
  • Remanded the matter to the Assessing Authority for fresh adjudication after granting proper opportunity of hearing.
  • Directed that no coercive action be taken during the pendency of fresh proceedings.
  • Directed the Assessing Authority to pass a fresh reasoned (speaking) order strictly in accordance with law and principles of natural justice.

Important Clarification

This judgment reiterates that:

  • Ex parte GST assessment orders cannot be sustained if passed without granting adequate opportunity of hearing.
  • Speaking orders containing proper reasoning are mandatory even where the assessee remains absent.
  • High Courts may exercise writ jurisdiction despite the availability of statutory appellate remedies where there is a clear violation of natural justice.
  • Recovery proceedings, including bank account attachment under Section 79, cannot survive if the underlying assessment order is set aside.
  • Fresh adjudication must be conducted after affording reasonable opportunity to the taxpayer and by passing a well-reasoned order.

Sections Involved

  • Article 226 of the Constitution of India
  • Section 74 of the Bihar Goods and Services Tax Act, 2017
  • Section 79 of the Central Goods and Services Tax Act, 2017
  • Section 79 of the Bihar Goods and Services Tax Act, 2017
  • Form GST DRC-07
  • Form GST DRC-13

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785564054_2493compressed.pdf  

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