Facts of the Case

The petitioner, M/s Kanhaiya Singh Vision Classes, challenged the legality of:

  • The ex parte assessment order dated 20.02.2019 passed by the Assistant Commissioner of State Taxes under Section 74 of the Bihar GST Act for the tax period July 2017 to March 2018.
  • The summary of the order issued in Form GST DRC-07 dated 28.02.2019.
  • The appellate order dated 09.01.2021, whereby the Additional Commissioner of State Taxes (Appeal) dismissed the petitioner's appeal.
  • The subsequent recovery proceedings including attachment of the petitioner's bank account through Form GST DRC-13 under Section 79 of the GST Act.

The petitioner contended that the assessment proceedings were completed ex parte without providing an adequate opportunity of hearing and that the assessment order was a non-speaking order lacking proper reasoning.

Issues Involved

  1. Whether an ex parte assessment order passed without providing adequate opportunity of hearing violates the principles of natural justice.
  2. Whether an assessment order without proper reasoning is legally sustainable.
  3. Whether recovery proceedings initiated on the basis of an invalid assessment order can continue.
  4. Whether the High Court can exercise writ jurisdiction despite the availability of statutory remedies where there is a violation of natural justice.

Petitioner's Arguments

The petitioner submitted that:

  • The assessment order under Section 74 was passed ex parte without granting sufficient opportunity to present its case.
  • The assessment order did not disclose any reasons explaining the determination of tax, interest and penalty.
  • The appellate authority failed to appreciate these legal infirmities and mechanically dismissed the appeal.
  • The consequential attachment of the bank account under Section 79 was illegal since it was based upon an unsustainable assessment order.
  • The petitioner sought quashing of the assessment order, appellate order, DRC-07, DRC-13 and all consequential recovery proceedings.

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.
  • The assessment could be reconsidered afresh on merits.
  • During the pendency of fresh proceedings, no coercive action would be taken against the petitioner.

The Court accepted the statement made on behalf of the Revenue.

Court Order / Findings

The Patna High Court held that although statutory remedies ordinarily exist under the GST law, the High Court can exercise its writ jurisdiction where an order suffers from patent illegality arising from violation 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.
  • The assessment order was not a speaking order and failed to disclose any reasons explaining the computation of tax liability.
  • Such orders entail serious civil consequences and therefore must strictly comply with the principles of natural justice.

Accordingly, the High Court:

  • Quashed the appellate order dated 09.01.2021.
  • Quashed the assessment order dated 20.02.2019.
  • Quashed the summary order in Form GST DRC-07.
  • Directed de-freezing/de-attachment of the petitioner's bank account.
  • Directed the petitioner to appear before the Assessing Authority on the specified date.
  • Directed the Assessing Authority to conduct fresh adjudication strictly in accordance with law.
  • Directed that adequate opportunity of hearing be granted.
  • Directed that a fresh speaking order containing proper reasons be passed.
  • Ordered that no coercive action shall be taken during pendency of the fresh proceedings.
  • Clarified that all issues on merits remain open for adjudication.
  • Granted liberty to both parties to pursue remedies available under law after the fresh order is passed.

Important Clarification

This judgment reiterates that:

  • Ex parte GST assessment orders must comply with the principles of natural justice.
  • Authorities are required to pass reasoned and speaking orders while determining tax liability.
  • Recovery proceedings including bank attachment cannot survive where the underlying assessment order is legally unsustainable.
  • High Courts may interfere under Article 226 despite alternate statutory remedies when the impugned order is ex facie illegal due to denial of natural justice.
  • Fresh adjudication must provide adequate opportunity to the taxpayer and consider all factual and legal submissions before passing a reasoned order.

Sections Involved

  • Section 74 – Determination of tax not paid or short paid by reason of fraud, wilful misstatement or suppression of facts under the Bihar GST Act, 2017 / CGST Act, 2017.
  • Section 79 – Recovery of tax by attachment and other recovery proceedings.
  • Article 226 of the Constitution of India – Writ jurisdiction of the High Court.

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785567031_2532compressed.pdf  

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