Facts of the Case

The petitioner, Pradeep Kumar Singh, resident of Bajitpur, Triveniganj, District Supaul, Bihar, challenged before the Patna High Court a demand notice dated 19.01.2020/19.01.2021 issued by the Deputy Commissioner of State Tax, Supaul, in Reference No. ZD1001210176174, assessing GST for the period October 2019 to March 2020 without affording him an opportunity of hearing. He also challenged the consequent demand order and the summary of the order in Form GST DRC-07, dated 19.01.2021, directing him to deposit CGST and SGST along with interest and penalty, as well as an order dated 28.02.2022 passed by the Joint Commissioner, State Tax, Supaul, freezing/holding four of his bank accounts across SBI, Bank of India (two accounts) and IDBI, used respectively for a home loan EMI and for running his business. All the impugned orders were ex parte in nature.

Issues Involved

  1. Whether the ex parte demand notice, the summary order in Form GST DRC-07, and the consequential bank account freezing order could be sustained where they were passed without affording the petitioner an opportunity of hearing and without recording reasons.

Petitioner's Arguments

  • The demand notice dated 19.01.2020/2021 and the demand order in Reference No. ZD1001210176174 were passed without giving the petitioner any opportunity of hearing and were accordingly unsustainable in law.
  • The freezing of his four bank accounts, including those used for a running home loan EMI and for business operations, by order dated 28.02.2022, was similarly unsustainable and ought to be quashed, with a direction to defreeze the accounts.

Respondent's Arguments

  • Learned counsel for the Revenue stated that he had no objection to the matter being remanded to the Assessing Authority for a fresh decision on merits.
  • The Revenue also agreed that no coercive steps would be taken against the petitioner during pendency of the matter before the Assessing Authority.

Court Order/Findings

  • The Court held it was not precluded from interfering despite the availability of a statutory remedy, where an order is, ex facie, bad in law.
  • Two reasons were recorded: violation of principles of natural justice, as no sufficient time was afforded to the petitioner to represent his case; and the order, being ex parte and unreasoned, did not disclose how the tax due was determined.
  • The demand notice dated 19.01.2021, the DRC-07 summary order, and the order dated 28.02.2022 freezing the bank accounts were all quashed and set aside.
  • The petitioner undertook to deposit 20% of the demand raised, within four weeks, without prejudice to the parties' rights, refundable within two months if found in excess.
  • The bank accounts were directed to be de-frozen/de-attached immediately.
  • The Assessing Authority was directed to decide the matter afresh on merits, after affording adequate opportunity of hearing, preferably within two months of the petitioner's appearance on 02.05.2022, by a speaking, reasoned order.
  • Liberty was reserved to both sides to pursue further remedies; the Court expressed no opinion on merits.

Important Clarification

  • An ex parte GST demand order that neither affords a real opportunity of hearing nor records reasons for the quantum determined is liable to be quashed on natural justice grounds alone, notwithstanding the existence of an alternate statutory remedy, and the writ court may condition remand on a partial pre-deposit.

Sections Involved

  • Central Goods and Services Tax Act, 2017 and Bihar Goods and Services Tax Act, 2017 — under which the demand for the period October 2019 to March 2020 was raised.
  • Form GST DRC-07 — summary of the order raising the tax demand.

Decision – In Favour of

Disposed of with directions, in favour of the Assessee on the natural-justice ground. The demand notice, the DRC-07 summary order and the bank-freezing order were quashed and the matter remanded for a fresh, reasoned decision after hearing, conditional on the petitioner depositing 20% of the demand; the Court expressed no view on the merits of the underlying tax demand.

Related Case Laws

No related case laws are available on this site at present.

Case Details

  • Court: Patna High Court
  • Case No.: Civil Writ Jurisdiction Case No.4808 of 2022
  • Coram: Hon'ble The Chief Justice (Sanjay Karol, CJ) and Hon'ble Mr. Justice S. Kumar
  • Order Date: 18.04.2022

Link to Download the Order

Download the full judgment (PDF)

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