Facts of the Case

The petitioner, Ritu Jha, challenged three sets of orders passed by the State Tax authorities of Bihar. First, an order/demand notice dated 19.02.2020 under Section 73 of the Bihar Goods and Services Tax Act, 2017 for the financial year 2018-19 (Reference No. ZA100220021435K), along with its summary in Form GST DRC-07. Second, a demand order dated 23.01.2021 passed under Rule 142(5) (Reference No. ZD100121020554D), which the petitioner contended was raised on gross payment and was unsustainable in law. Third, a demand/notice dated 04.10.2021 under Section 73 for financial year 2020-21 (Reference No. ZD1010210017965), assessing GST at 12% on gross income. All three sets of orders were passed ex parte. The petitioner also sought de-freezing of bank accounts held/frozen by the respondents and a direction for re-assessment after proper opportunity of hearing, and approached the Patna High Court accordingly.

Issues Involved

  1. Whether the impugned demand orders and notices, passed ex parte under Section 73 of the Bihar GST Act, 2017 and Rule 142(5), violated the principles of natural justice.
  2. Whether the writ court could interfere despite the availability of a statutory remedy where the orders are ex facie bad in law.
  3. Whether the freezing of the petitioner's bank accounts, consequent to the impugned orders, ought to be lifted.

Petitioner's Arguments

  • All three sets of orders — dated 19.02.2020, 23.01.2021 and 04.10.2021 — were passed ex parte without adequate opportunity of hearing.
  • The demand dated 23.01.2021 was raised on gross payment and the demand dated 04.10.2021 assessed 12% GST on gross income, both of which were not sustainable in the eye of law.
  • Sought defreezing of bank accounts and a direction for re-assessment after being given proper opportunity.

Respondent's Arguments

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

Court Order/Findings

  • Held that, notwithstanding the statutory remedy, the Court is not precluded from interfering where an order is ex facie bad in law.
  • Found all three sets of orders were passed ex parte in violation of principles of natural justice, with no sufficient time afforded to the petitioner and no reasons decipherable from the record for the amounts determined.
  • Held that the authorities had not adjudicated the matter on the attending facts and circumstances, and all issues of fact and law ought to have been dealt with even in ex parte proceedings.
  • Quashed the order dated 19.02.2020 and its Form GST DRC-07 summary, the demand order dated 23.01.2021, and the demand/notice dated 04.10.2021.
  • Remanded the matter for fresh, reasoned decision after affording opportunity of hearing, subject to the petitioner depositing 20% of the demand within four weeks, with bank accounts to be de-frozen immediately and no coercive steps taken meanwhile.

Important Clarification

  • Ex parte demand orders under Section 73 of the Bihar GST Act, 2017 that fail to disclose reasons for the amount determined can be set aside for violation of natural justice, notwithstanding the existence of an alternate statutory appellate remedy.
  • Such a remand does not amount to a finding on the merits of the tax demand; all contentions of the parties are expressly left open for the Assessing Authority to decide afresh.

Sections Involved

  • Section 73, Bihar Goods and Services Tax Act, 2017 — governs determination of tax not paid/short paid where there is no allegation of fraud or wilful misstatement.
  • Rule 142(5), Bihar Goods and Services Tax Rules, 2017 — provides for summary of the order to be uploaded electronically following determination of demand.
  • Form GST DRC-07 — summary of the demand order issued under the Bihar GST Act, 2017.

Decision – In Favour of

Disposed of with directions, in favour of the Assessee. All three impugned orders/notices were quashed on the short ground of violation of natural justice, and the matter was remanded for fresh adjudication on merits, subject to a 20% pre-deposit condition. The Court expressly clarified it has not expressed any opinion on merits and all issues are left open.

Related Case Laws

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

Case Details

  • Court: High Court of Judicature at Patna
  • Case No.: Civil Writ Jurisdiction Case No. 5499 of 2022
  • Coram: Hon'ble the Chief Justice (Sanjay Karol, CJ) and Hon'ble Mr. Justice S. Kumar
  • Date: 18.04.2022

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