Facts of the Case

The petitioner, Durain Industries Limited, Patna, challenged an ex-parte order dated 25.02.2022 passed by the Joint Commissioner of State Taxes, Kadam Kuan Circle, Patna, in Form GST DRC-13, along with the summary of order dated 30.01.2020 in Form GST DRC-07, raising a demand of tax, interest and penalty for the period 2017-18 under the Central Goods and Services Tax Act, 2017 and the Bihar Goods and Services Tax Act, 2017. The petitioner approached the Patna High Court under Article 226, seeking quashing of the ex-parte assessment, a restraint on coercive recovery during the pendency of the writ, and a declaration that a matter already decided after examination of material on record could not be reopened absent material foreign to the original records.

Issues Involved

  1. Whether an ex-parte assessment order raising a GST demand, passed without affording sufficient opportunity of hearing and without assigning reasons, can be sustained.
  2. Whether the High Court, despite the availability of a statutory remedy, can interfere in writ jurisdiction where the order is ex facie bad in law for violation of natural justice.

Petitioner's Arguments

  • The impugned order dated 25.02.2022 in Form GST DRC-13 and the summary of order dated 30.01.2020 in Form GST DRC-07 were passed ex-parte, without affording adequate opportunity of hearing.
  • The order failed to assign any reasons demonstrating how the officer arrived at the amount of tax, interest and penalty determined as payable.
  • Coercive recovery proceedings should be restrained during the pendency of the writ application.

Respondent's Arguments

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

Court Order/Findings

  • The Division Bench held that despite the availability of a statutory remedy, the Court is not precluded from interfering where, ex facie, the order is bad in law.
  • Two reasons were identified: (a) violation of principles of natural justice, as no sufficient time was afforded to the petitioner to represent its case; and (b) the ex-parte order did not assign any reason, even decipherable from the record, as to how the amount due was determined.
  • The Court quashed and set aside the order dated 25.02.2022 (Form GST DRC-13) and the summary of order dated 30.01.2020 (Form GST DRC-07) for the period 2017-18.
  • The matter was remitted to the Assessing Authority for a fresh, reasoned decision on merits after affording adequate opportunity of hearing, subject to the petitioner depositing 20% of the demand within eight weeks, de-freezing of any attached bank accounts, and a restraint on coercive recovery during the pendency of fresh proceedings.
  • Liberty was reserved to the petitioner to challenge the fresh order, and the Court clarified it had expressed no opinion on the merits of the underlying tax dispute.

Important Clarification

  • An ex-parte GST assessment order that fails to assign any discernible reasons for the tax determination, and is passed without affording adequate opportunity of hearing, is liable to be quashed for violation of natural justice, notwithstanding the availability of an alternate statutory remedy.
  • Where the Revenue itself concedes to a remand, courts commonly balance the interests of both sides by conditioning the remand on a partial pre-deposit (here 20% of the demand) while directing that all issues of fact and law be examined afresh through a speaking order.

Sections Involved

  • Central Goods and Services Tax Act, 2017 — governs assessment and demand of central tax; the impugned demand was raised under this Act.
  • Bihar Goods and Services Tax Act, 2017 — the corresponding State enactment under which the demand for state tax was also raised.
  • Form GST DRC-07 — summary of the order creating demand.
  • Form GST DRC-13 — notice to a third person for recovery, referenced here in the context of the demand order under challenge.

Decision – In Favour of

In favour of the Assessee — the ex-parte demand order was quashed for breach of natural justice and remanded for a fresh, reasoned decision, subject to a 20% pre-deposit condition and no expression of opinion on the merits of the tax dispute.

Related Case Laws

No related case laws are available on this site at present for cross-reference on this specific point.

Case Details

  • Court: High Court of Judicature at Patna
  • Case No.: Civil Writ Jurisdiction Case No. 4578 of 2022
  • Coram: Hon'ble The Chief Justice Sanjay Karol and Hon'ble Mr. Justice S. Kumar
  • Date of Order: 05.04.2022

Link to Download the Order

Download the full judgment (PDF)

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