Facts of the Case

The petitioner, M/s Renu Kumari, a sole proprietorship firm registered at Mahmadpur Baya, District Muzaffarpur, Bihar, through its proprietor Mrs. Renu Kumari, challenged proceedings initiated by the Assistant Commissioner of State Tax, West Circle, Muzaffarpur. The department alleged that TDS deducted in the petitioner's name, reflected in the deductor's GSTR-7, had not been disclosed in the petitioner's own return. Acting on this, the Assistant Commissioner passed an order dated 13.01.2020 under Section 74 of the Bihar Goods and Services Tax Act, 2017, followed by a further order dated 10.12.2020 alleging non-disclosure of accurate turnover for October 2019 to March 2020, culminating in a demand notice in Form GST DRC-07 dated 13.01.2021 for a total of Rs.7,91,709/- (tax, interest and penalty), with recovery directed through a bank attachment process dated 26.02.2021. The petitioner moved the Patna High Court against these orders.

Issues Involved

  1. Whether an ex-parte tax demand passed without affording the petitioner adequate opportunity of hearing can be sustained.
  2. Whether the High Court can interfere in writ jurisdiction despite the availability of a statutory appellate remedy.
  3. Whether the orders and demand notice disclosed sufficient reasons for determining the tax liability.

Petitioner's Arguments

  • The orders dated 10.12.2020 and 13.01.2021, and the consequential DRC-07 demand notice, were passed without providing any opportunity of hearing.
  • The demand of Rs.7,91,709/- arose purely from a GSTR-7 TDS reconciliation mismatch that was never properly put to the petitioner for explanation.
  • Recovery through bank account attachment was sought to be restrained pending adjudication of the writ petition.

Respondent's Arguments

  • Counsel for the Revenue did not oppose a remand, stating no objection to the matter being sent back 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 remanded proceedings.

Court Order/Findings

  • The Division Bench held that a writ court is not precluded from interfering despite the statutory remedy where an order is ex facie bad in law.
  • The impugned orders violated principles of natural justice — no sufficient time was afforded to the petitioner to represent her case.
  • The orders, being ex parte in nature, did not disclose reasons decipherable from the record as to how the tax liability was computed, and such an order entails civil consequences.
  • The orders dated 10.12.2020 and 13.01.2021, and the DRC-07 demand, were quashed and set aside, with the matter remanded to the Assessing Authority for a fresh, reasoned decision.
  • The petitioner was directed to deposit 20% of the demand within four weeks, without prejudice to the parties' rights, and bank accounts attached in connection with the proceeding were ordered to be de-frozen immediately.

Important Clarification

  • An order raising tax demand solely on the basis of a GSTR-7/TDS mismatch, passed without hearing the assessee and without recording discernible reasons, is liable to be quashed as violative of natural justice, irrespective of the availability of an alternate remedy.
  • The remand does not amount to a finding on merits — all contentions of both sides remain open before the Assessing Authority.

Sections Involved

  • Section 74, Bihar Goods and Services Tax Act, 2017 — determination of tax not paid by reason of fraud, wilful misstatement or suppression.
  • Form GST DRC-07 — summary of the order creating a demand under the GST law.

Decision – In Favour of

Disposed of with directions, substantially in favour of the Assessee — the ex-parte demand orders and DRC-07 were quashed and the matter remanded for a fresh, reasoned decision, subject to a 20% pre-deposit.

Related Case Laws

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

Case Details

  • Court: Patna High Court
  • Case No.: Civil Writ Jurisdiction Case No. 4434 of 2022
  • Coram: Hon'ble The Chief Justice (Sanjay Karol, CJ) and Hon'ble Mr. Justice S. Kumar
  • Date of Order: 05 April 2022

Link to Download the Order

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