Facts of the Case

The petitioner, Gammon Engineers and Contractors Pvt. Ltd., an incorporated company with a branch office at Patna Airport, Patna, Bihar (GSTIN 10AAECN8067D1ZR), was assessed by the Assistant Commissioner of State Taxes, Patliputra Circle, Patna, by an order dated 24.02.2021 under Section 73 of the CGST Act, 2017 and the Bihar GST Act, 2017, for the period 01.04.2019 to 31.03.2020, accompanied by a summary of the demand in Form GST DRC-07 dated 23.02.2021 and a rectification order dated 24.02.2021 in Form GST-08. The petitioner's appeal under Section 107 against this order, registered as Appeal Case No. AD1003210016721, was rejected by the Additional Commissioner of State Taxes (Appeals), Central Division, Patna, by order dated 03.02.2022. Aggrieved, the petitioner approached the Patna High Court by way of Civil Writ Jurisdiction Case No.3729 of 2022, seeking quashing of the assessment order, the DRC-07 summary, the rectification order, and the appellate rejection.

Issues Involved

  1. Whether an appellate order rejecting a Section 107 appeal by a cryptic, misconceived, and non-speaking order can be sustained.
  2. Whether an ex parte assessment order, passed without sufficient opportunity of hearing and without reasons decipherable from the record, can be sustained.
  3. Whether mere absence of auto-populated GSTR-2A resulting in a mismatch with the petitioner's GSTR-3B return can deprive the petitioner of input tax credit, particularly where tax has already been paid to the supplier.

Petitioner's Arguments

  • The appellate order dated 03.02.2022 rejecting the Section 107 appeal was cryptic, misconceived, and non-speaking.
  • The underlying assessment order dated 24.02.2021 and the DRC-07 summary were passed ex parte, without affording sufficient time to represent the petitioner's case, and without reasons showing how the tax liability was computed.
  • Mere absence of auto-populated GSTR-2A resulting in a mismatch with the return filed in Form GSTR-3B cannot deprive the petitioner of the benefit of input tax credit.
  • The petitioner cannot be deprived of input tax credit for defaults committed by the supplier, since tax paid to the supplier constitutes due discharge of the petitioner's liability under Section 16(2)(c) of the CGST/BGST Act, 2017.

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.
  • The Revenue agreed that no coercive steps would be taken against the petitioner during the pendency of the remanded proceedings.

Court Order/Findings

  • The Court held that, notwithstanding the statutory remedy of appeal, it is not precluded from interfering in writ jurisdiction where an order is ex facie bad in law.
  • It found the appellate order rejecting the Section 107 appeal to be a cryptic, misconceived, and non-speaking order.
  • It found two further infirmities in the underlying assessment: (a) violation of natural justice, as no sufficient time was afforded to the petitioner to represent its case; and (b) the order, being ex parte, did not assign reasons decipherable from the record as to how the tax due was determined; the Court also noted the authorities had not adjudicated on the attending facts and circumstances.
  • An ex parte order passed in violation of natural justice entails civil consequences and, on this ground alone, is liable to be quashed.
  • The Court quashed the appellate order dated 03.02.2022, the assessment order dated 24.02.2021, and the DRC-07 summary, and remanded the matter for fresh adjudication.
  • The petitioner was directed to ensure 10% pre-deposit for the appeal (stated to be already deposited) and to additionally deposit 10% of the demand before the Assessing Officer within four weeks, subject to refund if found excess; bank accounts attached in connection with the proceedings were directed to be de-frozen immediately.
  • The Assessing Authority was directed to decide the matter afresh on merits, after hearing, preferably within two months of the petitioner's appearance on 20.04.2022, by a speaking order; no coercive steps were to be taken meanwhile, and liberty was reserved to challenge the fresh order.

Important Clarification

  • An appellate order rejecting a statutory appeal without assigning reasons is liable to be quashed as non-speaking, regardless of the merits of the underlying dispute.
  • An order passed ex parte, without reasons that can be deciphered from the record as to how the demand was computed, is bad in law regardless of the availability of an appellate remedy.
  • The existence of an alternative statutory remedy does not bar writ jurisdiction where the impugned order is ex facie vitiated by a breach of natural justice.

Sections Involved

  • Article 226 of the Constitution of India – invoked for writ jurisdiction to challenge the assessment and appellate orders.
  • Section 73 of the CGST Act, 2017 and the Bihar GST Act, 2017 – provision under which the assessment order was passed.
  • Section 107 of the CGST Act, 2017 – provision under which the petitioner's appeal was filed and rejected.
  • Section 16(2)(c) of the CGST Act, 2017 – relied upon by the petitioner regarding entitlement to input tax credit despite supplier-side GSTR-2A mismatches.
  • Form GST DRC-07 – summary of the demand issued pursuant to the assessment order.
  • Form GST-08 – rectification order issued by the Assessing Authority.

Decision – In Favour of

Disposed of with directions, broadly in favour of the assessee on the questions of natural justice and the non-speaking appellate order: the assessment order, DRC-07 summary, and appellate rejection were all quashed and the matter remanded for a fresh decision on merits, subject to an additional 10% pre-deposit. The Court expressly did not express any opinion on the merits of the tax demand or the GSTR-2A/3B input tax credit dispute itself, leaving all issues open for the Assessing Authority to decide afresh.

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.3729 of 2022
  • Coram: Hon'ble the Chief Justice (Sanjay Karol, CJ) and Hon'ble Mr. Justice S. Kumar
  • Date of Order: 05.04.2022

Link to Download the Order

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