Facts of the Case

M/s Lovely Construction, a sole proprietorship registered under GSTIN 10BTJPS7434R2ZZ, was assessed by the Assistant Commissioner of State Taxes, Patna Central, Patna West, for the tax period 2018-19. By order dated 10.02.2021 passed under Section 73(9) of the Bihar Goods and Services Tax Act, 2017, the petitioner's input tax credit claim was rejected and a demand of Rs. 24,83,258/- was raised, including penalty, with a direction to initiate recovery proceedings without providing any further notice. Aggrieved by the ex parte nature of the order, the petitioner approached the Patna High Court seeking that the order be set aside.

Issues Involved

  1. Whether the order dated 10.02.2021 rejecting the input tax credit claim and raising a demand of Rs. 24,83,258/- was passed in violation of the principles of natural justice.
  2. Whether recovery proceedings could be initiated pursuant to such an order without affording the petitioner a further opportunity of hearing.
  3. Whether the High Court could interfere in writ jurisdiction despite the availability of a statutory appellate remedy.

Petitioner's Arguments

  • The order dated 10.02.2021 rejected the input tax credit claim and imposed tax and penalty under Section 73(9) of the BGST Act without affording adequate opportunity of hearing.
  • A direction was issued to initiate recovery proceedings against the petitioner without providing any further notice, compounding the breach of natural justice.
  • The order being ex parte in nature, it did not disclose sufficient reasons for the amount determined as due and payable.
  • Sought setting aside of the order and a fresh, reasoned decision after due opportunity of hearing.

Respondent's Arguments

  • Learned counsel for the Revenue raised no objection to the matter being remanded to the Assessing Authority for a fresh decision on merits.
  • Agreed that no coercive steps would be taken against the petitioner while the matter remained pending.
  • Undertook to have the Court's order communicated to the appropriate authority through electronic mode.

Court Order/Findings

  • The Division Bench reiterated that it is not precluded from interfering despite an available statutory remedy where an order is ex facie bad in law.
  • Two reasons were recorded: (a) violation of natural justice, as insufficient time was given to the petitioner to represent its case; and (b) the ex parte order failed to assign sufficient reasons discernible from the record for the amount determined as payable.
  • The impugned order dated 10.02.2021, raising a demand under Section 73(9) of the BGST Act for the period 2018-19, was quashed and set aside.
  • The petitioner was directed to deposit 20% of the demand within four weeks, without prejudice to the parties' contentions, with any excess deposit refundable within two months.
  • Attached bank accounts were directed to be de-frozen immediately, and the Assessing Authority was directed to pass a fresh, reasoned and speaking order on merits, expeditiously and preferably within two months of the petitioner's appearance.

Important Clarification

  • An ex parte demand order under Section 73(9) that does not disclose sufficient reasons for the quantum determined, or that is followed by recovery action without a further opportunity, is liable to be set aside on the short ground of natural justice alone.
  • The existence of an appellate remedy does not bar writ interference where the order is ex facie bad in law; such remand orders are typically conditional on partial pre-deposit and leave all issues open for the Assessing Authority to decide afresh.

Sections Involved

  • Section 73, Bihar Goods and Services Tax Act, 2017 — determination of tax not paid, short paid, or input tax credit wrongly availed, for reasons other than fraud.
  • Section 73(9), Bihar Goods and Services Tax Act, 2017 — computation and demand of tax, interest and penalty upon conclusion of the show cause process.

Decision – In Favour of

Disposed of in favour of the Assessee, with the Section 73(9) demand order quashed and the matter remanded to the Assessing Authority for a fresh, reasoned decision on merits, subject to a 20% pre-deposit condition.

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.: CWJC No.4066 of 2022
  • Case Title: M/s Lovely Construction vs Union of India & Ors.
  • Coram: Hon'ble the Chief Justice (Sanjay Karol, CJ) and Hon'ble Mr. Justice S. Kumar
  • Date of Order: 21.03.2022

Link to Download the Order

Click here to download the full order.

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