Facts of the Case

The petitioner, Sai Enterprises, a proprietorship concern of Bijay Kumar Chourasia based at Sikandarpur, Mirjanhat, Bhagalpur, Bihar, holding GSTIN 10AFHPC6919C1Z3, challenged an order dated 25.02.2020 passed by the Assistant Commissioner of State Tax, Bhagalpur Circle, imposing interest of Rs.4,41,079 under Section 75(12) of the CGST Act, 2017 read with Rule 142(5) of the Bihar Goods and Services Tax Rules, 2017, for the months of April 2018, May 2018 and March 2019, without prior issuance of a notice under Rule 142. The consequential summary in Form GST DRC-07 dated 20.02.2020 raised a demand of Rs.3,19,935 for Financial Year 2018-19. The petitioner's appeal against this order was dismissed by the Additional Commissioner, State Tax (Appeal), Bhagalpur Division, by order dated 09.09.2021 (Memo No.268), with a corresponding demand in Form GST APL-04 dated 15.09.2021. Aggrieved, the petitioner approached the Patna High Court.

Issues Involved

  1. Whether the interest order dated 25.02.2020 and the consequential DRC-07 could be sustained when passed without issuance of notice under Rule 142 of the BGST Rules, 2017.
  2. Whether the ex parte appellate order dated 09.09.2021, passed without adequate opportunity of hearing and without recorded reasons, violated the principles of natural justice.
  3. Whether the writ court could interfere notwithstanding the availability of the statutory appellate remedy.

Petitioner's Arguments

  • No notice was issued under Rule 142 of the BGST Rules before interest was imposed under Section 75(12) of the Act, resulting in an ex parte order.
  • The petitioner's contention regarding the applicability of the amendment to Section 50 of the Act had not been taken into account by the authorities.
  • The appellate order dismissing the appeal was likewise passed ex parte, without sufficient opportunity of hearing.
  • Both the interest/demand order and the appellate order were liable to be set aside for violation of natural justice.

Respondent's Arguments

  • Learned counsel for the Revenue stated that he had no objection if the matter were remanded to the Assessing Authority for a fresh decision on merits.
  • Agreed that no coercive steps would be taken against the petitioner during pendency of the fresh proceedings; this statement was accepted and taken on record.

Court Order / Findings

  • The Court held that, notwithstanding the availability of the statutory remedy, it was not precluded from interfering where an order was, ex facie, bad in law.
  • It found that the interest/demand order and the appellate order suffered from violation of natural justice — no sufficient opportunity of hearing was afforded, and the orders, being ex parte in nature, did not disclose reasons sufficient to show how the amount due was determined.
  • Quashed and set aside the appellate order dated 09.09.2021, the original order dated 25.02.2020, the DRC-07 dated 20.02.2020, and the Form GST APL-04 dated 15.09.2021.
  • Directed the petitioner to additionally deposit 10% of the demand amount within four weeks, over and above the 10% already deposited for the appeal, without prejudice to the parties' rights and refundable if found excess; directed de-freezing of the petitioner's bank accounts; and directed the Assessing Authority to decide the matter afresh on merits after complying with natural justice, preferably within two months, by a reasoned, speaking order, with liberty reserved to challenge the fresh order.

Important Clarification

  • Even where a statutory appellate remedy exists under the GST Act, a writ court can interfere where the impugned order is, on its face, bad in law — particularly where it is passed ex parte, without adequate opportunity of hearing, and without recording reasons for the tax or interest determined.
  • An interest demand under Section 75(12) raised without complying with the notice requirement under Rule 142 of the GST Rules is liable to be set aside on that ground, independent of the merits of the underlying liability.

Sections Involved

  • Section 75(12), Central Goods and Services Tax Act, 2017 — deals with recovery of self-assessed/admitted tax and interest.
  • Rule 142(5), Bihar Goods and Services Tax Rules, 2017 — prescribes the manner of issuance of a summary of demand and requires prior notice before determination.
  • Section 107, Central Goods and Services Tax Act, 2017 — governs first appeals, including the pre-deposit condition for maintainability.

Decision – In Favour of

Disposed of with directions, in part in favour of the Assessee — the impugned orders were quashed for breach of natural justice and the bank accounts ordered de-frozen, but the Court expressed no opinion on the merits of the underlying tax/interest liability, leaving all issues open for fresh adjudication.

Case Details

  • Court: High Court of Judicature at Patna
  • Case No.: Civil Writ Jurisdiction Case No.2314 of 2022
  • CNR: Not available on record
  • Coram: Hon'ble the Chief Justice Sanjay Karol and Hon'ble Mr. Justice S. Kumar
  • Decision Date: 22.02.2022
  • Disposal Nature: Disposed of – impugned orders quashed and remanded with directions

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