Facts of the Case: The petitioner, Sai Enterprises, a proprietorship concern of Bijay Kumar Chourasia, Bhagalpur, was assessed by the Assistant Commissioner of State Tax, Bhagalpur Circle, through an ex parte order dated 25.02.2020, with a consequent summary demand issued in Form GST DRC-07 dated 26.02.2020. The petitioner's statutory appeal against this order, bearing Appeal Case No. (ARN) AD100320000388X, was rejected by the Additional Commissioner, State Tax (Appeal), Bhagalpur Division, by order dated 09.09.2021. The petitioner contended that its submission on the applicability of an amendment introduced by way of Section 50 of the CGST Act, 2017 (concerning interest liability) had not been taken into account, and that both the original assessment and the appellate rejection were passed ex parte, without adequate opportunity of hearing. Aggrieved, the petitioner approached the Patna High Court under Article 226 of the Constitution.

Issues Involved

  1. Whether the ex parte assessment order and the appellate rejection, passed without adequately hearing the petitioner and without reasons, could be sustained.
  2. Whether the writ court could interfere despite the availability of a statutory remedy, where the impugned orders were ex facie bad in law.

Petitioner's Arguments

  • Both the original assessment order dated 25.02.2020 and the appellate order dated 09.09.2021 were passed ex parte, without sufficient opportunity of hearing.
  • The petitioner's contention regarding the applicability of the amendment to Section 50 (governing interest on delayed payment) had not been considered by the authorities.

Respondent's Arguments

  • The Revenue's counsel stated no objection to the matter being remanded to the Assessing Authority for a fresh decision on merits, and agreed that no coercive steps would be taken against the petitioner during the pendency of the case.

Court Order / Findings

  • The Court held that despite the availability of a statutory remedy, it was not precluded from interfering where an order was ex facie bad in law — here, for (a) violation of principles of natural justice, with insufficient opportunity of hearing; and (b) an ex parte order that assigned no reasons decipherable from the record for the amount determined.
  • The authorities were found not to have adjudicated the matter on the attending facts and circumstances, notwithstanding the ex parte nature of the proceedings.
  • The appellate order dated 09.09.2021, the original assessment order dated 25.02.2020, and the DRC-07 summary demand dated 26.02.2020 were quashed and set aside, and the matter remanded to the Assessing Authority for fresh, reasoned adjudication on merits.
  • Detailed safeguards were directed: de-freezing of the petitioner's bank accounts, an additional 10% deposit of the demand within four weeks, no coercive recovery during pendency, and a speaking order to be passed within two months of the petitioner's appearance. The Court clarified it had expressed no opinion on the merits, and all issues were left open, with liberty reserved to challenge the fresh order.

Important Clarification

  • A writ court will quash an ex parte GST assessment and its confirming appellate order where they are unreasoned and passed without adequate hearing, notwithstanding the availability of a statutory appellate remedy, and will remand for fresh, reasoned adjudication rather than deciding the substantive tax liability itself.

Sections Involved

  • Section 62, CGST Act, 2017 — best-judgment assessment in the absence of return filing.
  • Section 50, CGST Act, 2017 — interest on delayed payment of tax.
  • Section 107, CGST Act, 2017 — statutory appeal and pre-deposit requirements.
  • Rule 142, CGST Rules, 2017 — summary of demand orders in Form GST DRC-07.

Decision – In Favour of

Disposed of with directions, in favour of the Assessee on the procedural challenge. The ex parte assessment and appellate rejection were quashed and the matter remanded for fresh adjudication on merits, with the Court expressing no opinion on the substantive tax liability.

Related Case Laws

Case Details

  • Court: High Court of Judicature at Patna
  • Case No.: Civil Writ Jurisdiction Case No.2937 of 2022
  • CNR: Not indicated on the order
  • Coram: Hon'ble the Chief Justice Sanjay Karol and Hon'ble Mr. Justice S. Kumar
  • Date of Order: 28.02.2022

Link to Download the Order

https://mytaxexpert.co.in/uploads/1787077251_4643compressed.pdf

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