Simplified Explanation of the Judgment

In this case, the petitioner, a sole proprietorship firm engaged in trading, challenged several actions taken by the Bihar State Tax Department. The department had rejected the petitioner’s claim for Input Tax Credit (ITC) and imposed a significant tax and penalty under the Bihar Goods and Services Tax (BGST) Act, 2017.

The rejection of ITC was based on the ground that the supplier, JVL Agro Industries Ltd., had failed to file monthly GSTR-3B returns for the financial year 2017–18. Consequently, the department concluded that the petitioner’s ITC claim violated Section 16(2)(c) of the BGST Act. This led to a demand notice under Form GST DRC-07 for Rs. 8.43 lakhs and subsequent attachment of the petitioner’s bank account for recovery of Rs. 13.30 lakhs through DRC-13.

The petitioner approached the Patna High Court, seeking quashing of these orders and restoration of its banking operations. The State’s counsel had no objection to a remand for fresh adjudication.

The Hon’ble Chief Justice, delivering the oral judgment, observed significant procedural lapses in the case:

1. The order was passed ex parte, meaning without hearing the petitioner.
2. There was no sufficient opportunity for the petitioner to present its case.
3. The impugned order lacked reasons or clarity on how the amount was determined.

As these are clear violations of the principles of natural justice, the Court found it appropriate to set aside the orders.

The Court remanded the matter back to the Assessing Officer for fresh consideration on merit, after affording proper opportunity to the petitioner. The petitioner was directed to deposit 20% of the tax amount as a condition for reassessment, which would be adjusted or refunded as per the final outcome.

Further, the Court ordered the immediate release of the petitioner’s frozen bank accounts and barred any coercive recovery steps during the reassessment proceedings.

Significance or Implication of the Judgment

This judgment reinforces the vital role of procedural fairness in tax adjudication. It sends a strong message to tax authorities that ex parte orders without sufficient notice or justification can be quashed by constitutional courts. Importantly, it protects small businesses from arbitrary or automated tax recovery mechanisms, such as bank account attachments, without due process.

For taxpayers, the ruling underscores their right to a fair hearing and the requirement that tax officers must pass reasoned, speaking orders.

For the State, it emphasizes the need to ensure that recovery actions are legally sound and procedurally compliant to avoid unnecessary litigation.

Legal Issue(s) Decided and the Court’s Decision

• Whether ITC could be denied solely on supplier’s non-filing of GSTR-3B?
  → Matter remanded for fresh decision with due hearing.
• Whether bank account attachment without proper opportunity is valid?
  → Attachment quashed due to violation of natural justice.
• Whether summary proceedings under Section 73(9) can be done ex parte?
  → Ex parte orders without reason are impermissible; must be reasoned.
• Can the High Court interfere despite statutory remedy?
  → Yes, when there is a clear violation of natural justice.

Case Title
M/s Sandeep Traders vs The State of Bihar & Others

Case Number
Civil Writ Jurisdiction Case No.17286 of 2022

Citation(s)– 2023 (1) PLJR 674

Coram and Names of Judges
Hon’ble the Chief Justice Sanjay Karol
Hon’ble Mr. Justice Partha Sarthy

Names of Advocates and who they appeared for
Mr. Anurag Saurav — for the petitioner
Mr. Vivek Prasad (GP7) — for the respondents

Link to Judgment
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