Simplified Explanation of the Judgment
In a recent decision, the Patna High Court has set aside a tax demand order issued under the GST regime due to serious violations of natural justice. The case involved a business entity engaged in selling tractors, which had challenged a demand of over ₹61 lakhs raised by the State Tax Department for the financial year 2018–2019.
The petitioner’s key grievance was that the demand was issued without serving a show cause notice and without considering the Input Tax Credit (ITC) already available in their account. The authorities had also rejected the petitioner’s appeal on a mere technicality—delay of 65 days in filing—without considering the merits of the case.
Recognizing these procedural lapses, the High Court emphasized that even when proceedings are conducted ex parte (i.e., without the party being present), the assessing authority must assign clear reasons and provide fair opportunity to be heard. The Court noted that the order passed was entirely silent on how the tax liability was calculated and failed to give the petitioner any real chance to defend its position.
The Court also observed that procedural fairness is essential even if statutory remedies exist, especially when the impugned order causes civil consequences, such as freezing of bank accounts or recovery actions.
In light of this, the Court quashed both the demand order dated 22.01.2021 and the appellate rejection dated 27.09.2022. The case was remanded to the original assessing authority for a fresh decision, this time ensuring proper notice, opportunity of hearing, and reasoned order.
Importantly, the Court also ordered that the petitioner’s bank accounts, if frozen, be immediately defreezed and no coercive steps be taken during the fresh adjudication. The petitioner was directed to appear before the authority on a fixed date and cooperate with the proceedings.
Significance or Implication of the Judgment
This judgment underscores the importance of procedural fairness in tax proceedings under GST. It sends a clear message to tax authorities that:
- No tax demand can be enforced without following due process, including proper notice and a hearing.
- Mere technical delays in appeal filing cannot justify rejection if the matter involves significant financial and civil consequences.
- Taxpayers have a right to be heard and to understand how their liability has been assessed.
For businesses and individuals alike, the case reaffirms the constitutional guarantee of natural justice and provides a remedy against arbitrary tax actions.
Legal Issue(s) Decided and the Court’s Decision
- Whether the demand order issued without show cause notice violates natural justice?
- Yes; such an order is bad in law and liable to be set aside.
- Can an appeal be dismissed solely on the ground of delay without considering merits?
- No; the appellate authority must examine the matter substantively, especially when delay is not substantial.
- Can the High Court intervene despite statutory appeal processes under GST law?
- Yes; when there is ex facie violation of natural justice causing civil consequences.
Case Title
M/s Shiv Shakti Tractors v. Union of India & Others
Case Number
Civil Writ Jurisdiction Case No.129 of 2023
Citation(s)– 2023 (2) PLJR 114
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. Alok Kumar, Advocate — for the Petitioner
Dr. K.N. Singh (ASG), Mr. Anshuman Singh (Sr. SC, CGST & CX), Mr. Vivek Prasad (GP-7) — for the Respondents
Link to Judgment
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