The Patna High Court has set aside a significant demand order and subsequent appellate rejection issued against a business entity, highlighting the importance of procedural fairness in GST proceedings. The petitioner, a proprietor operating in Nawada, Bihar, challenged the imposition of over ₹61 lakh as tax, interest, and penalty without being given a proper opportunity to be heard.
The controversy arose when tax authorities issued a demand notice under Form GST DRC-07 for the financial year 2018–2019. The petitioner claimed that the demand was calculated without adjusting the available Input Tax Credit (ITC) from the cash/credit ledger. Most critically, the demand was raised without a proper show-cause notice, violating the principles of natural justice.
Additionally, when the petitioner approached the appellate authority — the Additional Commissioner, State Tax (Appeal), Magadh Division, Gaya — the appeal was dismissed solely on the grounds of a 65-day delay. No attempt was made to consider the substantive merits of the petitioner’s case.
Recognizing these procedural lapses, the High Court intervened. Despite the existence of statutory appellate remedies, the Bench comprising Hon’ble the Chief Justice Sanjay Karol and Hon’ble Mr. Justice Partha Sarthy held that courts are empowered to act when an order appears patently illegal on its face. The Court noted three key violations: absence of fair hearing, a non-speaking ex parte order, and failure to consider factual and legal issues.
On these grounds, the Court quashed both the original demand order dated 22.01.2021 and the appellate order dated 27.09.2022. It remanded the matter back to the Assessing Authority for fresh adjudication on merits. Importantly, the Court accepted the Revenue’s statement that limitation would not be a bar and no coercive recovery action would be taken pending fresh proceedings.
The Court also directed that the petitioner’s bank account be unfrozen immediately and permitted digital appearance before the Assessing Officer. The entire process was directed to be completed within two months.
Significance or Implication of the Judgment
This judgment reinforces the foundational principle of natural justice in taxation — no person should be penalized without being heard. For taxpayers in Bihar and across India, it emphasizes the necessity for tax authorities to follow due process and offer clear reasoning in their decisions.
For government departments, the decision serves as a reminder to handle GST enforcement and recovery proceedings in strict adherence to statutory and constitutional safeguards. The ruling also encourages early resolution and discourages procedural rigidity where substantive justice demands flexibility.
Legal Issue(s) Decided and the Court’s Decision
- Whether demand notice without show-cause or hearing violates natural justice?
✅ Yes. The Court held the order invalid for not providing an opportunity to be heard. - Whether appellate authority should consider the merits even with procedural delay?
✅ Yes. Dismissing an appeal solely on delay without merit review was deemed improper. - Can High Court interfere despite available appellate remedy?
✅ Yes. Courts can intervene if orders are facially illegal and violate basic rights. - What reliefs were granted?
✅ Demand and appellate orders quashed; matter remanded; bank account to be defrozen; no coercive action; matter to be heard afresh on merits.
Case Title
M/s Shiv Shakti Tractors vs. The Union of India & Ors.
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 — For the Petitioner
Dr. K.N. Singh (ASG), Mr. Anshuman Singh (Sr. SC, CGST & CX), and Mr. Vivek Prasad (GP-7) — For the Respondents
Link to Judgment
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