Simplified Explanation of the Judgment
In a recent ruling, the Patna High Court set aside a GST demand order and remanded the case back to the assessing authority after finding that the initial tax demand was issued in violation of natural justice principles. The matter involved a writ petition filed by a proprietorship firm against orders issued by the State Tax Department concerning a GST demand of over ₹61 lakh for the financial year 2018–2019.
The petitioner challenged two orders: first, the summary demand notice dated 22 January 2021 issued in Form GST DRC-07 by the Joint Commissioner of State Tax, Nawada; and second, the appellate order dated 27 September 2022 issued by the Additional Commissioner of State Tax (Appeals), Magadh Division, Gaya. The appellate authority had rejected the petitioner’s appeal solely on the ground of a 65-day delay, without addressing the merits of the case.
The High Court found that the demand order was passed without issuing a show-cause notice and without affording the petitioner a fair hearing. The order lacked reasoning and was passed ex parte. Such actions, the Court held, constitute a violation of natural justice, particularly when civil consequences like freezing of bank accounts and coercive recovery measures are involved.
Recognising the importance of procedural fairness, the Court accepted the suggestion from the revenue department that the matter could be remanded for fresh adjudication. The revenue’s counsel also agreed that limitation would not be used as a ground to block reconsideration of the matter.
Accordingly, the Court quashed both the demand order and the appellate order and issued comprehensive directions for a fresh hearing. The Court ordered that ten percent of the demanded amount (if not already deposited) be paid by the petitioner within four weeks, without prejudice to its legal position. The authorities were also directed to defreeze the petitioner’s bank account immediately.
The assessing authority has been instructed to conduct a fresh hearing on merits, provide a fair opportunity to the petitioner, and pass a reasoned order within two months of the petitioner’s appearance. No coercive steps are to be taken in the meantime. The petitioner has been asked to appear on 6 February 2023, preferably through digital means.
Significance or Implication of the Judgment
This judgment highlights the Patna High Court’s firm stance on upholding the principles of natural justice, especially in tax matters where substantial financial liabilities and business disruptions are at stake. It reinforces the idea that procedural fairness cannot be sacrificed, even in the face of statutory timelines.
For businesses and taxpayers, this ruling is a significant reminder that any tax order must be based on reasoned analysis and must follow due process, including prior notice and a hearing. For the government, it underscores the importance of ensuring that departmental actions meet constitutional standards of fairness.
Legal Issue(s) Decided and the Court’s Decision
- Whether the GST demand order was valid when issued without notice or hearing
- Court’s Decision: No, the order was quashed as it violated natural justice.
- Whether delay in filing an appeal could justify dismissal without hearing merits
- Court’s Decision: No, especially when the appeal rejection itself is flawed and the department agrees to a fresh hearing.
- Whether coercive action like bank account freezing could be sustained
- Court’s Decision: No, the Court directed de-freezing subject to further proceedings.
Case Title
M/s Shiv Shakti Tractors v. 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, 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
MTUjMTI5IzIwMjMjMSNO-HOahl6gpuPQ=
If you found this explanation helpful and wish to stay informed about how legal developments may affect your rights in Bihar, you may consider following Samvida Law Associates for more updates.
