M/S Maa Kali Cement Store vs. The Union Of INDIA

Held

The High Court quashed and set aside both the order dated January 12, 2022, passed by the Assistant Commissioner, State Tax, and the order dated September 29, 2022, passed by the Additional Commissioner, State Taxes (Appeals). The Court found that the initial order was passed ex parte and in violation of the principles of natural justice, as the petitioner was not afforded a fair opportunity of hearing and the order lacked sufficient reasoning. The appellate authority's rejection of the appeal solely on the ground of delay, without considering the merits, was also deemed unsustainable. The Court accepted the petitioner's undertaking to deposit 10% of the total demand amount before the Assessing Officer within four weeks, in addition to the 10% already deposited as a prerequisite for appeal hearing. The bank account of the petitioner was directed to be de-frozen immediately. The Assessing Authority was directed to decide the case on merits after complying with the principles of natural justice, affording adequate opportunity to all parties, and passing a speaking order within two months from the petitioner's appearance. No coercive steps were to be taken against the petitioner during this period. The Court explicitly stated that it had not expressed any opinion on the merits of the case.

Facts

The petitioner, M/s Maa Kali Cement Store, challenged an order dated January 12, 2022, and Form GST DRC-07 issued by the Assistant Commissioner, State Tax, Buxar Circle, for the period April 2020 to March 2021. This order imposed a demand of Rs. 65,89,033/- towards tax, interest, and penalty without adjusting available Input Tax Credit (ITC) and allegedly without issuing a show cause notice, violating principles of natural justice. The petitioner's subsequent appeal to the Additional Commissioner, State Taxes (Appeals), Patna West Division, was rejected on September 29, 2022, due to a 79-day delay, without considering the merits of the case. The petitioner sought quashing of both orders, a refund of any recovered amount, and de-freezing of their bank account.

Key Issues

1. Whether the order dated January 12, 2022, imposing a demand of Rs. 65,89,033/- without adjusting available ITC and without issuing a show cause notice, violates the principles of natural justice and Section 73 of the CGST Act, 2017? 2. Whether the rejection of the petitioner's appeal by the Additional Commissioner, State Taxes (Appeals) on September 29, 2022, solely on the ground of a 79-day delay, without considering the merits, is legally sustainable? Petitioner's Arguments: The petitioner contended that the initial order was passed ex parte, in violation of natural justice, as no sufficient opportunity for hearing was provided, and available ITC was not adjusted. They argued that the appellate authority failed to apply its mind and rejected the appeal on a technicality of delay without examining the substantive issues. Revenue's Arguments: The Revenue, through the learned counsel for the State, stated that they had no objection if the matter was remanded to the Assessing Authority for fresh decision on merits, and that the limitation period should not be a bar. They also agreed that no coercive steps should be taken against the petitioner during the pendency of the case.