M/S Aaryan Advertising World (A Proprietorship Firm) vs. The Union Of INDIA

Held

The Court quashed and set aside the impugned orders dated 22.11.2021 passed by the Assistant Commissioner of State Tax and the summary of order in Form GST DRC-07. The Court found the orders to be bad in law primarily due to violations of the principles of natural justice, specifically the lack of a fair opportunity of hearing and the ex parte nature of the proceedings without sufficient reasoning. The Court also noted that the authorities had not adjudicated the matter on the attending facts and circumstances. The Court accepted the petitioner's undertaking to deposit 50% of the tax amount already paid and an additional 10% of the demand within four weeks, without prejudice to the rights of the parties. The bank accounts of the petitioner were directed to be de-frozen. The Assessing Authority was directed to decide the case on merits after complying with principles of natural justice, affording adequate opportunity to parties, and passing a speaking order within two months of the petitioner's appearance. No coercive steps were to be taken against the petitioner during this period. The Court expressly stated that it had not expressed any opinion on the merits of the case, leaving all issues open.

Facts

The petitioner, M/s Aaryan Advertising World, filed a writ petition challenging Section 16(4) of the Bihar/Central Goods and Services Tax Act, 2017, and an amendment to Rule 61(5) of the Bihar/Central Goods and Services Rules, 2017. The petitioner also sought to quash an order dated 22.11.2021 and DRC-07 issued by the Assistant Commissioner of State Tax, Patna, disallowing Input Tax Credit (ITC) and imposing a demand of Rs. 10,18,361/-. The impugned orders were ex parte. The petitioner had deposited 50% of the tax amount and was ready to deposit an additional 10% of the demand. The Revenue had no objection to the matter being remanded for fresh adjudication on merits, without the limitation period being a bar, and without coercive steps during the pendency.

Key Issues

1. Whether Section 16(4) of the Bihar/Central Goods and Services Tax Act, 2017, which imposes a time limit for availing Input Tax Credit, is ultra vires the Constitution of India (Articles 14, 19(1)(g), 300A) and the basic structure of the GST Act? 2. Whether the amendment to Rule 61(5) of the Bihar/Central Goods and Services Rules, 2017, making GSTR-3B a valid return retrospectively from 01.07.2017, is ultra vires the Constitution (Articles 14, 19(1)(g), 300A) and interferes with vested rights to ITC? 3. Whether the ex parte order dated 22.11.2021 and DRC-07, disallowing ITC and imposing tax, penalty, and interest, are liable to be quashed for violating principles of natural justice and lacking sufficient reasoning? Petitioner's Arguments: The petitioner argued that Section 16(4) and the amendment to Rule 61(5) are unconstitutional and arbitrary, infringing fundamental rights and vested rights to ITC. They also contended that the impugned orders were passed ex parte without proper opportunity of hearing and lacked sufficient reasoning, violating principles of natural justice. Revenue's Arguments: The Revenue stated it had no objection to the matter being remanded to the Assessing Authority for fresh adjudication on merits, subject to certain conditions, and that the limitation period should not impede the decision. The Revenue did not contest the petitioner's arguments regarding the ex parte nature of the order.