M/S Shree Sai Traders ( A Sole Proprietorship Firm) vs. The Union Of INDIA

Held

The High Court quashed and set aside the impugned order dated September 19, 2022, passed by the Additional Commissioner (Appeal) and the original ex-parte order dated January 9, 2021, passed by the Assistant Commissioner of State Tax. The Court found the orders to be bad in law primarily due to the violation of the principles of natural justice, specifically the lack of a fair opportunity of hearing for the petitioner and the ex-parte nature of the orders which did not provide sufficient reasoning for the determined tax liability. The Court also noted that the authorities had not adjudicated the matter on the attending facts and circumstances. The Court accepted the Revenue's statement to remand the matter for fresh consideration. The Court directed the petitioner to deposit ten percent of the demand amount within four weeks, without prejudice to the rights of the parties. The bank account of the petitioner was ordered 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 for hearing and submission of documents, and passing a speaking order within two months. The issue of limitation was expressly waived for the purpose of this fresh adjudication. The Court explicitly stated that no opinion was expressed on the merits of the case, and all issues were left open.

Facts

The petitioner, M/s Shree Sai Traders, filed a writ petition challenging an order dated September 19, 2022, by the Additional Commissioner (Appeal), Patna East Division. This appellate order had rejected the petitioner's appeal against an ex-parte order dated January 9, 2021, passed by the Assistant Commissioner of State Tax, North Circle, Patna. The appeal was dismissed solely on the grounds of delay, exceeding the 90-day limit. The original ex-parte order imposed a demand of Rs. 1,55,762/- (including interest and penalty) under Section 73(9) of the BGST Act read with Rule 142 of the BGST Rules, 2017. This demand arose from an alleged discrepancy in TDS reflected in the GSTR-7 of a Tax Deductor, where the petitioner was accused of making a lesser entry than what was reflected by the Tax Deductor. The petitioner contended that evidence showing a double entry by the Tax Deductor was not considered.

Key Issues

1. Whether the appellate authority erred in dismissing the petitioner's appeal solely on the ground of delay, thereby violating the principles of natural justice and failing to adjudicate on the merits of the case, as contemplated under Section 107 of the BGST Act? 2. Whether the original ex-parte order dated January 9, 2021, passed by the Assistant Commissioner of State Tax, was vitiated by a violation of the principles of natural justice, specifically the right to a fair opportunity of hearing and adequate reasons for the demand raised under Section 73(9) of the BGST Act read with Rule 142 of the BGST Rules, 2017? Petitioner's Arguments: The petitioner argued that the appellate authority's decision to dismiss the appeal on grounds of delay, without considering the merits, was illegal and a violation of natural justice. They also contended that the original ex-parte order was passed without sufficient opportunity for hearing and lacked proper reasoning, failing to consider crucial evidence regarding the Tax Deductor's double entry of TDS. Revenue's Arguments: The learned counsel for the Revenue stated they had no objection if the matter was remanded to the Assessing Authority for a fresh decision on merits, and that the issue of limitation should not come in the way. They also agreed that no coercive steps should be taken against the petitioner during the pendency of the case.