Shree Baidyanath Automobiles vs. Union Of INDIA Through The Secretary Union Of INDIA Through The Secretary

Held

The Court quashed and set aside the impugned order dated 22.01.2021 passed by the Additional Commissioner of State Tax (Appeal) and the order dated 13.03.2020 passed by the Assistant Commissioner of State Tax. The Court found that the orders were passed in violation of the principles of natural justice, specifically a lack of fair opportunity of hearing and that the orders were ex-parte and lacked sufficient reasoning to determine the amount due. On these grounds alone, the writ petition was disposed of. The Court directed the petitioner to deposit 10% of the total amount (if not already done) and an additional 10% of the demand raised before the Assessing Officer within four weeks, without prejudice to the parties' rights. The bank account of the petitioner was ordered to be de-frozen. The petitioner was directed to appear before the Assessing Authority on 16th August 2021, and the Assessing Authority was directed to decide the case on merits after complying with the principles of natural justice, affording adequate opportunity to all concerned, and passing a speaking order expeditiously, preferably within two months. No coercive steps were to be taken against the petitioner during this period. The Court explicitly stated that no opinion on merits was expressed and all issues were left open.

Facts

The petitioner, Shree Baidyanath Automobiles, challenged orders disallowing input tax credit (ITC) for the tax period March 2019, primarily on the ground of late filing of GSTR-3B. The Assistant Commissioner of State Tax, Raxaul, rejected the ITC claim, and the Additional Commissioner of State Tax (Appeal) dismissed the petitioner's appeal against this order. The petitioner sought various declarations, including that Section 16(4) of the CGST and BGST Acts is unconstitutional and that GSTR-3B is not a return prescribed under Section 39(1). The revenue, through its counsel, agreed to a remand for fresh decision on merits, with no coercive steps to be taken against the petitioner during the pendency of the case. The High Court noted violations of natural justice, specifically a lack of sufficient opportunity for hearing and an ex-parte order without sufficient reasoning.

Key Issues

1. Whether Section 16(4) of the Central Goods and Services Tax Act, 2017 (CGST Act) and Section 16(4) of the Bihar Goods and Services Tax Act, 2017 (BGST Act), which deny input tax credit (ITC) for invoices received after the due date of furnishing the return for September following the financial year or the annual return, whichever is earlier, is violative of Articles 14 and 300A of the Constitution of India. The petitioner argued that these provisions are arbitrary, illegal, and procedural, overriding substantive conditions in Section 16(1) and 16(2). They contended that the non-obstante clause in Section 16(2) should prevail and that Section 16(4) should be interpreted to only restrict claims for invoices received after the financial year's end, not belatedly filed returns. 2. Whether GSTR-3B is a return prescribed under Section 39(1) of the CGST Act, 2017, and if Rule 61(5) of the CGST Rules, 2017, as amended retrospectively, is valid in prescribing GSTR-3B as such a return. The petitioner argued that GSTR-3B does not meet the parameters of a return under Section 39(1). 3. Whether the show cause notice and the subsequent order disallowing ITC for March 2019, and the appellate order dismissing the appeal, are bad in law due to violations of natural justice and lack of sufficient reasoning. The revenue did not contest the factual basis of these arguments, agreeing to a remand.