M/S Vastrayan vs. The Stae Of Bihar, Through The Commissioner Of State Tax Cum Secretary

Facts

The petitioner, M/s Vastrayan, filed a writ petition challenging a show cause notice dated February 8, 2020, and an ex-parte order dated March 8, 2020, issued by the Assistant Commissioner of State Tax, Gopalganj. The show cause notice was issued under Section 73 of the Goods and Services Tax Act, 2007, for the financial year 2017-18, proposing a recovery of Rs. 6,27,173/-. The ex-parte order, also under Section 73, directed the petitioner to pay this amount as tax, interest, and penalty. Additionally, a notice under Section 79(1)(c) was issued to the petitioner's banker directing the payment of the disputed sum. The petitioner sought to quash these notices and orders and stay their operation.

Held

The Court held that the ex-parte order dated March 8, 2020, passed by the Assistant Commissioner of State Tax, Gopalganj, and the consequential notice under Section 79(1)(c) were bad in law due to violations of the principles of natural justice. Specifically, the petitioner was not afforded a fair opportunity of hearing, and the ex-parte order did not provide sufficient reasons for determining the amount due. The Court found these grounds sufficient to dispose of the writ petition. The Court quashed the impugned notice and order. The petitioner was directed to deposit 10% of the total demand, and additionally, another 10% within four weeks, without prejudice to their rights. The bank account of the petitioner was to be de-frozen. 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 preferably 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 no opinion was expressed on the merits of the case and all issues were left open.

Key Issues

1. Whether the ex-parte order dated March 8, 2020, passed under Section 73 of the Goods and Services Tax Act, 2007, is liable to be quashed for violating the principles of natural justice, specifically the right to a fair opportunity of hearing and for lacking sufficient reasons. Petitioner's arguments: The petitioner contended that the order was passed ex-parte without affording sufficient time for them to represent their case and that the order lacked decipherable reasons for determining the amount due. They argued that such an order, entailing civil consequences, is bad in law. 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, with no coercive steps to be taken against the petitioner during the pendency of the case. The Union of India was impleaded as a party respondent.