Sai Enterprises (Proprietorship) vs. The Union Of INDIA

Facts

The petitioner, Sai Enterprises, challenged orders imposing interest and demand under the Goods and Services Tax (GST) Act. The Assistant Commissioner of State Tax, Bhagalpur, issued an order dated 25.02.2020 imposing interest of Rs. 4,41,079 under Section 75(12) and Rule 142(5) for April 2018, May 2018, and March 2019, allegedly without issuing a notice as per Rule 142 and violating principles of natural justice. A consequential demand of Rs. 3,19,935 was issued via DRC-07 dated 20.02.2020 for FY 2018-2019. The petitioner's appeal against these orders was dismissed by the Additional Commissioner State Tax (Appeal) on 09.09.2021. A further demand of Rs. 3,19,935 was issued in Form GST APL-04 dated 15.09.2021. The petitioner contended that both the initial order and the appellate order were ex parte and lacked proper reasoning.

Held

The Court quashed and set aside the impugned orders dated 09.09.2021 (appellate order), 25.02.2020 (Assistant Commissioner's order), 20.02.2020 (DRC-07), and 15.09.2021 (GST APL-04). The Court found the orders to be bad in law due to a violation 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 noted that the authorities failed to adjudicate the matter on the attending facts and circumstances. The Court directed the Assessing Authority to decide the case afresh on merits after complying with the principles of natural justice, affording adequate opportunity to all concerned, and passing a speaking order with reasons. The petitioner was directed to deposit ten percent of the total amount (if not already deposited) and additionally ten percent of the demand within four weeks, without prejudice to the rights of the parties. The bank account(s) of the petitioner were ordered to be de-frozen. The Assessing Authority was directed to decide the case expeditiously, preferably within two months from the petitioner's appearance. The Court explicitly stated that it had not expressed any opinion on merits and all issues were left open.

Key Issues

1. Whether the impugned orders imposing interest and demand under the GST Act were liable to be set aside for violation of principles of natural justice, specifically for lack of proper notice and opportunity of hearing, as argued by the petitioner? 2. Whether the appellate order dismissing the petitioner's appeal was valid, especially considering the petitioner's contention that the amendment brought by Section 50 of the GST Act was not taken into account and that the order was passed ex parte? Petitioner's Arguments: The petitioner argued that the orders were passed ex parte and in gross violation of the principles of natural justice, as no proper notice was issued under Rule 142 of the Bihar Goods and Services Tax Rules, 2017, and no sufficient opportunity of hearing was provided. They also contended that the appellate authority failed to consider the applicability of the amendment to Section 50 of the GST Act and that the orders lacked sufficient reasoning. Revenue's Arguments: The learned counsel for the Revenue stated that they had no objection if the matter was remanded to the Assessing Authority for deciding the case afresh on merits. They also agreed that no coercive steps would be taken against the petitioner during the pendency of the case.