M/S National Enterprises vs. The Union Of INDIA

Held

The Court quashed and set aside the impugned order dated February 15, 2020, and the subsequent order dated March 7, 2020. The primary reason for this decision was the violation of the principles of natural justice, specifically the lack of a fair opportunity of hearing afforded to the petitioner and the ex parte nature of the orders which lacked sufficient reasoning. The Court accepted the revenue's statement that the matter should be remanded to the Assessing Authority for a fresh decision on merits. The Court also directed the petitioner to deposit ten percent of the total demand amount, in addition to any amount already deposited, within four weeks, without prejudice to the parties' rights. The bank account(s) of the petitioner were 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 to all parties, and passing a speaking order within two months from the petitioner's appearance. The Court explicitly stated that it had not expressed any opinion on the merits of the case and all issues were left open. Liberty was reserved for the petitioner to challenge the vires of Section 16(4) and Rule 61(5) in separate proceedings.

Facts

The petitioner, M/s National Enterprises, challenged orders dated February 15, 2020, and March 7, 2020, issued by the Assistant Commissioner of State Tax, Muzaffarpur East. These orders disallowed Input Tax Credit (ITC) and imposed a total tax, penalty, and interest of Rs. 11,01,707/- for the tax period 2017-18. The petitioner also sought to declare Section 16(4) of the Bihar/Central Goods and Services Tax Act, 2017, and Rule 61(5) of the Bihar/Central Goods and Services Tax Rules, 2017, as ultra vires. The revenue, represented by the Union of India and various tax authorities, agreed to a remand of the matter 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.

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), and 300A) and the basic structure of the GST Act? The petitioner argued that this provision violates fundamental rights and the vested right to claim ITC. 2. Whether the amendment to Rule 61(5) of the Bihar/Central Goods and Services Tax Rules, 2017, making GSTR-3B a valid return retrospectively from July 1, 2017, is ultra vires the Constitution (Articles 14, 19(1)(g), and 300A) as it interferes with the vested right to avail ITC? The petitioner contended this amendment unfairly impacts their ITC claims. 3. Whether the impugned orders dated February 15, 2020, and March 7, 2020, disallowing ITC and imposing tax, penalty, and interest of Rs. 11,01,707/- are liable to be quashed or set aside? The petitioner argued these orders were passed in violation of principles of natural justice and lacked sufficient reasoning. The revenue did not contest the quashing of the orders and agreed to a remand.