M/S Sandeep Traders vs. The State Of Bihar

Held

The Court quashed and set aside the impugned order dated May 25, 2022, passed by the Joint Commissioner of State Tax, the demand notice dated May 25, 2022, and the order dated November 7, 2022, passed by the Assistant Commissioner of State Tax. The Court's decision was based on two primary grounds: (a) violation of the principles of natural justice, specifically the lack of a fair opportunity of hearing and insufficient time afforded to the petitioner, and (b) the order passed did not assign sufficient reasons for determining the amount due and payable. The Court held that an order passed in violation of natural justice entails civil consequences and is bad in law. The Court directed the petitioner to deposit twenty percent of the demand amount within four weeks, without prejudice to the parties' rights. The Court also ordered the de-freezing/de-attaching of the petitioner's bank account(s) 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. No coercive steps are to be taken against the petitioner during the assessment. All issues of fact and law were left open for adjudication by the Assessing Authority.

Facts

The petitioner, M/s Sandeep Traders, challenged an order dated May 25, 2022, passed by the Joint Commissioner of State Tax, Sahabad Circle, Araha, Bihar. This order rejected the petitioner's Input Tax Credit (ITC) claim for purchases made from "JVL AGRO INDUSTRIES LIMITED" during the Financial Year 2018-19. The rejection was based on the ground that "JVL AGRO INDUSTRIES LIMITED" had not furnished its monthly return in Form GSTR-3B. The impugned order also imposed a demand of Rs. 4,86,692/- as tax, interest, and penalty under Section 73(9) of the BGST Act. Subsequently, an order dated November 7, 2022, from the Assistant Commissioner of State Tax directed the attachment of the petitioner's bank account to recover Rs. 13,30,464/-. The petitioner sought to set aside these orders and release the attached bank account.

Key Issues

1. Whether the impugned order dated 25.05.2022, rejecting the Input Tax Credit claim and imposing tax, interest, and penalty, is liable to be set aside on the grounds of violation of principles of natural justice, specifically the lack of a fair opportunity of hearing and insufficient time afforded to the petitioner to represent their case? 2. Whether the impugned order dated 25.05.2022 is liable to be set aside for failing to provide sufficient reasons for determining the amount due and payable by the assessee? 3. Whether the subsequent order dated 07.11.2022 directing attachment of the bank account is liable to be set aside in light of the alleged infirmities in the initial order? Petitioner's Arguments: The petitioner contended that the orders were passed in violation of the principles of natural justice, as they were not afforded a fair opportunity of hearing and sufficient time to present their case. They also argued that the orders lacked sufficient reasoning to justify the demand. The petitioner sought the quashing of the impugned orders and the release of their attached bank account. Revenue's Arguments: The Revenue, through the learned counsel for the State, stated that they had no objection if the matter was remanded to the Assessing Authority for a fresh decision on merits. They also agreed that no coercive steps would be taken against the petitioner during the pendency of the case.