Vinod Kumar Singh vs. Goods And Service Tax
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The petitioner, Vinod Kumar Singh, proprietor of M/s Singh Traders, filed a writ petition challenging an order of demand dated March 2, 2020, passed by the Assistant Commissioner of State Tax, Muzaffarpur West, under Section 73 of the GST Act, 2017. The order pertained to the tax period April 2018-March 2019 and was issued in Form GST DRC-07. The petitioner contended that the order was passed unilaterally without providing an opportunity for show cause or a hearing. Consequently, the petitioner's bank accounts were frozen. The petitioner sought to quash the demand order and the consequential freezing of bank accounts. The delay in filing the petition was attributed to COVID-19 restrictions.
Held
The Court held that the impugned order dated March 2, 2020, passed by the Assistant Commissioner of State Tax, Muzaffarpur West, under Section 73 of the GST Act, 2017, was bad in law for two primary reasons: (a) violation of the principles of natural justice, as the petitioner was not afforded sufficient time or a fair opportunity to represent their case, and (b) the order was passed ex parte without assigning sufficient reasons to determine the amount due. The Court found that such an order, entailing civil consequences, could be interfered with notwithstanding the statutory remedy. Consequently, the Court quashed and set aside the impugned order. The Court also directed the de-freezing of the petitioner's bank accounts. The matter was remanded to the Assessing Authority for a fresh decision on merits after complying with the principles of natural justice, with the petitioner undertaking to deposit ten percent of the demand and an additional ten percent within four weeks. The Assessing Authority was directed to decide the case expeditiously, preferably within two months, and pass a speaking order. The Court explicitly stated that it had not expressed any opinion on the merits of the case and all issues were left open.
Key Issues
1. Whether the impugned order of demand dated March 2, 2020, passed under Section 73 of the GST Act, 2017, is liable to be quashed and set aside for being passed without providing the petitioner with an adequate opportunity of show cause and hearing, thereby violating the principles of natural justice? 2. Whether the consequential order of freezing the petitioner's bank accounts is liable to be quashed and set aside as a consequence of the invalid demand order? Petitioner's Arguments: The petitioner argued that the order was passed in violation of the principles of natural justice, specifically by denying a fair opportunity to present their case. They contended that an order passed ex parte without sufficient reasons and in violation of natural justice entails civil consequences and is therefore bad in law. 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 a fresh decision on merits. They also agreed that no coercive steps would be taken against the petitioner during the pendency of the case.
Sections Cited
Section 73
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Cause title — parties, addresses and appearances
ORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE) (The proceedings of the Court are being conducted by Hon’ble the Chief Justice/Hon’ble Judges through Video Conferencing from their residential offices/residences. Also the Advocates and the Staffs joined the proceedings through Video Conferencing from their residences/offices.) Date : 07-07-2021 Petitioner has prayed for the following relief(s): “I. That, the impugned order of demand dt.2.3.2020 unilaterally
passed
against the petitioner U/S 73 of the GST Act by respondent No.5 be quashed and set aside as it has been passed without providing 2/7 an opportunity
of show
cause and also without providing an opportunity of hearing
to the petitioner,
being an authority of law Respondents cannot pass order in such manner. II. That, petitioner further prays for quashing and setting aside the consequential order of freezing bank accounts of petitioner's firm SINGH TRADERS
vide
Current
A/C No.1637002100001816,
running
in KAMALPURA Branch of PUNJAB NATIONAL BANK, Muzaffarpur, and one Recurring account in the same bank Vide A/C No.xxxxxxxxxxx84312, Current balance of 1 account is Rs.2177869/- and 2nd is Rs.2056519/- III. That, for any other relief (s) for which petitioner is found entitled on the facts of this case and also in the eye of law. ” It is brought to our notice that the impugned order dated 2nd of March, 2020 has been passed by the Respondent No. 5 namely the Assistant Commissioner of State Tax, Muzaffarpur West, Tirhut, Bihar in GSTIN/ID 10BDVPS4441J2Z7, under Section 73 of GST Act, 2017; under Reference No. ZA1003200004091, for the tax period April 2018-March, 2019 in Form GST DRC-07, without providing an opportunity to the petitioner to show cause and without providing an opportunity of hearing to the petitioner in consequence whereof the bank accounts 3/7 of the petitioner detailed in the petition have been frozen. In our considered view, the delay stands sufficiently explained on account of COVID restrictions. Learned counsel for the Revenue, states that he has no objection if the matter is remanded to the Assessing Authority for deciding the case afresh. Also, the case shall be decided on merits. Also, during pendency of the case, no coercive steps shall be taken against the petitioner. Statement accepted and taken on record. However, having heard learned counsel for the parties as also perused the record made available, we are of the considered view that this Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, we form an opinion that the order is bad in law. This we say so, for two reasons- (a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences. As such, on this 4/7 short ground alone, we dispose of the present writ petition in the following mutually agreeable terms: (a) We quash and set aside the impugned order dated 2nd of March, 2020 passed by the Respondent No. 5, namely the Assistant Commissioner of State Tax, Muzaffarpur West, Tirhut, Bihar in GSTIN/ID 10BDVPS4441J2Z7, under Section 73 of GST Act, 2017; under Reference No. ZA1003200004091, for the tax period April 2018-March, 2019 in Form GST DRC-07; (b) We accept the statement of the petitioner that ten per cent of the total amount, being condition prerequisite for hearing of the appeal, already stands deposited. If that were so, well and good. However, if the amount is not deposited for whatever reason(s), same shall be done before the next date; (c) Further the petitioner undertakes to additionally deposit ten per cent of the amount of the demand raised before the Assessing Officer. This shall be done within four weeks. (d) This deposit shall be without prejudice to the respective rights and contention of the parties and subject to the order passed by the Assessing Officer. However, if it is ultimately found that the petitioner’s deposit is in excess, 5/7 the same shall be refunded within two months from the date of passing of the order; (e) We also direct for de-freezing/de-attaching of the bank account(s) of the writ-petitioner, if attached in reference to the proceedings, subject matter of present petition. This shall be done immediately. (f) Petitioner undertakes to appear before the Assessing Authority on 9th of August, 2021 at 10:30 A.M., if possible through digital mode; (g) The Assessing Authority shall decide the case on merits after complying with the principles of natural justice; (h) Opportunity of hearing shall be afforded to the parties to place on record all essential documents and materials, if so required and desired; (i) During pendency of the case, no coercive steps shall be taken against the petitioner. (j) The Assessing Authority shall pass a fresh order only after affording adequate opportunity to all concerned, including the writ petitioner; (k) Petitioner through learned counsel undertakes to fully cooperate in such proceedings and not take unnecessary adjournment;
6/7 (l) The Assessing Authority shall decide the case on merits expeditiously, preferably within a period of two months from the date of appearance of the petitioner; (m) The Assessing Authority shall pass a speaking order, assigning reasons, copy whereof shall be supplied to the parties; (n) Liberty reserved to the petitioner to challenge the order, if required and desired; (o) Equally, liberty reserved to the parties to take recourse to such other remedies as are otherwise available in accordance with law; (p) We are hopeful that as and when petitioner takes recourse to such remedies, before the appropriate forum, the same shall be dealt with, in accordance with law, with a reasonable dispatch; (q) We have not expressed any opinion on merits and all issues are left open; (r) If possible, proceedings during the time of current Pandemic [Covid-19] be conducted through digital mode; The instant petition sands disposed of in the aforesaid terms.
7/7 Interlocutory Application(s), if any, also stands disposed of. Learned counsel for the respondents undertakes to communicate the order to the appropriate authority through electronic mode.
P.K.P./- (Sanjay Karol, CJ) ( S. Kumar, J) AFR/NAFR CAV DATE Uploading Date 16.07.2021 Transmission Date
Reproduced from the public record of the Patna High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.