M/S. Kei Industries Limited vs. The State Of Bihar

Facts

M/s. KEI Industries Limited (the petitioner) filed a writ petition challenging an ex-parte order and demand notice dated July 30, 2019, issued by the Joint Commissioner of State Taxes, Patna West Circle. The order, passed under Sections 73(9) and 50 of the Bihar Goods and Service Tax Act, 2017, pertained to the financial year 2017-18 and disallowed the petitioner's claim for transitional credit from the VAT regime. The demand raised was Rs. 16,12,892.00. The petitioner contended that the order was passed without considering their reply and without affording them a hearing, violating the principles of natural justice. The revenue stated it had no objection if the matter was remanded for fresh decision on merits, with no coercive steps taken against the petitioner during pendency.

Held

The Court quashed and set aside the impugned ex-parte order and consequential demand notice dated July 30, 2019, issued by the Joint Commissioner of State Taxes. The decision was based on the clear violation of the principles of natural justice, specifically the lack of a fair opportunity of hearing and the ex-parte nature of the order which did not provide sufficient reasons for determining the amount due. The Court accepted the petitioner's statement that Rs. 3.2 lacs had already been deposited and directed the petitioner to additionally deposit ten percent of the demanded amount within four weeks. This deposit was to be without prejudice to the parties' rights and subject to the final order. The Court also directed the de-freezing of the petitioner's bank accounts. The matter was remanded to the Assessing Authority to decide the case afresh on merits after complying with the principles of natural justice, affording opportunities for hearing and submission of documents. The Assessing Authority was directed to pass a speaking order within two months of the petitioner's appearance, and no coercive steps were to be taken against the petitioner during this period. The Court explicitly stated that it had not expressed any opinion on the merits of the case, leaving all issues open.

Key Issues

1. Whether the ex-parte order and consequential demand notice dated July 30, 2019, passed under Section 73(9) and 50 of the Bihar Goods and Service Tax Act, 2017, are liable to be quashed for violating the principles of natural justice, specifically the right to a fair hearing and consideration of the petitioner's reply? Petitioner's Contention: The petitioner argued that the impugned order was passed ex-parte without affording them sufficient opportunity for hearing or considering their reply, thus violating principles of natural justice. They contended that had their reply been considered or a hearing granted, they could have explained the legitimacy of their transitional credit claim in TRAN-1 from the VAT regime. Revenue's Contention: The revenue did not contest the quashing of the order and agreed to a remand for fresh decision on merits, stating no objection to the matter being decided afresh and no coercive steps being taken against the petitioner.