M/S Efti Construction vs. The State Of Bihar

Facts

The petitioner, M/s EFTI Construction, challenged two orders: a Summary of Order in Form GST DRC-07 dated March 3, 2020, passed by the Assistant Commissioner of State Taxes (Respondent No. 3) under Section 74(1) of the Bihar Goods and Services Tax Act, 2017, and an order dated December 28, 2020, passed by the Additional Commissioner of State Taxes (Appeals) (Respondent No. 2) rejecting the petitioner's appeal on technical grounds of non-production of a certified copy of the first order. The petitioner contended that the initial order was cryptic, non-speaking, and passed without applying mind, especially as the tax and interest liability for the period October 2018 to March 2019 had already been discharged. The appeal was rejected ex parte. The Revenue stated it had no objection if the matter was remanded to the Assessing Authority for a fresh decision on merits, with no coercive steps during pendency.

Held

The Court held that the impugned orders were bad in law for two primary reasons: violation of the principles of natural justice, specifically the lack of a fair opportunity of hearing and insufficient time afforded to the petitioner, and the ex parte nature of the orders which did not provide sufficient reasoning for determining the amount due. The Court found that such orders, entailing civil consequences, were unsustainable on these grounds alone. Consequently, the Court quashed and set aside both the order of the Assistant Commissioner of State Taxes dated March 3, 2020, and the order of the Additional Commissioner of State Taxes (Appeals) dated December 28, 2020. The Court directed the petitioner to deposit 10% of the total amount (if not already deposited) and additionally deposit another 10% of the demand within four weeks, without prejudice to their rights. The bank accounts of the petitioner were ordered to be de-frozen. The matter was remanded to the Assessing Authority to decide the case afresh on merits after complying with the principles of natural justice, affording adequate opportunity to all parties, and passing a speaking order within two months of the petitioner's appearance. No coercive steps were to be taken 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 impugned order dated March 3, 2020, passed by the Assistant Commissioner of State Taxes under Section 74(1) of the Bihar Goods and Services Tax Act, 2017, is liable to be quashed for being cryptic, non-speaking, and passed without proper application of mind, particularly when the petitioner claims to have discharged the tax and interest liability for the period October 2018 to March 2019 prior to the order. 2. Whether the impugned order dated December 28, 2020, passed by the Additional Commissioner of State Taxes (Appeals) rejecting the petitioner's appeal on technical grounds of non-production of a certified copy of the order dated March 3, 2020, is sustainable, especially when both orders were ex parte. 3. Whether the recovery action initiated under Section 79(1)(c) of the Bihar Goods and Services Tax Act, 2017, for recovery of tax, interest, and penalty is illegal and without jurisdiction due to non-compliance with the proviso to Section 78 of the Act. Petitioner's Arguments: The petitioner argued that the orders were ex parte, violated principles of natural justice by not affording a fair opportunity of hearing, and lacked sufficient reasoning. They also contended that the liability had already been discharged. They relied on the principle that ex parte orders violating natural justice entail civil consequences. Revenue's Arguments: The Revenue stated it had no objection to the matter being remanded 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.