Patna High Court Sets Aside Order Violative Of Principles Of Natural Justice

Patna High Court Sets Aside Order Violative Of Principles Of Natural Justice

The Court said that sufficient time was not afforded to the Petitioner to represent his case which violated principles of natural justice

The Patna High Court set aside the order in Form GST DRC-07 passed by the Assistant Commissioner of State Tax on the ground that it violated principles of natural justice and that it was ex parte in nature.

The matter titled M/s National Enterprises v The Union of India And Ors was placed before a Division Bench of the High Court of Patna comprising Chief Justice Sanjay Karol and Justice S. Kumar.

The petition was filed to declare Section 16(4) of the Bihar/Central Goods and Services Tax Act, 2017 (GST Act) as ultra virus for being violative of Article 14, Article 19(1)(g) and Article 300A of the Constitution of India as the said section imposed a time limit for the availment of Input Tax Credit which the Petitioner contended was violative of the basic structure of the Bihar/Central Goods and Services Tax Act, 2017. The Petitioner had further challenged the amendment carried under Rule 61(5) of the Bihar/Central Goods and Services Tax Rules, 2017 (GST Rules) as being ultra vires as well.

The factual scenario for challenging such provisions was that the Respondent – Revenue Authorities had passed an order dated 7 March 2020 in Form GST DRC-07, which intimated that the Petitioner was disallowed from availing Input Tax Credit and tax was further imposed amounting to ₹11,01,707.

The Respondent – Revenue Authorities submitted that it had no objection if the matter was remanded back to the Assessing Authority for deciding the case afresh.

However, the Court opined that the order passed by the Respondent was bad in law. The reasons provided for this opinion were:

1. Violation of principles of natural justice

2. Ex parte order in nature

The bench noted that sufficient time was not afforded to the Petitioner to represent his case which violated principles of natural justice and that the order did not assign any sufficient reasons to determine the amount due and payable by the Petitioner, which was passed ex parte in nature. It concluded with the following observation:

"The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences."

The Court, therefore, set aside the order but the Petitioner undertook to deposit 10 per cent of the demand raised before the Assessing Officer, which would be without prejudice to the respective rights and contention of the parties.

Multiple directions were issued by the Court including de-freezing/de-attaching of the bank accounts of the Petitioner and to pass a fresh order after affording adequate opportunity to everyone.

The Court disposed of the petition with liberty to the Petitioner to challenge the vires of Section 16(4) of GST Act and Rule 61(5) of the G.S.T. Rules by way of separate proceedings.