Patna High Court Sets Aside Ex-Parte GST Demand for Violation of Natural Justice (2022)

Simplified Explanation of the Judgment

This case arises from a challenge to an ex-parte tax demand order passed under the Bihar Goods and Services Tax Act, 2017 (BGST Act). The petitioner is a registered taxpayer under GST in Bihar. The tax authorities (respondents) passed an order under Section 73(1) of the BGST Act for the financial year 2019–20, raising a demand of approximately ₹34.32 lakh, along with a summary of the order in Form GST DRC-07.

The petitioner approached the Patna High Court under its writ jurisdiction, primarily on the following broad grounds:

• The order was passed ex-parte (without hearing the petitioner).
• The order was cryptic and non-speaking (no proper reasons given).
• There was violation of the principles of natural justice, as no sufficient opportunity of hearing was granted.
• Coercive recovery steps were allegedly initiated on the basis of this order.

The High Court recorded that the ex-parte order dated 08.02.2021 was passed by the Assistant Commissioner of State Taxes, North Circle, Patna, under Section 73(1) of the BGST Act, and the demand of ₹34,32,721/- was raised through the corresponding DRC-07 for tax period 2019–20.

During the hearing, counsel for the State did not oppose the matter being remanded back to the Assessing Authority for a fresh decision on merits. The State also did not object to giving full opportunity of hearing to the petitioner and agreed that no coercive action would be taken during the pendency of such fresh proceedings.

The Court then considered whether it could interfere in such a matter despite the availability of a statutory appellate remedy. It held that, where there is a clear violation of the principles of natural justice and the order is ex-facie bad in law, the High Court is not precluded from exercising its writ jurisdiction. Two main defects were highlighted:

1. Violation of natural justice – the petitioner was not given sufficient time or fair opportunity to present its case.
2. Non-speaking ex-parte order – the order did not disclose any proper reasoning or basis for determining the tax demand.

The Court noted that because the order is ex-parte, passed in violation of natural justice and entails serious civil consequences, it can be interfered with even at the writ stage.

Accordingly, the Court set aside (quashed) the impugned order and the DRC-07 summary, subject to certain conditions and directions to balance the interests of both sides:

• The petitioner must deposit 10% of the disputed demand before the Assessing Officer within four weeks.
• This deposit is to be treated as without prejudice to the rights and contentions of both parties. If, on final adjudication, it is found that the petitioner has deposited any excess amount, it must be refunded within two months from the date of the fresh order.
• Any freezing or attachment of the petitioner’s bank accounts in connection with the impugned proceedings must be lifted immediately.
• The petitioner is required to appear before the Assessing Authority on a specified date and time (28.01.2022 at 10:30 A.M., including via digital mode if possible).
• The Assessing Authority must decide the matter afresh on merits, strictly in accordance with law and after following the principles of natural justice.
• Both sides must be given an opportunity to place all necessary documents and materials on record.
• No coercive steps for recovery are to be taken against the petitioner while the fresh proceedings are pending.
• The Assessing Authority is to pass a fresh, reasoned (speaking) order, preferably within two months from the petitioner’s appearance, and supply a copy to all concerned.
• Liberty is reserved to the petitioner to challenge the fresh order, if required, and to take recourse to any other remedies available in law; similarly, respondents may also act as per law.
• The Court clarified that it has not expressed any opinion on the merits of the tax demand itself; all issues are left open.

The writ petition was thus disposed of with these directions, and any pending interlocutory applications were also disposed of.

In short, the Patna High Court has protected the taxpayer’s right to be heard and to receive a reasoned order, while simultaneously safeguarding the State’s revenue interest by insisting on a 10% deposit and ensuring timely final adjudication.

Significance or Implication of the Judgment

This judgment is important for both taxpayers and tax authorities in Bihar and across India:

• Reinforcement of natural justice in GST proceedings: The Court has made it clear that ex-parte, non-speaking orders that seriously affect civil rights cannot be sustained, even if an appellate remedy exists.
• Balance between revenue interest and taxpayer rights: By requiring only 10% pre-deposit and directing de-freezing of bank accounts, the Court shows that harsh recovery measures should not be used when there are serious procedural defects.
• Guidance for tax officers: Officers under the BGST Act must ensure proper service of notices, grant adequate time for reply, and pass reasoned, speaking orders. Mechanical or cryptic orders are vulnerable to being set aside.
• Encouragement of digital hearings: The Court’s reference to digital mode during the COVID-19 pandemic also underlines the importance of using technology to ensure access to justice, especially in tax matters where timelines are strict.
• Wider impact on administrative law: The judgment reiterates that the existence of a statutory remedy does not bar writ jurisdiction where fundamental procedural safeguards like fair hearing and reasoned orders are violated.

Overall, the decision strengthens procedural safeguards under GST and sends a clear message that compliance with due process is not optional.

Legal Issue(s) Decided and the Court’s Decision with Reasoning

• Whether the Patna High Court can interfere in a GST demand order despite the availability of an alternative statutory remedy (appeal), when the order is ex-parte and passed in violation of natural justice?
  • Decision: Yes, the Court can interfere.
  • Reasoning:
    • The impugned order was ex-parte and passed without granting sufficient opportunity of hearing to the petitioner.
    • The order was cryptic and non-speaking, and it did not disclose how the tax liability was quantified.
    • Such an order, passed in violation of natural justice and having serious civil consequences, is ex facie bad in law and warrants interference in writ jurisdiction.
• Whether the ex-parte order and the corresponding DRC-07 summary under Section 73(1) of the BGST Act were sustainable?
  • Decision: No, they were quashed and set aside.
  • Reasoning:
    • There was clear violation of the principles of natural justice: the petitioner did not get fair or adequate opportunity to present its case before the Assessing Officer.
    • The order lacked adequate reasoning, making it non-speaking and arbitrary.
    • Such defects invalidate the order irrespective of the merits of the underlying tax demand.
• What conditions and directions should govern the fresh adjudication after quashing the order?
  • Decision / Directions:
    • The petitioner must deposit 10% of the disputed demand within four weeks, without prejudice to rights and contentions.
    • The petitioner’s bank accounts, if frozen/attached in relation to the impugned proceedings, must be de-frozen/de-attached immediately.
    • The petitioner must appear before the Assessing Authority on the specified date and cooperate fully.
    • The Assessing Authority must:
      • Decide the matter afresh on merits.
      • Afford proper opportunity of hearing.
      • Allow the parties to file all relevant documents.
      • Pass a speaking, reasoned order within a reasonable time (preferably two months).
    • No coercive steps to be taken during the fresh proceedings.
    • Liberty reserved to parties to challenge the fresh order or take other remedies in law.

Case Title

Sky Vision Media Private Limited v. State of Bihar & Ors.

Case Number

Civil Writ Jurisdiction Case No. 21364 of 2021

Coram and Names of Judges

• Hon’ble the Chief Justice Sanjay Karol
• Hon’ble Mr. Justice S. Kumar

Names of Advocates and Who They Appeared For

• For the petitioner:
  • Mr. Gautam Kumar Kejriwal, Advocate
  • Mr. Pawan Kumar Singh, Advocate
• For the respondents (State / Department of State Taxes):
  • Mr. Vivek Prasad, Government Pleader 7 (GP 7)

Link to Judgment

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