Case Background
The petitioner is a joint venture firm engaged in contract work. It was registered under the Bihar Value Added Tax Act, 2005 and allotted VAT/TIN-10011321013.
For a particular assessment year, the Deputy Commissioner, State Tax, Special Circle, Patna passed an order of assessment on 31.03.2021. On the same basis, a Notice of Demand was issued under Section 25 and Section 39 of the Bihar Value Added Tax Act, 2005 bearing Notice Id N110182137301242.
The order and demand together created a substantial tax liability against the petitioner. According to the judgment, this order was passed ex parte. The petitioner asserted that it did not get a fair chance to present its side, and the assessing officer did not give proper reasons showing how the tax amount was calculated.
Aggrieved, the petitioner filed Civil Writ Jurisdiction Case No.16650 of 2021 before the Patna High Court. It requested that the assessment order dated 31.03.2021 and the related demand notice be quashed and that coercive recovery be stopped.
What the Court Examined and Decided
The writ petition came up before a Division Bench of the Patna High Court, presided over by Hon’ble the Chief Justice along with Hon’ble Mr. Justice S. Kumar. The matter was heard through video conferencing on 24.01.2022, keeping in view the Covid-19 pandemic situation.
The Court recorded that the petitioner had specifically challenged the assessment order dated 31.03.2021 passed by the Deputy Commissioner, State Tax, Special Circle, Patna in VAT/TIN-10011321013 and the connected Notice of Demand issued under Sections 25 and 39 of the Bihar VAT Act, 2005.
At the hearing, counsel for the petitioner submitted that half of the demanded tax amount had already been recovered by the department. In addition, the petitioner expressed willingness to deposit a further 10 per cent of the impugned demand. This statement was accepted and taken on record by the Court.
Counsel appearing for the State Revenue authorities stated that the respondents had no objection if the case was remanded to the Assessing Authority for a fresh decision. It was clearly stated that the case would be decided on merits and, during the fresh proceedings, no coercive action would be taken against the petitioner. This stand of the Revenue was also accepted and taken on record.
Despite there being a statutory remedy available to the petitioner under the Bihar Value Added Tax Act against the assessment order, the High Court examined whether it should still exercise its writ jurisdiction. The Bench noted that normally, when an alternative remedy exists, High Courts are slow to interfere. However, the Court emphasised that this is not an absolute rule.
The Bench held that the Court is not barred from interfering where, on the face of the record (ex facie), the order appears to be bad in law. In this case, the Court found two main defects:
First, there was violation of the principles of natural justice. The Court recorded that no sufficient time had been afforded to the petitioner to represent its case. This meant the petitioner did not get a fair opportunity of hearing before the tax liability was fixed. Natural justice requires that an affected person be given proper notice and reasonable time to respond before an adverse order is passed.
Second, the order was ex parte and did not contain sufficient reasons, even on a reading of the record, to show how the assessing officer had determined the amount due and payable by the assessee. An ex parte order passed without proper reasoning, especially where it has civil consequences, is legally vulnerable.
The Court observed that such an ex parte order, passed in violation of natural justice, necessarily entails civil consequences for the taxpayer, such as attachment of bank accounts and recovery of large amounts. Because of these defects, the Bench also held that the authorities had failed to properly adjudicate the matter on the attending facts and circumstances.
The High Court noted that all issues of fact and law should have been examined and dealt with, even if the proceedings ended up being ex parte. The officer could not simply skip analysis and reasons only because the assessee was not present. For a lawful assessment, the authority must still apply its mind to the record and pass a reasoned, “speaking” order.
On this short ground of violation of natural justice and lack of reasons, and taking into account the stand of both sides, the Court decided to dispose of the writ petition with a detailed set of directions.
First, the High Court quashed and set aside the impugned assessment order dated 31.03.2021 passed by the Deputy Commissioner, State Tax, Special Circle, Patna in VAT/TIN-10011321013 and the connected Notice of Demand under Section 25 and Section 39 of the Bihar VAT Act, 2005 (Notice Id N110182137301242).
Second, the Court formally accepted the petitioner’s statement that fifty per cent of the demanded amount had already been recovered. It also recorded the petitioner’s undertaking to deposit an additional ten per cent of the demand before the Assessing Officer within four weeks. This payment was specifically stated to be without prejudice to the rights and contentions of both sides and subject to the final order of the Assessing Officer. If, after fresh assessment, it turned out that the amount deposited by the petitioner was in excess, the Court directed that such excess be refunded within two months from the date of the new order.
Third, the Court directed de-freezing or de-attaching of the petitioner’s bank accounts, if they had been attached in reference to the present proceedings. This was to be done immediately. This direction was important because attachment of bank accounts directly affects the business operations and cash flow of any assessee.
Fourth, clear directions were issued about the future conduct of the reassessment. The petitioner undertook to appear before the Assessing Authority on 28.02.2022 at 10:30 a.m., preferably through digital mode. The Assessing Authority was directed to decide the case afresh on merits after full compliance with principles of natural justice.
The Court mandated that an opportunity of hearing be provided to all parties to place on record essential documents and materials, if required and desired. It further ordered that during the pendency of the fresh assessment proceedings, no coercive steps were to be taken against the petitioner.
Fifth, the Court required the Assessing Authority to pass a fresh order only after giving adequate opportunity to everyone concerned, including the writ petitioner. The petitioner’s counsel also undertook before the Court that the petitioner would fully cooperate in the proceedings and would not seek unnecessary adjournments.
The Bench directed that the Assessing Authority should decide the matter expeditiously, preferably within two months from the date the petitioner appears. The new order must be a “speaking order” assigning reasons, and a copy must be supplied to the parties.
Sixth, the Court preserved the legal remedies of both sides. Liberty was kept open to the petitioner to challenge the fresh order, if required and desired. Similarly, liberty was reserved to all parties to take recourse to any other remedies available under law. The Court expressed hope that if the petitioner approached any appropriate forum in future, the matter would be decided in accordance with law and with reasonable speed.
The Bench clarified that it had expressed no opinion on the merits of the tax dispute. All questions of fact and law were left open for the Assessing Authority to consider afresh. It also observed that, if possible, further proceedings during the ongoing Covid-19 pandemic could be conducted through digital mode.
With these directions, the writ petition and any pending interlocutory applications were disposed of. Counsel for the respondents undertook to communicate the High Court’s order to the appropriate authority through electronic mode.
Why This Judgment Matters
This judgment is important for taxpayers in Bihar, especially contractors and business entities facing VAT or GST assessments.
First, it confirms that even when a statute provides appeal or revision remedies, the Patna High Court can still step in under its writ jurisdiction if a clear violation of natural justice is seen on the face of the record. Lack of fair hearing and lack of reasons are sufficient grounds.
Second, the decision shows that ex parte assessment orders cannot be used as a shortcut by tax officers. Officers must still examine the material on record, apply their mind and give a reasoned order explaining how the tax amount was calculated.
Third, it offers reassurance that bank accounts frozen in such circumstances can be ordered to be de-frozen when the underlying assessment is quashed and reconsidered, subject to reasonable security like partial deposit.
Finally, the judgment underlines that taxpayers must also cooperate. The Court balanced interests by requiring the petitioner to deposit part of the demand, attend the fresh proceedings and avoid unnecessary delay.
Legal Issues and Answers
Issue: Can the Patna High Court interfere with an ex parte VAT assessment order despite the availability of statutory remedies when there is alleged violation of natural justice?
Answer: Yes. The Court held it can interfere where, on the face of the record, the order is bad in law due to violation of natural justice and absence of reasons. It therefore quashed the ex parte order and remanded the matter for fresh assessment.
Issue: What safeguards should accompany remand of an ex parte tax assessment?
Answer: The Court directed de-freezing of bank accounts, required the assessee to deposit 10 per cent of the demand in addition to the already recovered 50 per cent, barred coercive steps during fresh proceedings, mandated a reasoned order on merits, and fixed a time-frame for completion.
Cases Cited by the Court
- No previous judgments are cited or relied upon in the text of this decision.
Case Details
Case Number: Civil Writ Jurisdiction Case No.16650 of 2021
Case Title: M/s CICO PATEL JV. v. The State of Bihar & Ors.
Citation: 2022 (1) PLJR 566
Coram: Hon’ble the Chief Justice; Hon’ble Mr. Justice S. Kumar
Advocates: For the petitioner – Mr. Anurag Saurav, Advocate; For the respondents – Mr. Vikash Kumar, SC-11
Nature of the case: Writ petition under Article 226 challenging ex parte assessment order and demand notice under the Bihar Value Added Tax Act, 2005.
Relevant statutory provisions: Section 25 and Section 39 of the Bihar Value Added Tax Act, 2005.
Date of judgment: 24.01.2022
Link to judgment: Click here to access the official Patna High Court judgment
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