Case Background
This case arose from proceedings under the Bihar Goods and Services Tax Act (BGST Act) against M/S Sandeep Traders, a sole proprietorship firm based in Ara, Bhojpur, Bihar. The firm had purchased goods from a supplier named JVL Agro Industries Limited and claimed Input Tax Credit (ITC) on the tax paid on those purchases.
For the tax period from July 2017 to March 2018, the Joint Commissioner of State Tax, Sahabad Circle, Ara, passed an order dated 25.05.2022 bearing reference no. ZD1005220088470. In that order, the officer rejected the petitioner’s ITC claim and raised a demand.
The department alleged that JVL Agro Industries Limited had not filed its monthly GST returns in Form GSTR-3 for the financial year 2017-18 (from July 2017 to March 2018). On this basis, it was alleged that the petitioner had availed ITC in violation of section 16(2)(c) of the BGST Act. The officer imposed tax, interest and penalty, and raised a demand of Rs. 8,43,770/- in Form GST DRC-07 on the same date.
Later, on 07.11.2022, the Assistant Commissioner of State Tax, Sahabad Circle, Ara, issued an order for recovery. A notice in Form DRC-13 was sent to Punjab National Bank, Station Road, Ara, directing attachment of the petitioner’s bank account and recovery of an amount of Rs. 13,30,464/-. Multiple bank accounts of the petitioner were attached in connection with this demand.
Feeling aggrieved, the petitioner approached the Patna High Court by filing Civil Writ Jurisdiction Case No. 17286 of 2022. The writ petition challenged the assessment order dated 25.05.2022, the demand notice in Form DRC-07, the recovery order dated 07.11.2022 and the DRC-13 bank attachment notice, and also prayed for release of the attached bank accounts.
What the Court Examined and Decided
The matter was heard by a Division Bench of the Patna High Court comprising Hon’ble the Chief Justice and Hon’ble Mr. Justice Partha Sarthy. Both sides were represented: the petitioner through counsel and the State through Government Pleader No. 7.
At the outset, it was brought to the Court’s notice that the Joint Commissioner of State Tax had passed the impugned order dated 25.05.2022 rejecting the petitioner’s ITC claim and raising a demand of Rs. 8,43,770/- for the period July 2017 to March 2018. It was also noted that the Assistant Commissioner had thereafter issued the DRC-13 notice on 07.11.2022, resulting in attachment of the petitioner’s bank account.
During the hearing, counsel for the Revenue made a significant statement. He stated that he had no objection if the matter was remanded back to the Assessing Authority for a fresh decision on merits. He also stated that during the pendency of the fresh proceedings, no coercive steps would be taken against the petitioner.
The Court accepted this statement on behalf of the Revenue and recorded it. However, the Bench did not stop at that. It examined the nature of the original orders and the manner in which they were passed.
The Court made it clear that even though there is a statutory remedy available under the tax law, the High Court is not powerless. Where, on the face of the record, the order appears to be bad in law, the Court can interfere in writ jurisdiction.
The Bench identified two main defects in the impugned order:
First, there was a violation of the principles of natural justice. The Court observed that a fair opportunity of hearing had not been given to the petitioner. No sufficient time was afforded to the petitioner to represent its case before the tax authority.
Second, the order was ex parte in nature and did not assign proper reasons. The Court noted that the order did not contain reasons which were sufficient or even decipherable from the record. There was no clear explanation as to how the officer had determined the amount due and payable by the assessee.
The Court emphasised that an ex parte order passed in violation of the principles of natural justice entails serious civil consequences. Because tax demands and bank attachments directly affect a person’s business and finances, the law requires a fair hearing and a reasoned order.
On this short ground alone, namely breach of natural justice and absence of a reasoned order, the High Court decided to dispose of the writ petition by laying down several agreed terms.
First, the Court quashed and set aside three things:
(a) The impugned order dated 25.05.2022 passed by the Joint Commissioner of State Tax, Sahabad Circle, Ara, Bihar (Ref. No. ZD1005220088470);
(b) The demand notice in Form GST DRC-07 dated 25.05.2022 (same reference number) for the period July 2017 to March 2018;
(c) The order dated 07.11.2022 passed by the Assistant Commissioner of State Tax, Sahabad Circle, Araha, Bihar, which had led to the bank attachment.
Second, the Court recorded an undertaking by the petitioner. The petitioner agreed to deposit 20% of the demand amount before the Assessing Officer within four weeks. This deposit was to be made without prejudice to the rights and contentions of the parties and subject to the final order.
The Court clarified that if it was found that the petitioner had already deposited up to 20% of the amount earlier, that amount would be adjusted against the required 20%. If any amount was found to have been deposited in excess, it would have to be refunded to the petitioner within two months from the date of the final order of the Assessing Authority.
Third, the Court directed the authorities to immediately de-freeze and de-attach the petitioner’s bank accounts, if they had been attached in connection with the present proceedings.
Fourth, the Court fixed a date for the next stage. The petitioner undertook to appear before the Assessing Authority on 23.01.2023 at 10:30 A.M., if possible through digital mode. The Assessing Authority was directed to decide the case afresh on merits after complying with the principles of natural justice.
The Court further observed that the authorities had earlier failed to adjudicate the matter on the attending facts and circumstances. It stressed that all issues of fact and law must be dealt with, even if the proceedings are ex parte in nature.
The Bench directed that an opportunity of hearing must be given to the parties to place on record all essential documents and materials, if so required and desired. During the pendency of the fresh assessment, no coercive steps were to be taken against the petitioner.
The Court required the Assessing Authority to pass a fresh order only after affording adequate opportunity to all concerned, including the petitioner. The petitioner, through counsel, undertook to fully cooperate in the proceedings and not to seek unnecessary adjournments.
The Assessing Authority was asked to decide the case on merits expeditiously, preferably within two months from the date of the petitioner’s appearance. The officer was also directed to pass a speaking order, assigning reasons, and to supply a copy of that order to the parties.
The Court reserved liberty to the petitioner to challenge the fresh order before the High Court again, if required and desired. Similarly, liberty was kept open for both parties to take recourse to any other remedies available in law. The Bench expressed hope that if such remedies were invoked, the appropriate forum would decide them in accordance with law and with reasonable dispatch.
Importantly, the Court clarified that it had not expressed any opinion on the merits of the dispute. All issues were left open to be decided by the Assessing Authority. The Court also suggested that, if possible, the proceedings may be conducted through digital mode.
With these directions and observations, the writ petition and any interlocutory applications were disposed of. The respondents’ counsel undertook to communicate the High Court’s order to the appropriate authority through electronic mode.
Why This Judgment Matters
This judgment is important for small businesses and traders facing GST demands in Bihar. It shows that the Patna High Court will protect taxpayers where tax officers pass orders without proper notice, hearing or reasons.
The Court has made it clear that tax assessments and recovery actions like bank attachment cannot be done mechanically. Even if the taxpayer does not appear, the officer must still examine the facts, apply the law and pass a speaking order.
The decision also balances the interests of the Revenue and the taxpayer. While the petitioner gets a fresh chance and relief from bank attachment, the Court has also required a 20% deposit to secure the Revenue’s interest, subject to final decision.
For others in similar situations, the judgment reinforces that violation of natural justice—no real hearing and non-speaking orders—can be grounds to approach the High Court, even where appeal remedies exist. It also shows that merits of the ITC claim were left open to be decided by the proper authority, not by the Court directly.
Legal Issues and Answers
- Issue: Can the High Court interfere with a GST assessment and recovery order where statutory remedies exist, if the order is passed ex parte without proper hearing or reasons?
Answer: Yes. The Patna High Court held that notwithstanding statutory remedy, it can interfere where the order is ex facie bad in law due to violation of natural justice and absence of reasons, and accordingly quashed the orders. - Issue: What directions can be given when an assessment order and bank attachment are found to violate principles of natural justice?
Answer: The Court quashed the assessment, demand and attachment orders, directed de-freezing of bank accounts, required a 20% deposit by the petitioner, and remanded the matter to the Assessing Authority for a fresh, reasoned decision after full opportunity of hearing, with no coercive steps in the meantime.
Case Details
Case Number: Civil Writ Jurisdiction Case No. 17286 of 2022
Case Title: M/S Sandeep Traders v. The State of Bihar & Ors.
Coram: Hon’ble the Chief Justice; Hon’ble Mr. Justice Partha Sarthy
Date of Judgment: 09.01.2023
Citation: 2023 (1) PLJR 674
Advocates: For the petitioner: Mr. Anurag Saurav, Advocate; For the respondents: Mr. Vivek Prasad (GP7)
Nature of the Case: Writ petition (civil) challenging GST assessment order, demand notice and recovery/bank attachment; remand to Assessing Authority.
Key Statutory Reference: Section 16(2)(c) of the BGST Act (as noted in the impugned assessment order; merits left open by the Court)
Link of Judgement : https://patnahighcourt.gov.in/viewjudgment/MTUjMzgjMjAyMiMyI04=-mD0xUWpNexo=
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