Patna High Court Quashes GST Orders for Violation of Natural Justice, Orders Fresh Hearing

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Case Name

M/s Shree Bhuneshwari Pharma vs. The State of Bihar & Ors. (High Court of Judicature at Patna)

Civil Writ Jurisdiction Case No. 7169 of 2021

Date: 24th June 2021

Key Takeaways

• Natural Justice: The court emphasized that orders affecting civil rights must not be passed without giving the affected party a fair hearing.
• COVID-19 Impact: The court recognized delays caused by COVID-19 restrictions as a valid reason for missing statutory deadlines.

Remand for Fresh Hearing: The impugned orders were set aside, and the matter was sent back to the tax authorities for a fresh decision, with clear instructions to follow due process.

• No Coercive Action: The court protected the petitioner from any coercive recovery actions during the pendency of the fresh proceedings.
• Deposit Requirement: The petitioner was required to deposit 10% of the disputed amount as a precondition for the appeal, with an additional 10% to be deposited before the assessing officer.

Issue

Did the tax authorities violate the principles of natural justice and wrongly reject the petitioner’s appeal as time-barred, especially considering the COVID-19 pandemic and related judicial orders extending limitation periods?

Facts

• Parties:
• Petitioner: M/s Shree Bhuneshwari Pharma, a proprietorship firm in Patna, represented by Rajive Ranjan Prasad.
• Respondents: State of Bihar (through the Department of State Taxes) and its officers.
• Timeline & Events:
• The Joint Commissioner of State Taxes passed an order against the petitioner under Sections 61, 73, and 50 of the Bihar Goods and Services Tax Act, 2017, and Section 20 of the Integrated Goods and Services Tax Act, 2017, for the period April 2018–December 2019.
• The order was communicated via Form GST DRC-07 on 29.08.2019.
• The petitioner’s appeal was rejected by the Additional Commissioner (Appeal) on 15.01.2021 as being time-barred.
• The petitioner argued that the delay was due to COVID-19 restrictions and referenced Supreme Court and High Court orders extending limitation periods during the pandemic.

Arguments

Petitioner (M/s Shree Bhuneshwari Pharma)

• The orders were passed ex parte (without their participation) and without giving them a fair opportunity to be heard.
• The appeal was filed within the extended limitation period as per Supreme Court and High Court orders due to COVID-19.
• The orders were thus violative of the principles of natural justice and without jurisdiction.

Respondents (State of Bihar & Tax Authorities)

• The main argument was procedural: the appeal was filed beyond the statutory limitation period.
• However, during the hearing, the counsel for the Revenue did not object to remanding the matter for a fresh hearing.

Key Legal Precedents & Statutory References

• Section 61, 73, and 50 of the Bihar Goods and Services Tax Act, 2017:
• These sections deal with scrutiny of returns, determination of tax not paid or short paid, and interest on delayed payment, respectively.
• Section 20 of the Integrated Goods and Services Tax Act, 2017:
• This section applies certain provisions of the CGST Act to IGST matters.
• Section 107 of the Bihar Goods and Services Tax Act, 2017:
• Deals with the right to appeal and the limitation period for filing appeals.
• Section 5 of the Limitation Act, 1963 & Section 29(2) of the Limitation Act, 1963:
• These sections allow for the extension of limitation periods in certain circumstances.
• Supreme Court Order in Writ Petition (Civil) No. 3 of 2020:
• Extended limitation periods for all judicial and quasi-judicial proceedings due to the COVID-19 pandemic.
• Patna High Court Orders in C.W.J.C. No. 5633 of 2020 (dated 30.04.2020 and 18.05.2020):
• Also extended limitation periods in view of the pandemic.

Judgement

• Orders Quashed:
• The court quashed the appellate order dated 15.01.2021 and the original assessment order dated 24.08.2019, as well as the summary order in Form GST DRC-07 dated 29.08.2019.
• Fresh Hearing Ordered:
• The matter was remanded to the Assessing Authority for a fresh decision on merits, with strict instructions to follow the principles of natural justice and provide a fair opportunity to the petitioner.
• Deposit Condition:
• The petitioner was required to deposit 10% of the disputed amount (if not already done) and an additional 10% before the Assessing Officer within four weeks.
• No Coercive Steps:
• The court directed that no coercive steps (like recovery or freezing of bank accounts) be taken against the petitioner during the pendency of the fresh proceedings.
• Timelines:
• The Assessing Authority was directed to decide the case expeditiously, preferably within two months from the petitioner’s appearance.
• Liberty to Parties:
• Both parties were given liberty to pursue further remedies as per law, and the court did not express any opinion on the merits of the case.

FAQs

Q1: Why were the original GST orders quashed?

A: Because they were passed without giving the petitioner a fair hearing, violating the principles of natural justice, and the appeal was wrongly rejected as time-barred despite COVID-19 extensions.

Q2: What happens next for the petitioner?

A: The case goes back to the Assessing Authority, who must now hear the petitioner’s side and decide the matter afresh, following due process.

Q3: Does the petitioner have to pay anything now?

A: Yes, the petitioner must deposit 10% of the disputed amount (if not already done) and an additional 10% before the Assessing Officer, but this is without prejudice to their rights.

Q4: Can the authorities take recovery action during the new proceedings?

A: No, the court has directed that no coercive steps be taken against the petitioner while the case is pending.

Q5: What if the petitioner disagrees with the new order?

A: The petitioner is free to challenge the new order through appropriate legal remedies.

Q6: What legal provisions were central to this case?

A: Sections 61, 73, 50, and 107 of the Bihar GST Act, Section 20 of the IGST Act, and Sections 5 and 29(2) of the Limitation Act, 1963, as well as Supreme Court and High Court orders extending limitation periods due to COVID-19.