The Patna High Court quashed Order imposing interest on gross amount without deducting ITC due to violation of principle of natural justice.

The Hon'ble Patna High Court in M/S Manshi Automobiles vs. Union of India & Ors. [Civil Writ Jurisdiction Case No.444 of 2022] has quashed Order imposing interest on gross amount without deducting ITC due to violation of principle of natural justice. The division bench of Chief Justice Sanjay Karol and Justice S. Kumar held that this Court was of the opinion that the order is bad in law for two reasons, violation of principles of natural justice, i.e. Fair opportunity of hearing as no sufficient time was afforded to the petitioner to represent his case; secondly, order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee.

1. Petitioner : M/S Manshi Automobiles

2. Respondents :

4. CORAM : 1. HON'BLE MR. Sanjay Karol, THE CHIEF JUSTICE, 2. HON'BLE MR. JUSTICE S. KUMAR

5. Council For Petitioners : Mr.Alok Kumar, Advocate

6. Council For Respondents : Mr.Dr. Krishna Nandan Singh (ASG) Mr. Vikash Kumar, SC 11

7. Date of pronouncement : JANUARY 17, 2022

8. Facts:

The Petitioner, M/s Manshi Automobiles has prayed for quashing of summary of order issued in Form GST DRC 07 dated 25.02.2020 by the Assistant Commissioner, State Tax, Danapur Circle, Danapur, District Patna the Respondent no.5 under Section 75 of the GST Act whereby the interest has been imposed on gross amount without deducting the Input Tax Credit which is already paid by the petitioner and in utter violation of the principle of natural justice as the same was passed without issuance of show cause notice.

The Petitioner has also prayed for quashing of orders dated 10.08.2021 issued vide Memos No. 1037, 1038 and 1039 all dated 13.08.2021 by the Respondent No. 4, whereby the appeal preferred by the petitioner has been rejected without any application of mind to the grounds of appeal raised by the petitioner.

The Petitioner has further prayed for further issuance of a direction or order restraining the Respondent No. 5 from taking any coercive action for recovery of the amount in demand from the petitioner during the pendency of the present writ application or for a direction to refund of the part or whole of the amount in case recovered from the petitioner.

Learned counsel for the Revenue has stated that he has no objection if the matter is remanded to the Assessing Authority for deciding the case afresh. Also, the case shall be decided on merits. Also, during pendency of the case, no coercive steps shall be taken against the petitioner.

The Hon'ble court was of the considered view that the Court is not precluded from interfering where the order is bad in law for two reasons, violation of principles of natural justice, i.e. Fair opportunity of hearing as no sufficient time was afforded to the petitioner to represent his case; secondly, order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences.

The court accepted the statement of the petitioner that ten per cent of the total amount, being condition prerequisite for hearing of the appeal, already stands deposited. However, if the amount is not deposited for whatever reason(s), same shall be done before the next date.

Further the petitioner undertakes to additionally deposit ten per cent of the amount of the demand raised in each case before the Assessing Officer. This shall be done within four weeks.

The court directed that This deposit shall be without prejudice to the respective rights and contention of the parties and subject to the order passed by the Assessing Officer. However, if it is ultimately found that the petitioner's deposit is in excess, the same shall be refunded within two months from the date of passing of the order.

The Petitioner undertakes to appear before the Assessing Authority on 7th February, 2022 at 10:30 A.M., if possible through digital mode.

9. Nature of Issue : Violation of the principle of natural justice,

10. Industry : Not industry specific

11. Held:

The division bench of The Chief Justice Shri Sanjay Karol, and Justice Shri S. Kumar held that the impugned orders dated 10.08.2021 (Annexure-2 series) passed by the Respondent No. 4 namely the Additional Commissioner of State Taxes (Appeal), Patna West Division, Patna in different appeals (Annexure-2 series), and the orders dated 25.02.2020 passed by Respondent No.5, namely The A.C.S.T., Danapur Circle, Danapur, district Patna for different tax periods in Form GST DRC-07 are quashed and set aside.

The court directed for de-freezing/de-attaching of the bank account(s) of the writ-petitioner, if attached in reference to the proceedings, subject matter of present petition. This shall be done immediately.

The court also directed that the Assessing Authority shall decide the case on merits after complying with the principles of natural justice;

The court also directed that Opportunity of hearing shall be afforded to the parties to place on record all essential documents and materials, if so required and desired;

The court further directed that During pendency of the case, no coercive steps shall be taken against the petitioner.

The court further directed that the Assessing Authority shall pass a fresh order only after affording adequate opportunity to all concerned, including the writ petitioner;

The court also directed to Petitioner to undertakes to fully cooperate in such proceedings and not take unnecessary adjournment.

The court further directed that the Assessing Authority shall decide the case on merits expeditiously, preferably within a period of two months from the date of appearance of the petitioner;

The court further directed that the Assessing Authority shall pass a speaking order, assigning reasons, copy whereof shall be supplied to the parties.

12. In favour of : Petitioner

13. Case Law Refereces :

14. Relevant Act/ Rules/ Forms :

15. Database Citation : GW-20-2022-BH