Know Your Limits Part 2.

In yet another interesting case, where both the adjudicating authority as well as First Appellate Authority were found violating the CGST ACT 2017 the High Court of Patna (Two members Bench) has found it to be a fit case to pass orders by imposing cost on the adjudicating authority and seeking explanation from Appellate Authority as to why contempt of Court act should not be initiated against the First Appellate Authority. The final orders are not passed as the case is posted for next hearing on 17/06/2025.

The High Court of Patna in civil writ 18049  of 2024 in the matter of M/S GREAT EASTERN HIRE PURCHASE PRIVATE LIMITED VERSUS THE STATE OF BIHAR THROUGH THE PRINCIPAL SECRETARY, STATE TAX, BIHAR, PATNA, THE PRINCIPAL SECRETARY CUM COMMISSIONER, DEPARTMENT OF STATE TAXES, GOVERNMENT OF BIHAR, PATNA, JOINT COMMISSIONER OF STATE TAX, GANDHI MAIDAN CIRCLE, PATNA, DEPUTY COMMISSIONER OF STATE TAX, GANDHI MAIDAN CIRCLE, PATNA, ASSISTANT COMMISSIONER OF STATE TAX, GANDHI MAIDAN CIRCLE, PATNA, ADDITIONAL COMMISSIONER OF STATE TAX (APPEALS), PATNA WEST DIVISION, PATNA, THE UNION OF INDIA, THE GOVERNMENT OF INDIA, MINISTRY OF FINANCE (DEPARTMENT OF REVENUE), THROUGH THE PRINCIPAL COMMISSIONER, CBIC, NEW DELHI - 2025 (5) TMI 731 - PATNA HIGH COURT has passed an interesting interim order where the Court has observed that recovery of GST has taken place in illegal manner. The entire case is discussed in the following paras.

In simple terms, GSTR 3B was not filed within time for the month of July 2019 up to 20/08/2019. The proper officer issued notice to file return within 15 days on 21/08/2019 itself. As the petitioner was having genuine hardships in paying the taxes, he could pay such taxes and file the GSTR 3 only on 19/09/2019. However, despite the fact that the proper officer have five years time to pass an order under section 62, he passed the order in a hurried manner on 12/09/2019 itself.

As the GSTR 3 was filed well within time after passing the order under section 62, the original order passed under section 62 automatically becomes null and void as provided in Section 62 itself. Section 62(2) provides for deemed withdrawal of the order under section 62 so far as Tax Amount is concerned.

Without bothering to notice that applicable GST for July 2019 is already paid in September 2019 itself, the proper office has recovered the GST for July 2019 in unlawful manner on 24/08/2023.

The petitioner filed an appeal before the First appellate authority which was also rejected on 11/07/2024 quoting limitation even though the appeal was preferred in time.

Thus, it becomes evident that both the adjudicating authority as well as the first appellate authority passed orders violating the provisions/instructions/circulars/Jurisdictional High Court Rulings by which the petitioner was put into undue hardship.

Few paragraphs of the order dated 06/05/2025 of the High Court of Patna are reproduced for better understanding on the gravity of the issues.

29. This Court finds much substance in the submission of the learned counsel for the petitioner. It is evident from the facts appearing on the records that the Respondent No. 5 has acted in complete violation of the established procedure of law. The said authority has misused her power and thereby passed an illegal order for recovery of the amount. The concerned authority did not think it just and proper to even issue a notice to the petitioner prior to passing an order of recovery which she was passing after about five years from the date of demand.

31. It is evident that the Appellate Authority has passed the impugned order as contained in Annexure 'P5' after six months of the passing of the judgment of the High Court but he has ignored the judgment of this Court and dismissed the appeal. His act is prima-facie contemptuous.

35. While setting aside the impugned orders as contained in Annexures 'P4' and 'P5' of the writ application, the consequences shall follow. We issue notice to the Assistant Commissioner of State Tax, Gandhi Maidan Circle, Patna (Respondent No. 5) who passed the impugned order (Annexure 'P4') to show cause as to why this Court should not award interest and cost which would be recovered from her.

36. We also call upon the Appellate Authority, namely, the Additional Commissioner of State Tax (Appeals), Patna West Division, Patna (Respondent No. 6) to satisfy this Court as to why a proceeding for contempt be not initiated against him for acting in willful disobedience and disregard to the order of this Court passed in the case of SIS Cash Services (supra).

From the above, it may be concluded that both the taxpayer and the tax collector should act by abiding the provisions of the GST Law. To be more particular, tax authorities are bound to pass orders in a manner that the order does not violate any provisions/ circulars under the GST Laws.