GST recovery stayed after demand issued without proper show-cause notice violating natural justice principles

Vihaan Networks Limited Versus The State of Bihar

Vihaan Networks Limited Versus The State of Bihar - 2023 (73) G. S. T. L. 30 (Pat.) Issues involved:
Challenge to notice for outstanding SGST amount, appeal process under BGST Act, non-constitution of GST Appellate Tribunal, stay of recovery proceedings, statutory remedy for appeal, acknowledgment of difficulty by State of Bihar, interim relief.

Analysis:
The case involves a writ application seeking the quashing of a notice demanding the deposit of an outstanding SGST amount. The petitioner, a company registered under BGST Rules, received notices regarding credit carry forward and a show-cause notice for a tax demand. The petitioner alleged that the demand was confirmed without a hearing, leading to an appeal where the demand was revised. However, the GST Appellate Tribunal, as required under Section 112 of the BGST Act, has not been constituted, depriving the petitioner of the appeal remedy.

The petitioner complied with the appeal deposit requirements but could not file an appeal due to the non-existence of the Appellate Tribunal. The State of Bihar acknowledged this issue and issued a notification for the calculation of the appeal period post-tribunal constitution. The Court noted that the petitioner's right to appeal under Section 112 of the BGST Act is not time-barred, and the absence of the Tribunal has hindered the appeal process.

Considering the strong prima facie case made by the petitioner and the unjust nature of proceeding with recovery without the Tribunal in place, the Court granted interim relief by staying the impugned notice. The Court emphasized the importance of the petitioner's statutory remedy under Sections 112(8) and (9) of the BGST Act and the acknowledgment of the tribunal issue by the State of Bihar under Section 172 of the Act.

In conclusion, the Court found it unjust to proceed with recovery when the Appellate Tribunal was not constituted, ensuring the petitioner's statutory right to appeal is not hindered. The interim relief was granted, and the case was listed for further proceedings, with a requirement for a counter affidavit from the State of Bihar.