Sita Pandey vs The State Of Bihar
2023 Latest Caselaw 3968 Patna

          IN THE HIGH COURT OF JUDICATURE AT PATNA
                       Civil Writ Jurisdiction Case No.5407 of 2023
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Sita Pandey, an adult female, aged about 53 years, Wife of Vishvnath Pandey, resident of Village-Kurthaul, Police Station-Parsa Bazar, District-Patna (Bihar). Proprietor of Om Shri Security Service having office at Kurthaul, Police Station- Parsa Bazar, District-Patna.

... ... Petitioner/s Versus

1. The State of Bihar, through the Commissioner of State Tax, Patna.

2. The Joint Commissioner of State Tax (Appeal), Patna North Circle, Patna.

3. The Assistant Commissioner of State Tax Patna North Circle, Patna.

4. The Assistant Commissioner of State Tax, Patna North Circle, Patna.

... ... Respondent/s ====================================================== Appearance :

For the Petitioner/s : Mr. Saket Tiwary, Advocate Mr. Rakesh Kumar Singh, Advocate Mr. Amritya Raj, Advocate For the Respondent/s : Mr. Vivek Prasad (GP-7) ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE PARTHA SARTHY ORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE)

Date : 23-08-2023

1. "There is a tendency for valiant tax executives clothed with judicial powers to remember their former capacity at the expense of the latter. In a welfare state and in appreciation of the nature of the judicial process, such an attitude, motivated by Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

various reasons, cannot be commended.

The penalty for deviance from these norms is the peril to the order passed. The effect of mala fides on exercise of administrative power is well-established."

[R.S. Joshi, Sales Tax Officer, Gujarat and Others v. Ajit Mills Limited and Another;(1977) 4 SCC 98]

2. This is a classic case of a valorous overreach by a

tax executive; recovering the assessed tax due, just after a day of

dismissal of the appeal; when there was a further appeal

provided and the Tribunal before which such an appeal is to be

filed was not constituted.

3. On facts, suffice it to notice that the assessee carries

on the business of manpower supply including security and

cleaning services to different establishments; in which is

included Government Polytechnic Institutions. The issue arose

as to whether the services provided to Government Polytechnic

Institutes would fall under the exemption stipulated in Entry No.

66(b)(iii) of Notification No. 12/2017 dated 28.06.2017

clarifying it to be services provided by or to Educational

Institutions up to Higher Secondary School or equivalent.

Reliance was also placed on the memo issued by the

Department of Education, Government of Bihar which

considered Polytechnics to be equivalent to Intermediate i.e.

Senior Secondary.

Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

4. We would not dwell upon the legal issue raised as

to exemption since the assessee has an appellate remedy which

has not been exhausted and the forum where such appeal is to be

instituted has not yet been constituted. We are only concerned

with the recovery made, peremptorily and surreptitiously from

the bank accounts of the assessee, on the very next day of the

rejection of the appeal.

5. Learned counsel for the petitioner Shri Saket

Tiwary asserts that the recovery was done in a most arbitrary

manner, especially when there was no Appellate Tribunal

constituted and there were notifications issued, both by the

Central Government and the State Government providing for

and extending the period of limitation to commence only from

the date of constitution of such Tribunals. It is also pointed out

that this Court in such matters have been consistently directing

payment of 20 per cent, as provided for in Section 112(8) of the

Bihar Goods and Services Tax Act, 2017 (hereinafter referred to

as "BGST Act") and staying recovery till the Tribunal is

constituted and the limitation of three months from that date is

crossed. In the present case, ignoring the statutory provisions

and the notifications issued, the recovery was made arbitrarily

and without any notice. Thus, frustrating the appellate remedy Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

of the petitioner assesee and putting the very business of the

assessee into jeopardy. The petitioner prays for refund of the

amounts recovered and stay of the assessment order confirmed

in appeal till the Appellate Tribunal is constituted under Section

109 of the BGST Act. The learned counsel Shri Saket Tiwary

also prays for interest on the amounts recovered and exceptional

costs for the prejudice caused to the business of the petitioner,

by the high-handed act of the tax authority.

6. Learned Government Advocate Shri Vivek Prasad,

on the other hand, relies on Section 78 of the BGST Act and its

proviso which enables recovery even within the period of three

months, if the proper officer considers it expedient in the

interest of Revenue. In the present case, there are reasons

recorded in writing by the Recovery Officer and hence, the

recovery has been made well within the contours of the statute.

The decision with respect to stay of recovery on payment of 20

per cent of the tax liability came later to the recovery in the

present case. There are absolutely no mala fides in the recovery

effected and the same was done only considering the expediency

which arose because of the close of the financial year. The

learned Government Advocate would seek for dismissal of the

writ petition.

Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

7. The assessee was issued with an assessment order

dated 14.12.2022 produced as Annexure-2. The tax dues under

the BGST and CGST Act were Rs. 18,91,609.00 each. There

was also a further liability of interest of Rs. 16,02,552.00 each

and a penalty of Rs. 1,89,161.00 each under the two enactments.

The total liability came to Rs. 73,66,644.00 which was directed

to be paid on or before 14.03.2023 as per Annexure-2. The

assessee filed an appeal which did not find favour with the

Appellate Authority, who rejected it on 27.03.2023, as is evident

from Annexure-1. Immediately on the next day, the Assessing

Officer issued Annexure-3 notice to the Branch Managers of the

four banks in which the assessee maintained accounts. A total

amount of Rs. 69,88,322.00 was sought to be recovered which

included the equal liabilities under the CGST and SGST

enactments. The 10 per cent deposited under each of the

enactments being Rs. 1,89,161.00 at the appellate stage was

deducted when the recovery notice was issued. The recovery

notice at Annexure-3 is dated 28.03.2023 and the entire amounts

have been recovered which resulted in the present challenge

before this Court.

8. The CGST Act provides for constitution of

Appellate Tribunal for hearing appeals against the orders passed Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

by the Appellate Authority or the Revisional Authority and

Section 109 of the BGST Act provides for the said Appellate

Tribunal constituted under the CGST Act to also hear the

appeals under the BGST Act. Section 112 enables any person

aggrieved by an order passed against him under Section 107 or

Section 108 of the BGST Act or the CGST Act to appeal to the

Appellate Tribunal against such order within three months from

the date on which the order sought to be appealed against is

communicated to the person preferring the appeal. Sub-section

(8) of Section 112 makes it mandatory for an appeal to be

instituted; that the appellant pays in full the amount of tax,

interest, fine, fee and penalty arising from the impugned order

as admitted by him and a sum equal to twenty per cent of the

remaining amount of tax in dispute, in addition to the amount

paid under Section 107(6). Hence, the admitted amount of tax

and other dues have to be satisfied along with twenty per cent of

the tax in dispute; in addition to the ten per cent paid under

Section 107 (6). On such payment being made, not only is the

instituted appeal maintainable; under sub-section (9) of Section

112, there is a deemed stay of the recovery proceedings for the

balance amount till the disposal of the appeal. Hence, when a

proper appeal is instituted before the Appellate Tribunal, with Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

the payments as required for maintaining the appeal, then there

is a statutory embargo from making any recovery based on the

assessment order or the first appellate order.

9. It is in this context that the proviso to Section 78

has to be looked at. Section 78 has the nominal heading

"Initiation of recovery proceedings" and requires a taxable

person to satisfy an order passed under the BGST Act by paying

up the amounts due within a period of three months from the

date of service of such order. The proviso enables the proper

officer in expedient situations, in the interest of revenue, for

reasons recorded in writing, to require the taxable person to

make such payment within such period, less than a period of

three months, as may be specified by him. In the present case,

admittedly there is no notice issued specifying the time within

three months, within which time the assessee was supposed to

pay the amounts as per the order.

10. The contention of the learned Government

Advocate is also that there is no requirement for a notice and

reasons alone are to be recorded, which is available in the files,

an extract of which is produced as Annexure-D along with the

supplementary counter affidavit dated 10.05.2023 filed on

behalf of Respondent Nos. 2 and 3. The reasons stated, as Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

evident from the extract of the file which is also dated

27.03.2023 is that the financial year 2022-23 is coming to an

end and there are bank holidays on the immediate days

following. We cannot but express our deep anguish and

dissatisfaction in the reasons recorded by the officer. The

imminent bank holidays of 2 or 3 days and the close of the

financial year, we are afraid, cannot be termed valid reasons to

justify an expedient recovery under the proviso to Section 78

and it is not clear as to how the interest of the revenue would

suffer, if the recovery is kept in abeyance for three months or at

least a notice is issued to the assessee before the recovery is

effectuated from the banks, behind the back of the assessee. The

counter affidavit does not speak of any notice having been given

to the assessee before recovery. Notices were issued to the banks

of the assessee and the amounts remaining in the various

accounts forcefully forfeited and paid over to the Tax

Department.

11. As far as the statutory provision not requiring a

notice to the assessee, we need only refer to the Constitution

Bench decision of the Hon'ble Supreme Court in Mohinder

Singh Gill and another v. The Chief Election Commissioner,

New Delhi and others; AIR 1978 Supreme Court 851 from Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

which we extract hereunder Paragraphs 75 and 76:-

"75. Fair hearing is thus a postulate of decision-making cancelling a poll, although fair abridgement of that process is permissible. It can be fair without the rules of evidence or forms of trial. It cannot be fair if apprising the affected and appraising the representations is absent. The philosophy behind natural justice is, in one sense, participatory justice in the process of democratic rule of law.

76. We have been told that wherever the Parliament has intended a hearing it has said so in the Act and the rules and inferentially where it has not specificated it is otiose. There is no such sequatur. The silence of a statute has no exclusionary effect except where it flows from necessary implication. Article 324 vests a wide power and where some direct consequence on candidates emanates from its exercise we must read this functional obligation."

[underlining by us for emphasis]

12. The aforesaid declaration of law made with

respect to a decision cancelling a poll, applies across the board

to every judicial and quasi-judicial order and action taken. The

principles of natural justice stand embedded in every coercive

action taken by a statutory authority, even within the four

corners of the law; when it could, in the normal circumstances

cause prejudice to the person against whom such proceedings

are levelled. The recording of reasons as coming forth in the

provision to Section 78 are not to be recorded surreptitiously Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

and kept in the files, but to be informed to the assessee and a

time specified within three months for the payment to be made.

In fact, on a reading of the proviso we are of the definite opinion

that there is a requirement of notice, if not prior to the recording

of reasons; at least intimation of the reasons which motivates the

proper officer to recover the amounts due, considering such

recovery to be expedient in the interest of revenue with clear

specification of the period; less than a period of three months,

within which the amounts are to be paid.

13. Section 78 provides that a person against whom an

order is passed shall satisfy the amounts payable within a period

of three months and the proviso empowers the Assessing Officer

to seek satisfaction of such dues even during a period lesser than

three months. The provision is worded so:-

"78. Initiation of recovery proceedings.- Any amount payable by a taxable person in pursuance of an order passed under this Act shall be paid by such person within a period of three months from the date of service of such order failing which recovery proceedings shall be initiated:

Provided that where the proper officer considers it expedient in the interest of revenue, he may, for reasons to be recorded in writing, require the said taxable person to make such payment within such period less than a period of three months as may be specified by him."

[underlining by us for emphasis] Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

Hence, when reasons are recorded in writing, there is a duty on

the Assessing Officer to specify the time within which the

amounts are to be paid which intimation has to go to the

assessee.

14. In this context, we also have to notice that the

Appellate Tribunal under Section 109 of the CGST Act has not

yet been constituted. We would not rely at all on the equitable

directions issued by this Court in various petitions staying

recovery on payment of twenty per cent of the balance tax due

as provided under Section 112(8). However, it is very evident

that even the Central Government and the State Government

was conscious of the fact of the Tribunal having not yet been

constituted. Two notifications, one of the Central Government

and the other of the State Government, are produced as

Annexure 8 and 9 along with the writ petition. Both these

notifications invoke the power conferred respectively under

Section 172 of the CGST and BGST Act. For removal of

difficulties, presumably for reason of the non-constitution of the

Tribunal, the three months limitation period stipulated under

sub-section (1) of Section 112 of both the enactments are

extended to the latter of the following dates; (i) of

communication of order or (ii) the date on which the President Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

or the State President, as the case may be, of the Appellate

Tribunal after its constitution under Section 109, enters office. It

is also stipulated that the six month period provided under

Section 112(3) shall also stand extended by the very same

period from the aforesaid dates; whichever date falls later.

Hence, there could not have been a recovery surreptitiously, by

issuing notices to the banks and coercing them to pay the

amounts, that too the entire due amounts, including the tax,

interest and penalty.

15. The Legislature had, in the event of an appeal

filed to the Tribunal, only intended twenty percent of the tax

dues alone to be paid; on which payment the entire demand was

liable to be stayed till the disposal of the appeal. However,

admitted tax; interest, fine and penalty also have to be satisfied.

Hence even if coercive action could have been taken the tax

officer should have confined it to the twenty percent of the total

amounts assessed, in addition to the ten percent paid at the first

appellate stage and any admitted tax, if remaining unpaid. The

tax officer had definitely erred, that too egregiously, to the

extent of his action being termed high-handed, in surreptitiously

making the recovery of the entire amounts due as tax, interest

and penalty, even contrary to the legislative mandate. As we Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

found, the reasons stated are unconvincing and clearly untenable

and the approaching closure of the financial year end can only

be a motivation to enhance the individual targets assigned by the

higher authorities.

16. Following the dictum laid down in UTI Mutual

Fund v. Income-Tax Officer and Others; [2012] 345 ITR 71

(Bom), we issue the following guidelines in so far as the

recoveries are concerned:-

(1). There shall be no recovery of tax within the time

limit for filing an appeal and when a stay application is filed in a

properly instituted appeal, before the stay application is

disposed of by the Appellate Authority;

(2) Even when the stay application in the appeal is

disposed of, the recovery shall be initiated only after a

reasonable period so as to enable the assessee to move a higher

forum;

(3) However, in cases where the Assessing Officer has

reason to believe that the assessee may defeat the demand or

that it is expedient in the interest of Revenue, as is provided

under the proviso to Section 78, there can be a recovery but with

notice to the assessee, which notice shows the reasons for

initiating it and specifies the lesser time within which the Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

assessee is directed to satisfy the dues;

(4). Though a bank account could be attached; before

withdrawing the amount, reasonable prior notice should be

furnished to the assessee to enable the assessee to make a

representation or seek recourse to a remedy in law;

(5). We also remind the Tax Authorities, as was done

in the UTI Mutual Fund (supra) that the 'authorities under the

tax enactment shall not act as a mere tax gatherer but act as a

quasi-judicial authority vested with the public duty of protecting

the interest of the Revenue while at the same time balancing the

need to mitigate the hardship to the assessee' (sic-UTI Mutual

Fund).

17. We cannot but find a definite overreach by the tax

authority, the officer who issued Annexure-3 order, to

surreptitiously recover the amounts due as per the assessment

order passed, from the bank accounts of the assessee, without

proper intimation being given to the assessee or a time specified

for the assessee to satisfy the demands; even if the action was

motivated by expediency and in the interest of the Revenue,

which we have found is not discernible from the reasons

recorded in the instant case. The reasons stated by the officer

were kept hidden within the folds of the files; at the risk of Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

repetition, were also not convincing. The close of the

assessment year and one or two days of bank holidays, we are

not convinced are sufficient reasons to forfeit the amounts kept

in the account of a running business. The State and its revenues

would not collapse if the said amounts were not recovered but

there is every chance of a business folding up without liquid

funds being available to it, especially a running concern with

liabilities to its employees, its other creditors and so on and so

forth.

18. The actions of the Tax Authorities, under the

taxing statute should be tempered with good conscience and

judicious reasoning, which in the instant case was in complete

derogation of the established principles of rule of law;

reigning supreme even when there is a compulsory extraction

of money for the larger good and welfare, which a levy of tax

always is. The tax authority should also act as a facilitator of

business and economy and not merely as an extortionist,

always looking to have the pound of flesh, to satisfy his

hierarchical superiors to push his/her personal agendas. We

have no doubt that the action complained of, was high handed

and arbitrary.

19. As we observed, the Assessing Authority in the Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

scheme of the enactment could not have made recovery of the

entire amount. Section 112 provides for twenty per cent of the

tax amount due, in addition to the ten per cent amount paid at

the first appellate stage, for maintaining a second appeal

before the Appellate Tribunal. On such payment being made

under Section 112(8), there is also a requirement that the

further recovery proceedings would be stayed. Hence, when

an Appellate Authority was not constituted even when the

Assessing Officer acted under the proviso to Section 78 what

could have been recovered is only twenty per cent of the tax

amount due in addition to that paid up to institute a first

appeal. We see from Annexure-3 order that under both the

BGST and CGST Act, the tax amounts due are Rs.

18,91,609.00 and the demand made of Rs. 34,94,161.00 each

under CGST and BGST Act is after including the interest and

penalty. We also notice that Rs. 1,89,161.00 has been reduced

from the total demand raised under Annexure-2 order,

presumably, the ten per cent payment made by the assessee at

the first appellate stage.

20. Hence, what was required to be paid by the

assessee, for maintaining an appeal before the Appellate

Tribunal, if constituted, was Rs. 7,56,644.00 being the twenty Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

per cent of the tax dues under the BGST and CGST Act.

Hence, the balance amounts from the total sums forfeited of

Rs. 69,88,322.00 recovered shall be paid over to the assessee

within a period of two weeks from today, failing which

interest shall run at the rate of 12 per cent per annum. If the

amounts are satisfied within two weeks, as directed

hereinabove, it is made clear that if eventually the demand is

confirmed against the assessee, there shall not be any interest

claimed under the statute between the date on which the

amounts were credited by the banks as per Annexure-3 order

and the date of refund as directed hereinabove; since the State

had the benefit of the amounts in its coffers. If the liability is

set aside then for the periods the assessee was deprived of the

amounts recovered, she shall be entitled to claim interest from

the department.

21. We are also of the opinion that the officer who

issued Annexure-3 order, who acted in complete derogation of

the statutory provisions and established principles of law,

should pay an amount of Rs. 5,000/- (five thousand) as cost to

the assessee; a receipt of which shall be filed within two

weeks in the instant writ petition.

22. The writ petition is allowed with the above Patna High Court CWJC No.5407 of 2023 dt.23-08-2023

directions and the guidelines as laid down by us hereinabove.

(K. Vinod Chandran, CJ)

(Partha Sarthy, J) P.K.P./-

AFR/NAFR                AFR
CAV DATE
Uploading Date          30.08.2023
Transmission Date