M/S Shivam Enterprise v The State Of Bihar: Patna HC on Admitted ITC Demand

M/S Shivam Enterprise, a Patna-based proprietorship, challenged a GST show cause notice and the resulting demand order before the Patna High Court. It argued that the notice and demand violated Section 73(1) and Section 75(4) of the BGST/CGST Act, 2017, and the principles of natural justice. The Court dismissed the writ. It rested its decision on the petitioner's own reply to the show cause notice, which accepted that input tax credit had been wrongly availed. The case is a useful reference on how an admission in a reply can dispose of procedural challenges to a GST demand.

This page is a research summary of one specific Indian tax judgment, NOT legal advice. Always verify against the full judgment and consult a professional for case-specific guidance.

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The case at a glance

• Parties: M/S Shivam Enterprise v The State Of Bihar
• Bench: Patna High Court - Orders
• Date: 12 August 2025
• Court level: High Court
• Sections engaged: 73(1), 75(4)
• Outcome: Revenue succeeded

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Facts of the case

The petitioner is a proprietorship firm with a GSTIN and a Patna address, acting through its proprietor. The writ application (Civil Writ Jurisdiction Case No. 6990 of 2025) challenged a demand order and a summary of demand in Form DRC-07. The demand was for tax, interest and penalty totalling Rs.4,53,833 under the BGST Act for July 2017 to March 2018. The petitioner also challenged the underlying show cause notice, which it described as unsigned and not digitally signed.

The petitioner's grievances concerned process. A summary of the show cause notice dated 03.07.2019 was uploaded on the GST portal under the "Additional Notices" column. It asked for a submission by 08.07.2019, and the personal hearing was fixed for the same date as the reply deadline. A reminder notice uploaded on 03.08.2019 likewise fixed the personal hearing on 16.08.2019, the date fixed for the reply. The petitioner argued that this did not meet the personal-hearing requirement of Section 75(4), that the notices lacked digital signatures, and that the demand order was unreasoned. It also said no prior notice in Form ASMT-10 had been issued.

The State's case was that the demand followed the petitioner's own online submission, which accepted that transitional credit under the SGST head of Rs.3,45,120 had been wrongly availed. The State said the order was passed online on 19.08.2019 and a system-generated DRC-07 summary was issued with digital signature. It also said only interest of Rs.1,08,713 had been imposed for the wrong availment of input tax credit and that no penalty had been levied. In the rejoinder, the petitioner for the first time said its representative had made an inadvertent drafting error in the reply.

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Issues raised

• Whether the show cause notice and demand order were vitiated under Section 73(1) and Section 75(4) because of the hearing dates, the uploading of notices under "Additional Notices", and the absence of digital signatures.
• Whether the demand order was unreasoned and passed in breach of natural justice.
• Whether the petitioner could resile from its reply accepting wrong availment of input tax credit by attributing a mistake to its representative.
• Whether the High Court should exercise judicial review over a demand that, per the State, consisted only of interest on wrongly availed credit.

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What the court held

The Court dismissed the writ application: "This writ application has no merit. It is dismissed accordingly." It found no reason to exercise its power of judicial review on these facts.

The Court's reasoning turned on the petitioner's reply. It noted that, after the show cause notice, the petitioner had submitted a reply through its representative accepting that input tax credit had been wrongly availed and utilised in 2017-18. The Proper Officer's order was based on that acceptance, so the Court said it need not go into the issue of service of notice. It also observed that the petitioner had not pleaded in the writ application that its representative had done anything wrong. The plea that the representative erred and was unaware of the facts appeared only in the rejoinder, which the Court called a bald plea with no basis and not inspiring confidence.

The Court recorded that the Proper Officer had raised a demand only for interest on the amount wrongly availed as input tax credit, under the interest provision of the BGST Act. No penalty had been imposed.

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Strategy observations

1. The petitioner framed its challenge around procedural defects: the personal-hearing dates under Section 75(4), the unsigned and portal-uploaded notices, and the alleged lack of a reasoned order.
2. The State met the challenge with the petitioner's own written submission. According to the order, that online reply accepted wrongful availment of transitional credit of Rs.3,45,120.
3. The State also disputed the petitioner's description of the demand, stating that only interest of Rs.1,08,713 had been imposed and no penalty.
4. The petitioner then claimed in the rejoinder that its representative had erred in the reply. The Court noted that this plea was absent from the writ application and was raised only at the rejoinder stage.
5. The Court treated the admission as decisive and declined to examine the notice-service question.

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Why this case matters

The order shows a High Court declining to entertain procedural objections to a GST demand when the demand rests on the registered person's own written acceptance of wrong input tax credit. The Court gave weight to the timing of the plea that the representative had erred. That plea first surfaced in the rejoinder and was not supported by particulars of how the representative went wrong.

The order also illustrates how the nature of the demand shaped the Court's approach. As recorded, the demand was confined to interest on credit wrongly availed, with no penalty, and the Court found no ground for judicial review. For researchers tracking Section 73(1) and Section 75(4) disputes before the High Courts, the case is an example where alleged procedural defects did not prevail against an admission on the record.

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Source

This case is drawn from the TaxNoticeAI structured legal corpus (16,101 Indian tax judgments, CBIC circulars, ITAT rulings, AAR rulings, GSTAT rulings), sourced from indiankanoon.org and official court portals. Original document: https://indiankanoon.org/doc/119390793/