Estimated GST without analysis of coal use & brick production is illegal: Patna HC

The court observed that the tax authorities had not taken into account the typical relationship between the quantity of coal consumed and the number of bricks produced. The judgment noted that, for example, producing one ton of bricks typically requires between 100 and 250 kilograms of coal. The authorities failed to conduct this exercise, which would have allowed them to reasonably infer whether the petitioner had manipulated invoices or e-Way Bills.

By failing to apply a technical standard and instead relying on a mere estimation, the court concluded that the tax authorities’ assessment was based on “mere guesswork” and was legally flawed. The court quashed the order and directed the respondents to conduct a fresh assessment. This new assessment must be done in strict accordance with a proper technical analysis and with full regard for the principles of natural justice, including providing the petitioner with an opportunity to be heard. The court has given the authorities six months to complete this process and has instructed the petitioner to cooperate fully.