M/S Bhagwati Coke Industries PVT. LTD. vs. The State Of Bihar And Ors

Held

The Court held that the Assessing Officer was not justified in imposing tax based solely on the minimum price indicated in the circular dated 18.07.2013, disregarding the actual sale price supported by documentary evidence. The Court noted that the respondents, in their supplementary counter-affidavit, clarified that the circular was a modality for software preparation to alert about potential tax evasion and for enquiry purposes, not a definitive price fixation. The circular indicated that if goods were carried at a price lower than the quoted minimum, it would trigger physical verification to establish the authenticity of the rate. In this case, the petitioner had provided sale documents (Annexures 2 and 4 series) showing the purchase of coal at Rs. 1740/- per M.T. from Central Coalfields Limited, a Government of India company. Tax was assessed by Jharkhand State based on this price, and the company itself had deducted tax as per the invoice. The Court found no material or cogent evidence presented by the department to show that the petitioner attempted to evade duty by under-pricing the coal. Therefore, imposing tax based on the circular without specific evidence of under-pricing and ignoring the available material was arbitrary and unsustainable. The impugned order was quashed, and tax was to be determined at Rs. 1740/- per M.T. The prayer to declare the circular ultra vires was not considered as it was no longer necessary, especially after the advent of the GST Act.

Facts

The petitioner, M/s Bhagwati Coke Industries Pvt. Ltd., challenged an order dated 09.01.2014 passed by the Assessing Officer under the VAT Act. The Assessing Officer imposed tax by treating the price of coal at Rs. 7000/- per Metric Ton, instead of the actual sale price of Rs. 1740/- per M.T. as indicated in the sale order. The petitioner purchased 627 M.T. of coal from Central Coalfields Limited, a Government of India undertaking, in Jharkhand. After obtaining necessary documents and paying duty in Jharkhand, the petitioner entered Bihar. At the check-post, the vehicle was stopped, and proceedings were initiated based on a Bihar Government circular dated 18.07.2013, which fixed a minimum price of Rs. 7000/- per M.T. for coal, deeming the petitioner's declared price to be below this minimum.

Key Issues

1. Whether the Assessing Officer was justified in imposing tax on the petitioner based on a minimum price fixed by a departmental circular, disregarding the actual sale price evidenced by sale orders and invoices? (Question of law) Petitioner's contention: The petitioner argued that since the sale order and other documents clearly showed the price of coal at Rs. 1740/- per M.T., and tax was paid based on this price, the impugned action of assessing tax on an assumed minimum price from a circular was unsustainable. They relied on this Court's judgment in M/s Nazir Saw Mill vs. State of Bihar (CWJC No. 2223 of 2014) where a similar act of the department was questioned. Revenue's contention: The respondents argued that the price was fixed after proper technical evaluation by experts, and therefore, no interference was called for.