M/S. Bharti Airtel LTD. vs. The State Of Bihar And Ors

Held

The Court held that the assessment order dated July 3, 2018, for the period 2015-16, in so far as it imposed interest of Rs. 1,02,77,424/-, was not sustainable. The Court reasoned that Section 33 of the VAT Act, read with Rule 25 of the Bihar Value Added Tax Rules, 2005, which governs reassessments based on audit objections, does not authorize the imposition of interest. The Court found that the Assessing Authority had illegally resorted to Section 31 of the VAT Act for levying interest, which is distinct from the procedure for reassessment on an audit objection under Section 33. The Court relied on its previous decision in M/s Tata Project Limited vs. the State of Bihar & ors. (C.W.J.C.No. 24431/2018) which held that resorting to Section 31(2) for imposing a penalty in a proceeding initiated on an audit objection under Section 33 is overstepping jurisdiction. Consequently, the assessment order and the consequential demand notice to the extent they raised a demand for interest were quashed and set aside. The Court noted that the excess amount deposited by the petitioner for 2014-15 had been adjusted against the liability for 2015-16. The remaining balance of Rs. 7,72,508/- (Rs. 2,57,90,273 - Rs. 2,50,17,765) was directed to be deposited by the petitioner within four weeks if still payable.

Facts

M/s. Bharti Airtel Ltd. (the petitioner) filed a writ petition challenging an order dated July 3, 2018, passed by the Deputy Commissioner, State Taxes, for the period 2015-16. The order held the petitioner liable for a short payment of Rs. 2,57,90,273/- under the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act, 1993 (the Entry Tax Act), and levied interest of Rs. 1,02,77,424/-, totaling Rs. 3,60,67,697/-. The challenge also extended to the consequential demand notice. The petitioner argued that the assessment was made despite a significant advance tax deposit of Rs. 4 Crores under the Bihar Value Added Tax Act, 2005 (VAT Act) for the period 2014-15, of which approximately Rs. 2.50 Crores was yet to be adjusted. The respondents contended that the demand was raised following an audit objection by the Accountant General, and the adjustment of excess amount was made after the reassessment order.

Key Issues

1. Whether the Assessing Authority, while passing a reassessment order under Section 8 of the Entry Tax Act read with Section 31 of the VAT Act, could legally impose interest on the short payment of tax, considering the procedure prescribed under Section 33 of the VAT Act and Rule 25 of the Bihar Value Added Tax Rules, 2005. Petitioner's arguments: The petitioner contended that the Assessing Authority acted in gross abuse of statutory powers by raising the demand and levying interest, ignoring the substantial advance tax deposit made under the VAT Act. They argued that past precedents and departmental practice in similar situations supported the adjustment of excess advance tax against the Entry Tax liability. The petitioner further argued that the reassessment order, based on an audit objection, should have followed the procedure under Section 33 of the VAT Act and Rule 25, which do not permit the levy of penalty or interest, and that recourse to Section 31 for imposing interest was illegal. Revenue's arguments: The State argued that the demand was raised on an audit objection recommending interest on the deficit tax amount. They submitted that the adjustment of the excess amount was made on an application filed by the petitioner under Section 68 of the VAT Act after the reassessment order had already been passed under Section 31 of the VAT Act read with Section 8 of the Entry Tax Act, and therefore, the petitioner could not avoid liability. The State relied on Union of India v. State of Bihar & ors. (2012) and Indian Oil Corporation v. State of Bihar & ors. (2018).