Relief for Indian Oil: Patna HC Quashes ₹5,463 Cr Sales Tax Demand Over Antedated Ex Parte Order [Read Order]

In a recent ruling, the Patna High Court quashed Rs. 5,463 crore sales tax demand against Indian Oil Corporation Ltd. (IOCL) citing that the reassessment order was antedated and time-barred.

Indian Oil Corporation Ltd. (IOCL), the petitioner had challenged the assessment order dated 21.02.2019, issued under Section 17(3) of the Bihar Finance Act, 1981, for the period 1999-2000. The assessment was based on an estimated turnover of Rs. 5,463 crore, with multiple disallowances.

Become PF & ESIC Pro: Basic to Advance Course - Enroll Today

The Bihar Commercial Taxes Tribunal had earlier set aside the assessment and directed a fresh hearing but the tax department failed to provide the corporation an opportunity to present its case before issuing a demand notice on 21.10.2020 (almost 20 months later).

Read More: RBI Enables Direct INR-MVR Trade Settlement Between India and Maldives

The tax department argued that the reassessment was conducted within the prescribed two-year limitation period under Section 24 of the Bihar Finance Act. The department claimed that the corporation was duly served a notice for a fresh hearing on 17.12.2018, but failed to appear. The department also stated that as per Rule 50 of the Bihar VAT Rules, 2005, once notice is served, the taxpayer must track proceedings independently.

The corporation’s counsel argued that the assessment order was backdated and issued only after it applied for a refund of excess tax paid. They further argued that the department failed to provide proper notice and hearing, violating principles of natural justice. The company pointed out discrepancies in the tax department’s records, particularly in the order sheet entries, notice service report, and unexplained delay in issuing the demand notice.

Read More: RBI Issues Guidelines for Annual Closing of Government Accounts for FY 2024-25

A division bench comprising Justice Rajeev Ranjan Prasad and Justice Ramesh Chand Malviya ruled in favor of IOCL. The court observed that proper service of notice was not provided, and the ex parte reassessment order appeared to be antedated to circumvent the limitation period.

Learn DTAA and international taxation, live course with e-notes Click here

The court referred to the State of Andhra Pradesh v. M. Ramakishtaiah & Co., in which the Supreme Court set aside a delayed tax order due to a lack of communication within a reasonable time.

The court held that the reassessment order was legally invalid, quashed the Rs. 5,463 crore tax demand, and imposed a Rs. 1 lakh cost on the tax department for procedural lapses. The court also directed the Bihar Tax Department to initiate an internal inquiry and take responsibility for the delay and misconduct. The writ petition was allowed.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates