Case Law Details
Indian Oil Corporation Ltd. Vs State of Bihar (Patna High Court)
The Patna High Court delivered a significant judgment quashing a reassessment order and demand notice issued to Indian Oil Corporation Ltd. (IOCL) for the assessment period of 1999-2000. The court’s decision, centered on allegations of antedating and a gross violation of natural justice principles, highlights the importance of timely communication of orders and adherence to procedural fairness in tax assessment proceedings. The case also serves as a reminder of the judiciary’s power to scrutinize administrative actions and hold authorities accountable for lapses in procedure.
Background of the Case:
IOCL, a public sector undertaking engaged in the marketing of petroleum products, faced an assessment under Section 17(3) of the Bihar Finance Act, 1981. The Commercial Taxes Officer (CTO) estimated IOCL’s gross turnover and made several disallowances. Aggrieved by this assessment, IOCL pursued appeals through the administrative hierarchy, ultimately reaching the Commercial Taxes Tribunal. The tribunal, finding the estimation of turnover and disallowances unjustified, set aside the appellate authority’s order and directed the assessing authority to conduct a fresh assessment (de novo). Crucially, the tribunal’s order, dated August 25, 2017, specifically mandated granting IOCL an opportunity to be heard.
The Bone of Contention: Delay and Alleged Antedating:
The crux of IOCL’s grievance lay in the assessing authority’s apparent disregard for the tribunal’s directive. IOCL claimed that no notice was ever issued to them for the fresh assessment proceedings, depriving them of the opportunity to present their case and relevant documents. With the limitation period for reassessment under the Bihar Finance Act, 1981, nearing expiry, IOCL filed an application for a refund of excess tax paid. It was only after this refund application that the assessing authority purportedly took action.
In a surprising turn of events, IOCL received a demand notice in October 2020, purportedly issued in pursuance of a reassessment order dated February 21, 2019. The actual reassessment order, however, was not provided to IOCL until they specifically applied for a certified copy in November 2020. This substantial delay of approximately 20 months between the purported date of the order and its communication raised serious concerns about the order’s legitimacy.
IOCL vehemently argued that the reassessment order was antedated. They pointed to inconsistencies in the order sheet, particularly regarding dates and memo numbers, as evidence of this antedating. They claimed that the order sheet revealed subsequent entries contradicting earlier dates, suggesting manipulation of records. IOCL also contested the purported service of the initial hearing notice, alleging that the process server’s report lacked crucial details, such as the name and designation of the person who supposedly received the notice on behalf of IOCL.
Respondent’s Counterarguments and the Court’s Scrutiny:
The respondents, representing the tax department, countered IOCL’s claims, asserting that a hearing notice had indeed been issued and served in December 2018, scheduling a hearing for January 2019. They presented a copy of the notice and an extract from the issue register as proof of service. They further argued that under the relevant rules, once a notice is served, no further notice is required, and it is the assessee’s responsibility to inquire about subsequent proceedings. The respondents attributed the reassessment order’s timing to the need to comply with the limitation period. They denied any manipulation of the order sheet.
The Patna High Court meticulously examined the records and heard arguments from both sides. The court observed that the tribunal’s order for reassessment was communicated to the assessing authority in August 2017. However, the order sheet remained conspicuously silent until December 2019, when the purported hearing notice was issued. The court noted the discrepancies in dates and memo numbers cited by IOCL. It also expressed skepticism about the service of the hearing notice, highlighting the lack of proper acknowledgment and endorsement by the process server.
The Court’s Reasoning and Reliance on Precedent:
The court placed significant emphasis on the inordinate and unexplained delay in communicating the reassessment order to IOCL. This delay, coupled with the discrepancies in the records, led the court to question the veracity of the order’s purported date. The court relied heavily on the Supreme Court’s judgment in State of Andhra Pradesh vs. M. Ramakishtaiah & Co. In that case, the Supreme Court had held that an unexplained delay in communicating an order can lead to the presumption that the order was not made on the date it purports to have been made. Applying this principle to IOCL’s case, the Patna High Court concluded that the reassessment order was likely antedated.
The High Court underscored the importance of adhering to the principles of natural justice. By not providing IOCL with a proper opportunity to be heard during the reassessment proceedings, the assessing authority had violated these principles. 1 The court also criticized the assessing authority’s inaction for over two years after receiving the tribunal’s order, terming it as “laches” and deprecating the subsequent attempt to “antedate” the Order.
Judgment and Consequences:
The Patna High Court quashed the reassessment order and the consequential demand notice, declaring them to be invalid. The court’s judgment served as a strong indictment of the assessing authority’s conduct. Beyond merely setting aside the impugned order, the court imposed a cost of Rs. 1 lakh on the respondents, payable to IOCL, as a form of compensation for the undue hardship caused. Furthermore, the court directed the respondent no. 1 to institute an inquiry into the matter, fix responsibility for the procedural lapses and delays, and pass an appropriate order within three months. This directive emphasized the court’s commitment to ensuring accountability and preventing similar instances of procedural impropriety in the future.
FULL TEXT OF THE JUDGMENT/ORDER OF PATNA HIGH COURT
The petitioner has prayed for the following reliefs:-
i) the order dated 21.02.2019 (as contained Annexure– 5) passed by respondent no. 2 for the period 1999 – 2000 under section 17(3) of the Bihar Finance Act, 1981 made available on 05.11.2020 be quashed.
ii) the notice of demand dated 21.02.2019 (as contained in Annexure – 4) served on 21.10.2020 issued by the respondent no. 2 be quashed
iii) for granting any other relief (s) to which the petitioner is otherwise found entitled to.
Brief Facts
2. Mr. S. D. Sanjay, learned Senior counsel for the petitioner submits that the petitioner is a Public Sector Undertaking of the Government of India. It is engaged in the business of marketing of petroleum products. In the assessment for the period 1999-2000 under Section 17(3) of the Bihar Finance Act, 1981 (hereinafter referred to as the ‘Act of 1981’), the Commercial Taxes Officer, Special Circle, Patna (in short ‘CTO’) determined the gross turnover of the petitioner at Rs. 54,63,46,08,715/- on estimate. The CTO also made several disallowances in the assessment.
3. It is submitted that being aggrieved by the order of assessment (Annexure ‘1’ series to the writ application), the petitioner preferred an appeal before the Joint Commissioner of Commercial Taxes (Appeals), Central Division, Patna but the same was dismissed vide order dated 02.09.2004 in Appeal Case No. 288/289 of 2003.
4. Thereafter, the petitioner preferred a revision application before the learned Commercial Taxes Tribunal, Bihar, Patna challenging the order of the appellate authority on various grounds. In revision, the learned Tribunal held that the estimation of gross turnover without any basis was not justified and the other disallowances were also not justified. Thus, the learned Tribunal set aside the order of the appellate authority and issued a direction to the assessing authority to pass an order of assessment de novo. In its order dated 25.08.2017 (Annexure ‘3’ to the writ application), the learned Tribunal specifically directed the assessing authority to grant an opportunity of hearing to the petitioner. The said order of the Tribunal was communicated to the Deputy Commissioner, Commercial Taxes, Special Circle, Patna through Memo No. 506 dated 30.08.2017.
5. The grievance of the petitioner is that the assessing authority did not issue any notice to the petitioner in compliance of the order of the Tribunal. No opportunity for production of requisite books and other documents for completion of fresh assessment proceedings was provided to the petitioner. Since there was no notice to the petitioner and the period of limitation, which is two years in terms of proviso to Section 24 of the Act of 1981, elapsed, the petitioner company filed an application for refund. After receipt of the application of the petitioner-company seeking refund, the respondent no. 2 sent an email on 21.10.2020 by which a demand notice in pursuance to an order purported to have been passed on 21.02.2019 was served upon the petitioner-company. It is submitted that only the demand notice was sent by mail on 21.10.2020, but the order of assessment was not communicated in the said mail. A copy of the notice of demand dated 21.02.2019 issued by respondent no. 2 along with email served on 21.10.2020 has been annexed and marked as Annexure ‘4’ series to the writ application.
6. It is submitted that after receipt of the notice of demand, the petitioner filed an application on 02.11.2020 for obtaining the certified copy of the order of assessment said to have been passed pursuant to the revisional order, the certified copy was made available to the petitioner on 05.11.2020.
Submissions on behalf of the petitioner
7. Learned Senior counsel for the petitioner has vehemently submitted before this Court that the order of assessment passed by respondent no. 2, which is under challenge, is an antedated order which has been passed in haste by the respondent authority (Respondent No. 2) only after receipt of the refund application from the petitioner-company. In this connection, it is submitted that the entire ordersheet of the assessment proceeding is running in ‘64’ pages. On perusal of the last five dates, it may be seen that the ordersheets have been drawn on 12.08.2005, 12.2019, 18.01.2019, 21.02.2019, and 31.10.2020. Submission is that if for the first time after the revisional order was passed by the Tribunal, the order was drawn on 17.12.2019, there could not have been a date fixed on 18.01.2019 and 21.02.2019. This is a case of antedating. It is submitted that in the right hand side of the ordersheet, there is a mention of Memo 3935 dated 17.12.2019, on this date, in particular, there is an interpolation and overwriting. It is his submission that the ordersheet clearly shows that the order of assessment passed by respondent no. 2 is antedated and the same is barred by law of limitation as per proviso to Section 24 of the Act of 1981.
8. Learned Senior counsel submits that the impugned order of assessment and the demand notice have been passed in complete violation of the revisional order of the Tribunal, no opportunity of hearing has been given to the petitioner hence, the impugned order and the demand notice suffer from the vice of violation of principles of natural justice and fair play in It is his submission that this Court may hold and declare that the order impugned which is Annexure ‘5’ to the writ application is no order in the eye of law, it is a nullity and the assessment proceeding itself lapsed on expiry of a period of two years from 30.08.2017 which is the date of communication of the revisional order to the assessing authority.
Stand of the Respondents
9. Mr. Vikas Kumar, learned Standing Counsel-11 has opposed the contentions advanced on behalf of petitioner- company. He has also produced the original file pertaining to the assessment proceedings.
10. It is found that in paragraph ‘5’ of the counter affidavit, the answering respondent no. 2 has seriously disputed the fact of non-issuance/service of notice to the petitioner. He has brought on record a copy of the notice issued to the petitioner vide Process No. 3935 dated 17.12.2018 for appearance on 18.01.2019. It is submitted that on perusal of the issue register, it would appear that the notice for hearing vide Process No. 3935 dated 17.12.2018 finds mention in it with date of appearance on 18.01.2019. Xerox copy of the relevant extract of the issue register has been enclosed as Annexure ‘B’ to the counter affidavit.
11. It is submitted that the notice vide Process No. 3935 was received by the petitioner on 19.12.2018 which is also evident from the report of the process server at the back of the notice and as such, there is valid service of notice upon the Relying upon Rule 50 of the Bihar Value Added Tax Rules, 2005 (as existed at the relevant time), it is submitted that if once a notice has been served validly under the provision of Rule 50, no further notice shall be required to be served afresh during course of the proceeding and it shall be the duty of the person upon whom notice has been served to inquire about the order passed or fresh dates fixed, as the case may be, in this regard. Learned counsel submits that since there was no representation on behalf of the petitioner, the assessment order was required to be passed within the period of limitation as per provision of Section 37 of the Bihar VAT Act, 2005, therefore, a decision was taken to pass an ex parte order fixing date as 21.02.2019 and on the appointed date, detailed order was passed.
12. The respondent no. 2 has submitted that the contention of the petitioner with respect to interpolation with the ordersheet is not correct.
13. Learned Standing counsel has relied upon a judgment of the Hon’ble Supreme Court in the case of State of Maharashtra and Others vs. Greatship (India) Limited (Civil Appeal No. 4956 of 2022) wherein the Hon’ble Supreme Court has been pleased to take a view that in a writ petition against order of assessment by-passing the statutory remedy of appeal, if there are serious disputes on facts as to whether the assessment order was passed on 20.03.2020 or 14.07.2020, the High Court should refrain from exercising its jurisdiction under the constitutional provisions. The question is not of maintainability but is of entertainability.
Reply on behalf of the petitioner
14. Mr. S.D. Sanjay, learned Senior counsel has, in response submitted that between 12.08.2005 and 17.12.2019, there is no noting in the ordersheet. On 17.12.2019, there is a reference to the order passed by the Tribunal on 30.08.2017 but there is no noting in the ordersheet to show receipt of the order passed by Commercial Taxes Tribunal by the answering respondent. If the order was received on 30.08.2017, why the ordersheet does not record receipt of the order passed by the Tribunal and respondent no. 2 proceeded to issue notice only on 17.12.2019. Learned Senior counsel has relied upon a judgment of the Hon’ble Supreme Court in the case of State of Andhra Pradesh vs. M. Ramakishtaiah & Co. reported in (1994) 93 STC 406 to submit that in the said case, the order of the Deputy Commissioner was said to have been made on January 6, 1973 but it was served upon the assessee on November 21, 1973 i.e. precisely ten and half months later. There was no explanation from the Deputy Commissioner why it was so delayed. Therefore, the Hon’ble Supreme Court held that it must be presumed that the order was not made on the date it purports to have been made.
Consideration
15. We have heard learned counsel for the parties and perused the records. It is evident from the records that the revisional order of the learned Tribunal was communicated to the CTO vide Memo No. 506 dated 30.08.2017. At the top of the copy of the revisional order which is available in the records, there is an endorsement presumably of the CTO in the following words
.”. This endorsement has been made on 04.09.2017. It is available at page no. ‘74’ of the record.
The operative part of the revisional order reads as under:-
16. It further appears from the revisional order that it was communicated to the petitioner-company also by the same memo. It, however, appears from the ordersheet side of the records that no order was drawn on 04.09.2017. Laches on the part of the office of respondent no. 2 writ large on the face of the records. In fact, the first order date mentioned in the record after receipt of the revisional order is “17.12.2019” fixing the date of hearing on “18.01.2019”. In the right hand side margin portion, there is an endorsement showing “3935/17.12.2019”. There are overwritings at two places, firstly in the date fixed for hearing and secondly in the year of the Process No. 3935. Copy of the Memo No. 3935 is available on the record and perusal thereof shows that it bears a date of “17.12.2018”. If the date of “17.12.2018” is taken as the correct date, it is evident that in the ordersheet, the date has been wrongly mentioned as “17.12.2019” instead of “17.12.2018”.
17. It has been contended on behalf of the petitioner- company that Process No. 3935 dated 17.12.2018 was never served upon the petitioner-company but in the left hand side portion, there is an endorsement saying that someone has received the notice on 19.12.2018. There is no seal of the petitioner- company and it is not clear as to who has received the notice on behalf of the petitioner-company. There is a completely vague initial of someone who is not identified. On the backside, there is an endorsement of service of notice and one name “Munna” is written but who is this Munna is not known and there is no endorsement by the process server that to whom he met and served the notice.
18. In these circumstances, a question has arisen before this Court as to whether this Court should declare that the notice vide Process No. 3935 is antedated. In the opinion of this Court before declaring that it is an antedated notice, the parties would be required to adduce their respective evidences. It will be a question of fact which may be decided only on the basis of the evidences after giving opportunity of hearing to both the parties to adduce their respective evidences. As a constitutional Court, this Court shall exercise self-restraint in venturing into this issue on the basis of its own assumption of facts. This Court would, therefore, proceed to consider other issues treating the notice issued on 12.2018.
19. This Court would, however, record that there is no proper service of notice upon the petitioner-company. The copy of Process No. 3935 which is available on the record and said to have been served upon the petitioner-company does not bear the seal of the petitioner-company in acknowledgment of receipt of The process server has not endorsed on the backside of the notice as to whom he met in the office of the petitioner-company and served the notice. Thus, he has not even shown the identification of the person in the office of the petitioner-company who received the notice. In such circumstance, the order dated 18.01.2019, in which the respondent no.2 has recorded that notice has been served, does not inspire confidence of this Court. It appears from a reading of the order dated 18.01.2019 that respondent no.2 was in haste as he was afraid that this being an old matter, it is on the verge of being time barred so he had no option but to pass an ex parte order. He fixed the case for ex parte order on 21.02.2019 and from the order dated 21.02.2019, it appears that the respondent no.2 passed an ex parte order of reassessment which is impugned in the present writ application. In the right hand margin portion, there is a mention of Memo No.5170 dated 21.02.2019 giving an impression that the ex parte order was communicated to the petitioner-company vide Memo No.5170 dated 21.02.2019. This has been seriously disputed by the learned Senior counsel for the petitioner. In paragraph ‘19’ of the writ application, the petitioner has specifically stated that the demand notice was served upon the petitioner vide email on 21.10.2020 after the petitioner submitted its refund application for refund of excess tax paid during the pendency of the appeal proceeding in respect of the order of assessment for assessment year 1999-2000 purported to have been passed on 21.02.2019 i.e. after a period of nearly twenty months of the passing of the order of assessment without giving any explanation for such abnormal delay in communicating the said order and it leads to only one conclusion that the order of assessment was not passed on the date it was purported to have been passed and the same has been antedated to overcome the limitation period. In response to paragraph ‘19’ of the writ application, respondent no.2 is completely silent in his counter affidavit. There is no whisper in the counter affidavit that the ex parte order dated 21.02.2019 was communicated to the petitioner- company prior to issuance of demand notice. At the same time, there is no explanation showing the reasons for not communicating the reassessment order dated 21.02.2019 for a period of twenty months from the date of the order. As recorded hereinabove, in the right hand margin portion of the order dated 21.02.2019, an impression has been given of issuance of one Memo No.5170 dated 21.02.2019 but on record it appears that the said memo which is available at page ‘85’ of the file has been made available to the petitioner-company only on 21st October, 2020. It is this document of the department which itself demonstrates that the communication with regard to passing of the ex parte order of reassessment and result thereof has been shown issued on 21.02.2019 but in fact served upon the petitioner-company on 21st October, 2020. This is in Form-XV. It has been sent to petitioner- company on email also on 21.10.2020 only. In view of what is evident from the records and there being complete silence on the part of respondent no.2 in not explaining the reason for non- communication of the order dated 21.02.2019, this Court finds that what has been held by the Hon’ble Supreme Court in the case of State of Andhra Pradesh vs. M. Ramakishtaiah & Co. (supra) shall hold good for the petitioner-company as well. The relevant extract of the order of the Hon’ble Supreme Court are being quoted hereunder for a ready reference:-
“In the circumstances, the assessee raised a contention that the order was in fact made after the expiry of four years but was ante-dated, and therefore, it is bad. The High Court accepted this submission but on a different reasoning. The High Court was of the opinion that every order must be communicated within a reasonable period and since the order of the Deputy Commissioner in this case was not so communicated, the High Court declared that the respondent- assessee shall not be bound by it. This was done by the High Court following its decision in T.R.C. No. 1 of 1976 pronounced on the same day [against which judgment Civil Appeal No. 1014 of 1977 (in this batch) has been filed].
We are of the opinion that the theory evolved by the High Court may not be really called for in the circumstances of the case. We are of the opinion that this appeal has to be dismissed on the ground urged by the assessee himself. As stated above, the order of the Deputy Commissioner is said to have been made on January 6, 1973, but it was served upon the assessee on November 21, 1973, i.e., precisely 10 1/2 months later. There is no explanation from the Deputy Commissioner why it was so delayed. If there had been a proper explanation, it would have been a different matter. But, in the absence of any explanation whatsoever, we must presume that the order was not made on the date it purports to have been made. It could have been made after the expiry of the prescribed four years’ period. The civil appeal is accordingly dismissed. No costs.
Civil Appeal No. 1014 of 1977:
Though the dates are different in this case, the facts are substantially similar. Indeed, the delay in communication in this case is more than one year and five months. For the reasons given in Civil Appeal No. 491 of 1977, this appeal too is dismissed. No costs.
Appeals dismissed.”
20. At this stage, we would reproduce Section 24 of the Act of 1981 as under:-
“24. Period of limitation for completion of assessment proceedings. – Except a proceeding under sub-section (5) of section 17, section 18 and sub-section (1) of section 19 no proceedings for assessment of the tax payable by a dealer under this part in respect of any period shall be initiated and completed except before the expiry of four years from the expiry of such period :
Provided that a proceeding for re-assessment in pursuance of or as a result of an order on appeal, revision and reference or review shall be initiated and completed before the expiry of two years from the date of communication of such order to the assessing authority.”
21. We are of the opinion that in the present case, the ex parte order of reassessment (Annexure ‘5’) passed by respondent no.2 is antedated and it was not made within the period of limitation as provided under proviso to Section 24 of the Act of 1981. It is bad in law and is liable to be set aside. Accordingly, we set aside Annexure ‘5’ series to the writ application. The consequential demand notice shall not operate.
22. This writ application is allowed.
23. At this stage, we must record that the office of respondent no.2 remained sitting over the matter without any action for an inordinate period of over two years and thereafter indulged in passing of an antedated ex parte order which is liable to be deprecated. In the circumstances, we impose a cost of Rs.1 lakh which the respondents would be liable to pay to the petitioner within a period of one month from the date of receipt/production of a copy of the order. The respondent no.1 shall institute an appropriate inquiry into the matter and fix the responsibility for the laches in the present proceeding and pass an appropriate order in this regard within a period of three months from the date of communication.
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