Patna High Court
Patna High Court
Litigation News

Patna HC sets aside "cryptic" Tax Settlement Authority Order for indecipherable reasoning, violation of natural justice [Read Judgment]

Describing an order passed by a Bihar Tax Settlement Authority as "cryptic" and passed without an "application of mind", the Patna High Court set-aside the order assailed by an aggrieved tax settlement applicant.

Lydia Suzanne Thomas

In a recent judgment, a Division Bench comprising of the Chief Justice of the Patna High Court Sanjay Karol and Justice S Kumar set aside a cryptic order passed by an Authority constituted under the Bihar Settlement Taxation Disputes Act, 2019 (the Act) for an apparent "non-application of mind."

The 2019 Act sets out a mechanism for the payment of outstanding tax dues accruing from legal proceedings before December 2017.

The petitioner, M/s VST Industries, in legal trouble since 2009, had approached the Authority to settle certain amounts of tax that remained unpaid. Their application for settlement was rejected on June 26, this year.

The High Court noted that the order rejected the application despite VST's adherence to procedure, placing on record required material and documents and responses to queries raised by the Authority.

The High Court went on to opine that the order is devoid of "any decipherable reasons."

"To our mind, the order on the face of it is without any decipherable reasons and is cryptic."
Patna High Court
"It doesn’t even refer to or deal with anyone of the facts stated by the Petitioner... Unequivocally Petitioner has expressed its intent and desire to get the matter settled under the Act...there is non-application of mind, much less consideration of material placed by the party in support of its claim for settlement under the Act", the Court said.

Holding that the Order was passed without an "application of mind", the Bench referred to the Supreme Court's iteration of the principles of natural justice in Dharmpal Satyapal Limited v. Deputy Commissioner of Central Excise, Gauhati and Ors (2015).

In that case, the Court had held the pronouncing of "reasoned orders" to be a requirement of the natural justice principles. The principles would have to be followed (by an authority) when considering the facts and circumstances of the case on hand, the Patna High Court enunciated.

The Court found the Authority's failure to consider the material placed before it as a "non-application" of mind and quashed the order.

"We may observe that with intent to put an end to the entire litigation, spread over more one and a half decades, and Petitioner sought to exercise its right under Law, which, unfortunately, appears to have been scuttled by the Prescribed Authority without application of mind."

the Bench remarked.

Rejecting the State's claim that the amount in question could not be settled as it was an amount adjudicated upon in an "interim order", the Court found that the scope of the Act was to arrive "at a settlement de hors any litigation or dispute."

This reason was neither specified in the order of rejection nor the Authority's communications seeking clarifications, the Court observed. Nor was any action taken against the petitioners on this basis, the Court added.

The Court went on to state,

"There is yet another reason to discard such a plea. The reasons for rejection cannot be supplanted by way of an affidavit (submitted as a response to the plea in the High Court), especially when they were neither in the mind of the Officer nor on record of proceedings."

In parting, the Court directed the Authority to consider VST's application again, adding that "A fresh order (should) be passed strictly in accordance with Law, by assigning reasons."

Read Patna High Court's decision here:

VST Industries v. State of Bihar - Judgment dated July 13, 2020.pdf
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