Jharkhand High Court Quashes Time-Barred VAT Reassessments In Batch Including Tata Chemicals, Hindalco, L&T

The Jharkhand High Court has recently quashed reassessment proceedings initiated against Tata Chemicals Limited, Hindalco Industries Limited, Larsen and Toubro Ltd., Tata Steel Limited and several other taxpayers, holding that reopening of completed VAT assessments beyond the statutory period is barred by limitation.

A Division Bench of Justice Rongon Mukhopadhyay and Justice Deepak Roshan observed that the issue was already settled and that “the law is set at rest.”

Referring to its earlier ruling in Jharkhand Ispat Pvt. Ltd. v. State of Jharkhand, the Court recalled that it had “quashed and set aside the impugned notices of re-assessment holding therein that the same was barred by limitation.”

The batch of writ petitions concerned reassessment proceedings relating to financial years 2006-07, 2007-08 and 2008-09. In each case, original assessments had been completed. Years later, reassessment notices were issued under Section 42(3) of the Jharkhand Value Added Tax Act, 2005.

That provision, introduced by the 2011 amendment, enabled reopening of assessments on the basis of audit objections, including those raised by the Comptroller and Auditor General of India as in this case. 

The company taxpayers argued that under Section 40(1) of the Act, reassessment could not be initiated after five years from the end of the relevant financial year. They contended that the impugned notices and orders were issued well beyond the statutory period and were therefore void.

It was further submitted that the assessing authorities had acted mechanically on audit objections without independently recording satisfaction that turnover had escaped assessment. Several petitioners also challenged the constitutional validity of Section 42(3) and the notification granting it retrospective effect from April 1, 2006.

The bench recorded that in the earlier decision, “the issue was as to whether the proceeding for re-assessment initiated beyond the period prescribed under the Act, is barred by limitation or not and thus, consequently the impugned notice initiating the proceeding, is void ab-initio or not.”

It further noted that although the State had challenged that judgment before the Supreme Court, “the Hon'ble Apex Court did not interfere with the order passed by this Court… and thus, the law is set at rest.”

As the State did not dispute that the present cases were covered by that ruling, the court held that the impugned reassessment notices, orders, and consequential demand notices were barred by limitation and not sustainable in law. The writ petitions were allowed.

For Petitioners: Senior Advocate Biren Poddar, Advocate Amrita Sinha, Advocate Shweta Suman, Advocate Pragunee Kashyap, Advocate Sumit Gadodia, Advocate Nidhi Lal, Advocate Shruti Shekhar, Advocate Biren Poddar, Advocate Piyush Poddar, Advocate Deepak Sinha, Advocate Manav Poddar.

For Respondents: Advocate Ravi Prakash Mishra, A.C. to AAG-II, Advocate Rahul Saboo, G.P.-II, Advocate Kunal Chandra Suman, A.C. to G.P.-II.