Patna High Court
Ircon International Ltd.versusThe State of Bihar
- Decided
- Disposal
- DISMISSED
Holding
The Court held that the writ applications seeking refund of VAT and input tax credit are without merit and must be dismissed.
Summary
The Patna High Court considered four civil writ applications filed by Ircon International Ltd. seeking refunds of amounts recovered under the Bihar Value Added Tax Act, 2005, including a Rs 18.52 crore recovery under Section 47 and smaller refunds for the years 2005‑06, 2006‑07 and 2011‑12. The petitioner contended that the tax on steel structures should be levied at 5% under Schedule IV, that labour expenses were deductible, and that excess input tax credit should be refunded. The respondents argued that the steel structures are unscheduled goods taxable at 13.5%, that the petitioner failed to produce required documents, that penalty under Section 41(6) was lawfully imposed, and that refund cannot be granted while dues remain outstanding. The Court examined the applicability of Sections 47, 68‑70, 31, 33, 37 and 41(6) of the Bihar VAT Act and the definition of "iron and steel" under the Central Sales Tax Act. Relying on its earlier judgments in CWJC 3600 of 2020, CWJC 11625 of 2019 and CWJC 1716 of 2023, the Court found the writ applications meritless. Consequently, all four writ petitions were dismissed.
Issues considered
- The correct rate of VAT applicable to steel structures used in a works contract under the Bihar VAT Act, 2005
- Whether the petitioner is entitled to refund of excess tax and input tax credit under Sections 68‑70 of the Bihar VAT Act
- The lawfulness of penalty imposed under Section 41(6) of the Bihar VAT Act without prior notice
- The effect of pending tax dues on the entitlement to refund of input tax credit
- The procedural validity of the petitioner's refund applications and the requirement of supporting documents
Legislation cited
- Bihar Value Added Tax Act, 2005 — s. 16(1), 16(1A), 31, 33, 37, 41(6), 47, 68, 70
- Central Sales Tax Act — s. 14
- Companies Act, 1956
Subjects
- VAT refund
- input tax credit
- penalty under Section 41(6)
- steel structures taxation
- Section 47 notice
- Bihar VAT Act
- Civil writ jurisdiction
- tax assessment
- labour expense deduction
- Central Sales Tax Act
Judgment
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.3800 of 2019
======================================================
Ircon International Ltd. a company incorporated under the Companies Act
1956 having its office at Sone Annexe Bhawan, Bir Chand Patel Path, Patna
through its Joint General Manager (Finance) Rahul Kumar, son of Shri
Mahendra Mishra, resident of Flat No. 303, RKM Regency, Ram Nagri, P.O.
Ashiana, P.S. Rajeev Nagar, District Patna.
... ... Petitioner
Versus
1. The State of Bihar, through Commissioner of State Taxes, Bihar, Patna
having its office at Vikas Bhawan, Patna.
2. Assistant Commissioner of State Taxes, West Circle, having its office at
Kautilya Bhawan, Anta Ghat, Patna.
3. Commercial Taxes Officer, West Circle, Patna.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 13258 of 2019
======================================================
Ircon International Ltd. a company incorporated under the Companies Act
1956 having its office at Sone Annexe Bhawan, Bir Chand Patel Path, Patna
through its General Manager Sandeep Sinha, Son of Late Satya Deo Narayan
Sinha Resident of Flat No.504, Chandra Regency, Viveka Nand Marg, P.O.
and P.S. Shree Krishna Puri, District- Patna.
... ... Petitioner
Versus
1. The State of Bihar through Commissioner of State Tax, Bihar, Patna having
its office at Vikas Bhawan, Patna.
2. Joint Commissioner of State Tax, Patna West Circle, Patna.
3. Asst. Commissioner of Commercial Tax, Patna West Circle, Patna.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 13286 of 2019
======================================================
Ircon International Ltd. a Company incorporated under the Companies Act
1956 having its office at Sone Annexe Bhawan, Bir Chand Patel Path, Patna
through its General Manager Sandeep Sinha son of Late Satya Deo Narayan
Sinha resident of Flat No. 504, Chandra Regency, Viveka Nand Marg, P.O and
P.S.- Shree Krishna Puri, Distt.- Patna
... ... Petitioner
Versus
1. The State of Bihar through Commissioner of State Tax, Bihar, Patna having
Patna High Court CWJC No.3800 of 2019 dt.25-02-2026
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its office at Vikas Bhawan, Patna
2. Joint Commissioner of State Tax Patna West Circle, Patna
3. Asst. Commissioner of Commercial Tax Patna West Circle, Patna
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 13854 of 2019
======================================================
Ircon International Ltd. a company incorporated under the Companies Act
1956 having its office at Sone Annexe Bhawan, Bir Chand Patel Path, Patna
through its General Manager Sandeep Sinha Son of Late Satya Deo Narayan
Sinha, resident of Flat No 504 Chandra Regency, Viveka Nand Marg, P.O. and
P.S.-Shree Krishna Puri, District-Patna
... ... Petitioner
Versus
1. The State of Bihar through Commissioner of State Tax, Bihar, Patna having
its office at Vikas Bhawan, Patna
2. Joint Commissioner of State Tax Patna West Circle, Patna
3. Asst. Commissioner of Commercial Tax Patna West Circle, Patna
4. Commercial Tax Officer Patna West Circle, Patna
... ... Respondents
======================================================
Appearance :
(In Civil Writ Jurisdiction Case No. 3800 of 2019)
For the Petitioner : Mr. Tarun Gulati, Sr. Advocate
Mr. D.V.Pathy, Sr. Advocate
Mr. Siddhartha Prasad, Advocate
Mr. Pramod Kandpal, Advocate
Mr. Sadashiv Tiwary, Advocate
Ms. Shivani Dewella, Advocate
Mr. Hiresh Karan, Advocate
For the State : Mr. Vikash Kumar, SC-11
(In Civil Writ Jurisdiction Case No. 13258 of 2019)
For the Petitioner : Mr. Tarun Gulati, Sr. Advocate
Mr. D.V.Pathy, Sr. Advocate
Mr. Siddhartha Prasad, Advocate
Mr. Pramod Kandpal, Advocate
Mr. Sadashiv Tiwary, Advocate
Ms. Shivani Dewella, Advocate
Mr. Hiresh Karan, Advocate
For the State : Mr. Vikash Kumar, SC-11
(In Civil Writ Jurisdiction Case No. 13286 of 2019)
For the Petitioner : Mr. Tarun Gulati, Sr. Advocate
Mr. D.V.Pathy, Sr. Advocate
Mr. Siddhartha Prasad, Advocate
Mr. Pramod Kandpal, Advocate
Mr. Sadashiv Tiwary, Advocate
Ms. Shivani Dewella, Advocate
Patna High Court CWJC No.3800 of 2019 dt.25-02-2026
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Mr. Hiresh Karan, Advocate
For the State : Mr. Vikash Kumar, SC-11
(In Civil Writ Jurisdiction Case No. 13854 of 2019)
For the Petitioner : Mr. Tarun Gulati, Sr. Advocate
Mr. D.V.Pathy, Sr. Advocate
Mr. Siddhartha Prasad, Advocate
Mr. Pramod Kandpal, Advocate
Mr. Sadashiv Tiwary, Advocate
Ms. Shivani Dewella, Advocate
Mr. Hiresh Karan, Advocate
For the State : Mr. Vikash Kumar, SC-11
======================================================
CORAM: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD
and
HONOURABLE MR. JUSTICE SOURENDRA PANDEY
ORAL JUDGMENT
(Per: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD)
Date : 25-02-2026
These four writ applications have been taken together
for consideration. We would extract the prayers made in the writ
applications hereunder for a ready reference:-
CWJC No. 3800 of 2019
2. In this writ application, the petitioner prays for the
following reliefs:-
“(i) The respondent no.2 be directed to refund a sum of
Rs. 18.52 Crores recovered pursuant to a notice under
section 47 of the Bihar Value Added Tax Act, 2005 for
the period 2012-13.
(ii) For granting any other relief(s) to which the
petitioner is otherwise found entitled to.”
3. It is the case of the petitioner that the petitioner filed
its return for the period 2012-13 giving true and fair disclosure of
its turnover and paid the taxes accordingly. For the period under
consideration, the petitioner was entrusted with the work of
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fabrication, erection and installation of the steel structures in
relation to Ganga Bridge project at Digha Ghat, Patna. For the
purposes of execution of the project awarded to it, the petitioner
used iron and steel structures and also incurred substantial
expenses towards labour. The petitioner claimed deductions on
account of labour expenses and payments made to the
subcontractor and the petitioner paid tax at the rate of 5% on
transfer of property in goods in the nature of iron and steel.
4. The audit raised an objection inter alia that the
petitioner has claimed expenditure on account of labour and has
paid tax at the rate of 5 percent on iron and steel, whereas the same
are taxable at the rate of 13.5 percent. The petitioner was served
with a notice dated 17.02.2018 issued by respondent no.3 for the
period 2012-13.
5. It is the case of the petitioner that the respondent no.3
held that the iron and steel transferred in the execution of the
works contract is fabricated iron and steel structure and is not
covered by Section 14(1)(d) of the Central Sales Tax (in short
‘CST’) Act. The respondent accordingly brought the same to tax at
the rate of 13.5 percent and also charged interest on the tax
computed.
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6. Aggrieved by the order of assessment, the petitioner
filed an application for revision before the respondent no.1 along
with petition for stay of demand and also filed an application for
early hearing of the revision. During pendency of the revision and
the stay application, the respondent no.2 attached the bank account
of the petitioner maintained with the Central Bank of India, Buddh
Marg Branch to recover the whole of the amount in dispute raised
in pursuance of an order of assessment.
7. Aggrieved by the recovery, the petitioner filed a writ
petition vide CWJC No. 17239 of 2018 before this Court on the
grounds inter alia that the action of respondent no.2 in the issue of
notice under Section 47 of the Act to recover the whole of the
amount in dispute in the facts of the case is illegal. This Court,
after hearing the parties, held that petitioner should file an appeal
before the appellate authority and pay a sum equal to 20 percent of
the amount in dispute. This Court directed that the notice of
recovery in Section 47 of the Act shall be kept in abeyance until
consideration of the stay application. In compliance with the order
of this Court, the petitioner paid a sum of Rs. 5.83 Crores and also
filed an appeal before learned Joint Commissioner of Commercial
Taxes (Appeal), West Division, Patna, along with the petition for
stay.
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8. The petitioner has given narration of the submissions
made before the Joint Commissioner of Commercial Taxes
(Appeal). It, however, appears that the Joint Commissioner
(Appeal) directed the petitioner to pay a sum equal to 50 percent of
the amount in dispute as a condition for grant of ad-interim stay
during the pendency of the appeal. The petitioner filed a revision
application before respondent no.1 and also filed an application for
early hearing of the revision. It is his grievance that respondent
no. 2 proceeded to recover the whole of the amount in dispute and
recovered a sum of Rs. 27.38 Crores by attachment of the bank
account of the petitioner maintained with the Central Bank of
India, Buddh Marg Branch.
9. The petitioner is aggrieved by the disallowance of
claim on account of labour expenses as according to him, the
entire claim was made on the basis of receipts from the Railways
under such head and the petitioner had received payment from
Indian Railways under three different categories, one being of
labour and the other being supply of material. The petitioner also
claims that reading of the definition of iron and steel in Section 14
of the CST Act would make it abundantly clear that all steel
structures are iron and steel.
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10. A counter-affidavit has been filed on behalf of
respondent Assistant Commissioner of State Taxes, West Circle,
Patna. It is the stand of the respondent that the contention of the
petitioner is not correct. The Assessing Officer allowed 30 percent
of the gross turnover (GTO) under deduction claimed under supply
of labour and services (as per notification S.O. 242 dated 28
September 2016) and the remaining amount has been rejected as
petitioner did not submit proper documents such as bill of supply,
appended schedules along with the running account bill, copy of
agreement to the subcontractor, proof of payment and the
bifurcation of the payment being made to subcontractor at the time
of hearing. The respondent further contended that the dealer has
paid tax on iron steel structures at the rate of 5 percent in terms of
Schedule IV of the Bihar Value Added Tax Act, 2005 but after
looking at the detail being provided by the dealer, such as running
account bill and contract order, it would be clear that the transfer
of property is in the form of structure of steel, which is
independently a form of goods. Steel structure does not come
under the provision of Schedule IV of the Bihar VAT Act, 2005,
therefore, it is unscheduled goods on which chargeability of tax is
at the rate of 13.5 percent.
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11. A supplementary affidavit has been filed on behalf of
the petitioner through its Joint General Manager (Finance). In
paragraph ‘2’ and ‘3’ of the said supplementary affidavit, the
petitioner has made the following statements:-
“2. That the petitioner has filed the present writ
application for a direction to the respondent no.2 to
refund a sum of Rs. 18.52 Crores recovered in
pursuance of a notice under Section 47 of the Act.
3. That the petitioner states that the respondent no.2
while proceeding to make a hasty recovery did not
take into consideration the fact that a sum of Rs. 60
lakhs, Rs. 1.40 lakhs and Rs. 24.71 lakhs totalling 2
Crores for the period 2005-06, 2006-07 and 2011-12
being an amount of excess tax paid in pursuance of
an order of assessment. The petitioner may mention
here that it has filed three separate writ petition for
the said three years before this Hon'ble Court.”
12. Having gone through the entire pleadings on the
record, we are of the considered opinion that the result of this case
is directly dependent upon the decisions of this Court in CWJC
No. 3600 of 2020, CWJC No.11625 of 2019 and CWJC No. 1716
of 2023 which involve common questions.
13. In view of the dismissal of those three writ
applications, this writ application is liable to be dismissed and we
do so accordingly.
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CWJC No. 13258 of 2019, CWJC 13286 of 2019 and
CWJC 13854 of 2019
14. It appears that in the supplementary affidavit filed by
the petitioner in CWJC No. 3800 of 2019, the petitioner is
referring to these three writ applications.
15. In CWJC No. 13258 of 2019, the petitioner prays for
the following reliefs:-
“(i) The respondent no. 3 be directed to refund a sum
of Rs. 60 Lacs for the period 2005-06 with interest
under section 68 of the Bihar Value Added Tax Act,
2005 (hereinafter called the Act).
(ii) For granting any other relief (s) to which the
petitioner is otherwise found entitled to.”
16. In CWJC No. 13286 of 2019, the petitioner prays for
the following reliefs:-
“(i) The respondent no. 3 be directed to refund a sum
of Rs. 1.40 Lacs for the period 2006-07 with interest
under section 68 of the Bihar Value Added Tax Act,
2005 (hereinafter called the Act).
(ii) For granting any other relief (s) to which the
petitioner is otherwise found entitled to.”
17. In CWJC No. 13854 of 2019, the petitioner prays for
the following reliefs:-
“(i) The respondent no. 3 be directed to refund a sum
of Rs. 24,71,032 for the period 2011-12 with
interest thereon under section 68 of the Bihar Value
Added Tax Act, 2005 (hereinafter called the Act).
(ii) For granting any other relief (s) to which the
petitioner is otherwise found entitled to.”
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18. We have taken CWJC No. 13258 of 2019 to notice
the facts involved in these three writ applications. It is the case of
the petitioner that the petitioner filed its return for the period
2005–06, made true and fair disclosure therein and also paid the
taxes accordingly. The petitioner claimed that for the purposes of
execution of works contract, it has made payment to
subcontractors and has deducted tax at source on payments made
to them to the extent of material used in the usual course of the
works contract. The petitioner has filed deduction of taxes at
source and has filed the monthly and quarterly return in the
prescribed form and in the prescribed manner. The CAG, however,
raised an objection that the petitioner has deducted tax at source at
lower rates on payments made to subcontractors and was required
to pay the difference between the tax deductible and tax deducted.
Accordingly, a notice was issued to the petitioner under Section 33
of the Act. The audit had raised a common and consolidated
objection for the period 2005-06 and 2006-07.
19. It is stated that in course of hearing, the petitioner
appeared through its Advocate before respondent no.3 and filed
details of payments made to the subcontractors and also deduction
of tax at source thereon together with the monthly and quarterly
returns in the prescribed form. The grievance of the petitioner is
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that the respondent no.2 rejected the petition of the petitioner on
the solitary ground that the Advocate did not file his Vakalatnama.
The respondent proceeded to pass an ex-parte order of penalty. It is
stated that respondent no.2 imposed penalty under Section 41(6) of
the Act and passed a single order and demand notice for the period
2005-06 and 2006-07.
20. It is stated that being aggrieved by the order, the
petitioner filed a revision before respondent no.1 on the grounds
inter alia that no notice under Section 41(6) of the Act was issued
prior to imposition of the penalty thereunder and the proceedings
were initiated only on the observations/objections of the CAG and
that tax at source was deducted only on the material comprised in
the execution of the works contract supplied by the subcontractor.
It is stated that the petitioner also filed a stay application but upon
hearing, the respondent no.1 directed the petitioner to pay a sum of
Rs. 2 Crores as a condition for stay of the balance amount of
penalty. Thereafter, the petitioner deposited a sum of Rs. 2 Crores
for the period 2005-06 (Rs. 60 lakhs for the period 2005-06 and
Rs. 1.40 lakhs for the period 2006-07). Thereafter, respondent no.1
passed final order setting aside the order imposing penalty under
Section 41(6) of the Act. The respondent no.2, however, did not
pass any order in pursuance of the order in revision passed by
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respondent no.1. The petitioner, after a long wait, thereafter filed a
consolidated application for refund of an amount of Rs. 2 Crores in
prescribed form and in the prescribed manner. The petitioner
approached respondent no.2 and also respondent no.3 time without
numbers but no order whatsoever was passed on the refund
application.
21. The counter-affidavit filed on behalf of respondent
nos. 2 and 3 is on the record. It is the case of the respondents that
before fresh order could be passed, the petitioner filed a refund
application before the Circle In-charge demanding a refund of Rs.
60 lakhs. The refund application was not filed before the
competent authority i.e. the Additional Commissioner of State
Taxes (under VAT: Joint Commissioner of Commercial Taxes),
Administration, Patna West Division, the refund application was
premature as the same had been filed before the fresh order was
passed by the respondent authorities.
22. It is the case of the respondents that the respondent
no.3 was under obligation to pass fresh penalty order before the
expiry of the year following the year during which the suo moto
revision order was passed by the Commissioner (respondent no.1).
It is contended that Section 37 of the Bihar VAT Act does not
prescribe any limitation and whatever limitation has been
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prescribed under Section 37 is applicable to tax assessment
proceeding and not to penalty proceedings. Referring to the
questions of law framed in paragraph ‘2’ of the writ petition, it is
submitted that the petitioner is not correct in contending that the
order passed by respondent no.1 has become final in view of the
time limited prescribed under Section 37 of the Act.
23. It is evident that an identical counter-affidavit has
been filed by respondent nos.2 and 3 in CWJC No. 13286 of 2019
also.
24. In CWJC No. 13854 of 2019, the petitioner claims
that the petitioner has filed its return for the period 2011-12 and
made true and fair disclosure therein and paid taxes accordingly.
The petitioner claimed output tax of Rs. 5,22,49,261/- and input
tax credit of Rs. 5,47,20,294/-. The petitioner claimed carry
forward of unadjusted input tax credit amounting to Rs.
24,71,032/-.
25. It is stated that the petitioner also filed its return for
the period 2012-13 but in the said return, the petitioner had not
carried forward input tax credit of the year preceding amounting to
Rs. 24,71,032/-. It is submitted that the return filed by the
petitioner for the period 2011-12 was not selected either for
scrutiny or audit, therefore, the return is deemed to be assessed.
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However, the audit objections were raised and respondent no.4
initiated reassessment proceedings for the period 2012-13. The
respondent no.4 passed an order of assessment under Section 31 of
the Act on the basis of the objections. It is the submission of the
petitioner that the petitioner had not carried forward the unadjusted
input tax credit for the period 2011-12 in its return for the period
2012-13. According to the petitioner, the unadjusted input tax
credit constitutes excess payments of tax and is thus refundable.
26. The petitioner filed an application for refund of the
excess input tax credit for the period 2011-12 in the prescribed
form and in the prescribed manner and thereafter approached
respondent nos. 2 and 3 time without members but in vain.
27. A counter-affidavit has been filed in this case on
behalf of respondent nos.2 and 3. It is the contention of the
respondents that the petitioner claimed the differential amount of
Rs. 24,71,032/- as an unadjusted input tax credit but the same was
not shown as brought forward input tax credit in the return filed
for the year 2012-13. It is submitted that the petitioner is not
entitled to the claim refund because of the reasons mentioned in
the statements. Even if it were entitled to the claim refund for
2011-12, the same could not have been made because an assessed
tax amount of Rs. 33,46,03,529.89/- is due from the petitioner for
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the year 2013-14. According to Sections 68 to 70 of the Bihar VAT
Act, a refund (for a particular year) cannot be made to a dealer
who owes money to the department (in respect of other years).
28. It is further contended that the petitioner has not
filed the Tax Audit Report (TAR) for the year, which is a
precondition for refund of input tax credit as mandated in the first
proviso to Section 16(1). Moreover, the input tax credit was
carried forward by the petitioner during 2012-13, which implies
that the petitioner was not entitled to input tax refund as per the
proviso to Section 16(1A). It is stated that in part III of its annual
return for 2011-12, the petitioner has shown to have made intra-
state purchases to the tune of Rs. 97,51,31,710.96/- (corresponding
input tax Rs. 4,87,56,584.54/-) only but has claimed input tax
credit on Rs. 1,12,42,24,444.7/- (corresponding input tax Rs.
5,47,20,294.9/-). As per VATMIS also, the intra-state purchases of
the petitioner were Rs. 97,51,31,710.96/- only. Thus, the claim of
the petitioner is false and contradictory.
29. We have noticed that in all these three writ
applications, respondents have filed detailed counter-affidavits and
given the reasons for denying the claim of the petitioner. Copies of
the counter-affidavits were served on learned counsel for the
petitioner several years ago but the petitioner has not mustered
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courage to deny the averments made in the counter-affidavits. The
respondents have gone to the extent of saying that the claims are
false, still the petitioner has not come out with its denial.
30. In the circumstances, we are of the considered
opinion that these writ applications have no merit and are
dismissed accordingly.
(Rajeev Ranjan Prasad, J)
(Sourendra Pandey, J)
SUSHMA2/Rishi
AFR/NAFR
CAV DATE 27.11.2025
Uploading Date 25.02.2026
Transmission Date 25.02.2026
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