Court directs Amara Raja Batteries Ltd. to pay arrears of admitted tax for settlement, allowing fresh settlement order despite expiry of the scheme
In a landmark judgment delivered on November 6, 2026, the Division Bench of the Patna High Court, comprising Justice Anil Kumar Sinha and Justice Vikash Kumar, clarified the interpretation of “admitted tax” and “disputed amount” under the Bihar Settlement of Taxation Disputes Act, 2024 (“Settlement Act”), emphasizing the Legislature’s intent to maintain a clear distinction between the two for purposes of tax dispute settlement.
The case arose from writ petitions filed by Amara Raja Batteries Ltd. (now Amara Raja Energy and Mobility Ltd.), a leading manufacturer of automotive and industrial batteries, challenging the rejection of their applications for settlement of tax disputes for multiple tax periods ranging from 2007-08 to 2017-18. The rejection orders stemmed from the petitioner’s alleged failure to pay the full amount of admitted tax as per the prescribed settlement scheme.
The petitioner had filed tax returns under the Bihar Value Added Tax Act, 2005, disclosing output tax liabilities and claiming set-off of Entry Tax payments. While the petitioner claimed to have discharged the entire admitted tax by adjusting the Entry Tax amount and paying the balance by cheque, the assessing authority disallowed a portion of the Entry Tax set-off, thereby raising additional tax demands. The petitioner contested the additional demand as a disputed amount arising from assessment proceedings and appeal, not as admitted tax.
The Patna High Court analyzed the statutory provisions of the Settlement Act, specifically Sections 2(b), 2(d), 2(f), and Section 3(1) with its Explanation 1, along with the Settlement Rules, 2024. The Court held that:
1. Admitted Tax vs. Disputed Amount: The Settlement Act defines “admitted tax” as the tax admitted as payable in the returns filed, while “disputed amount” refers to tax determined as payable pursuant to assessment or appeal orders. The Legislature intended to distinguish admitted tax from amounts arising from disputes in assessment proceedings.
2. Non-Mechanical Treatment: The additional demand arising from the disallowance of Entry Tax set-off cannot be mechanically treated as part of admitted tax. It falls within the “disputed amount” category and is subject to settlement under the scheme’s disputed tax provisions.
3. Strict Compliance for Settlement: For availing the settlement scheme, the petitioner must pay arrears or short payments of admitted tax strictly as per the statutory scheme. In this case, the petitioner had an arrear of Rs. 8,58,814/- due to the reduced Entry Tax set-off allowed by the assessing authority, which must be paid to qualify for settlement.
4. Procedure Under Settlement Rules: The prescribed authority must verify computations and payments under the scheme and cannot reject applications by treating disputed tax as admitted tax without proper examination and communication of deficiencies.
5. Effect of Expiry of Settlement Scheme: Despite the scheme’s expiry, the Court held that if the petitioner deposits the arrears of admitted tax within two weeks, the respondents are bound to pass fresh settlement orders in line with the Act’s objectives. This relief was extended to all connected writ petitions pertaining to various tax periods.
The judgment reinforces the need for meticulous adherence to statutory definitions and procedures under tax settlement laws and protects taxpayers’ rights to have their disputes adjudicated fairly without arbitrary conflation of admitted tax and disputed amounts.
Senior Advocate D.V. Pathy, representing the petitioner, argued for strict interpretation of admitted tax and challenged the authority’s mechanical approach. The State’s counsel contended that the petitioner had not fully paid admitted tax as per the assessment order and failed to comply with settlement conditions. The Court’s ruling favored the petitioner’s interpretation while directing compliance with payment obligations.
This decision has significant implications for tax practitioners and assessees in Bihar, clarifying that settlement applications must be computed and processed strictly in accordance with the Settlement Act and Rules, and that disputed tax cannot be treated as admitted tax to reject settlement applications summarily.
Bottom Line:
Bihar Settlement of Taxation Disputes Act, 2024 - Distinction between "admitted tax" and "disputed amount" must be maintained - Amount arising from disallowance of Entry Tax set-off in assessment cannot be mechanically treated as settlement amount - For availing settlement scheme, assessee must pay arrears/short payment of admitted tax as per strict interpretation of Section 2(b) and Explanation 1 to Section 3(1) - Even after expiry of scheme, Court can permit payment within specified time and direct fresh settlement order.
Statutory provision(s):
Bihar Settlement of Taxation Disputes Act, 2024 Sections 2(b), 2(d), 2(f), 3(1) and Explanation 1 to Section 3(1); Bihar Settlement of Taxation Disputes Rules, 2024 Rule 4; Bihar Value Added Tax Act, 2005; Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993
Amara Raja Batteries Ltd. v. State of Bihar, (Patna)(DB) : Law Finder Doc Id # 3014900
