2023 (4) TMI 760 - ORISSA HIGH COURT

Suppression of sales or not - peas - confirmation of order based on conjectures and surmises - doubt and suspicion - Levy of penalty - satisfaction of the Assessing Officer that the escapement of tax was without reasonable cause - Section 43(2) of the Odisha Value Added Tax Act, 2004.

HELD THAT:- The discretionary exercise of power amounts to something that is not compulsory, but it is left to the discretion of the person or authority involved, such as a discretionary grant. It is opposite to “mandatory”. Therefore, “discretionary” is a term which involves an alternative power, i.e., a power to do or refrain from doing a certain thing. In other words, it would be power of free decision or choice within certain legal bounds - The significant words employed in Section 43(2) of the OVAT Act are “he may direct the dealer to pay, by way of penalty”. The language itself gives clear indication of application of discretion. Discretion, as it appears from generic sense, may be unrestricted, but in its application it demands certain rule of law to be followed and reposes conduct and application of mind, testing whether the delegates of it acted rationally, fairly without fear and favour taking all relevant fact and material considerations. Discretion conferred, if unqualified and untrammelled, it has to be exercised sparingly with abundant caution when facts and circumstances warrant.

Such being conceptual understanding of the term “discretion” based on well-settled dicta of different Courts and its application to fact-situation of given case, considering the present case in the said perspective, it seems that the learned Odisha Sales Tribunal, while considering certain allegations out of eight categories as reflected in the Assessment Order based on the contents of Fraud Case Report as unsustainable but for two, failed to apply its judicial discretion while imposing penalty by invoking powers under Section 43(2) of the OVAT Act. Discretion as applied by the Tribunal should have been supported by independent reason for exercise of said power.

In the case at hand, the learned Odisha Sales Tax Tribunal after computing the tax effect on establishing suppression of turnover to the tune of Rs. 6,00,332/-, as if there is absence of discretion in invoking power under Section 43(2) and construing the provision as mandatory in every circumstance, without discussing anything more, simply imposed penalty equal to twice the amount of tax so determined. Such exercise of power, in the opinion of this Court, is arbitrary, illogical and indicative of non-application of mind.

Since penalty is a statutory liability and is substantive in nature, the provisions for imposition thereof are to be strictly construed. It is, therefore, pertinent to put forth the well-accepted principle with regard to strict interpretation. In a taxing statute one has to look at what is clearly said. There is no equity about a tax. There is no intendment. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly on the language used. If the meaning of the provision is reasonably clear, Courts have no jurisdiction to mitigate harshness. A Court of law, has nothing to do with the reasonableness or unreasonableness of a provision of a statute except so far as it may hold it in interpreting what the Legislature has said - The Court is to ascribe the natural and ordinary meaning to the words used by the Legislature and the Court ought not, under any circumstances, to substitute its own impression and ideas in place of the legislative intent as is available from a plain reading of the statutory provisions.

Section 43(2) of the OVAT Act specifically requires satisfaction of the Assessing Authority to be recorded while proceeding to exercise said power to impose penalty. The authority has to determine whether a penalty should be imposed and if it decides to impose a penalty the extent of the penalty liable to be imposed has been fixed in the statutory provision under Section 43(2) of the OVAT Act - Sri Rudra Prasad Kar, learned counsel for the petitioner laid stress upon the fact that the learned Tribunal accepted the explanation proffered by the petitioner with respect to 29 written pages contained in small note book which related to transactions procured through brokers and held that the allegation in the Fraud Case Report is not established - Agreeing with the contention of the learned counsel for the petitioner, there is no warrant for imposition of penalty under Section 43(2) of the OVAT Act.

Since this Court held that there is little scope in interfering with the factual adjudication made by the learned Odisha Sales Tax Tribunal, Cuttack, question Nos. I, II and III are answered against the petitioner-assessee and in favour of the Revenue-opposite party. So far as question No. IV is concerned, this Court, having noticed infirmity in exercise of power and improper use of discretion to impose of penalty under Section 43(2) of the OVAT Act by the learned Odisha Sales Tax Tribunal, answers said question in the affirmative, i.e., in favour of the assessee-dealer and against the opposite party- Revenue.

The sales tax revision petition is disposed off.