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2021 (9) TMI 945 - HC - VAT and Sales TaxUpfront collection of tax and penalty - SCN was not issued - whether Sales Tax Officer (STO) can collect upfront tax and penalty from the Petitioner at the time of a surprise inspection undertaken of his business premises without passing any assessment order? - Orissa Value Added Tax Act, 2004 (OVAT Act) - HELD THAT:- As explained in MG. GARMENTS VERSUS SALES TAX OFFICER, INVESTIGATION UNIT, BHUBANESWAR AND OTHERS [2008 (11) TMI 618 - ORISSA HIGH COURT], the penalty under Section 73(10) of the OVAT Act can be imposed “only after giving the dealer an opportunity of being heard and after holding such further enquiry as the authorised officer concerns may consider necessary.” In that case, the sum had been collected on 4th February, 2008 even before the Petitioner could reply to the show cause notice issued to it on 2nd February, 2008. In the Present case, the situation appears to be even worse while the collection of tax and penalty took place on 10th April, 2007, the assessment order itself was passed subsequently on 16th April, 2007. However, no show cause notice was issued to the Petitioner at any time prior to the collection of the above amount on a surprise inspection. It is plain from the second proviso to 16-D (5) of the OST Act that it envisages payment of the amount of tax by the person affected “in respect of such goods to be assessed in the prescribed manner” as well as the penalty equivalent to twenty per centum of the value of the goods seized as a condition of the goods seized - the question of first collecting the tax and penalty upfront under Section 73 (10) of the OVAT Act and then assessing the person from whom the amount was collected, is not permissible in law. The Court holds that the collection of the tax and penalty by the STO, Cuttack (Opposite Party No.3) from the Petitioner on 10th April, 2007 is without any authority of law. Accordingly, it is directed that the aforementioned sum of ₹ 3,29,787/- collected from the Petitioner will be refunded to him together with interest as applicable under the relevant rules within a period of four weeks from today. It is made clear that the interest will be continued to be paid till the date of actual refund - Petition allowed.
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