TMI Blog2006 (7) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... ons in rule 23 of the said Rules which mandate that notice for reopening has to be in form VI and form VI uses the expression where the Sales Tax Officer has reasons to believe . Thus, we hold that the words for any reason in section 12(8) of the OST Act do not give wider powers to the authorities to reopen assessment compared to words reasons to believe since the words reasons to believe are incorporated in the statutory form in which notice of assessment is to be issued. The court also holds that while exercising power u/s 12(8) of the OST Act, the authority has to act consistently with the statutory norms prescribed under the statutory rules and the forms. The importance of this doctrine lies in the fact that if a statutory functionary is vested with a power to act, it is that statutory authority alone who will form the necessary objective opinion for exercising its powers. In doing so, it may take into consideration whatever is relevant. As in the instant case, audit objection may be a relevant consideration. Taking that objection into consideration, the Sales Tax Officer has to form his objective opinion. But the Sales Tax Officer cannot totally abdicate or surrender his discr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nths ending on . . . . . . has exceeded Rs. 25,000/- but that you have nevertheless without sufficient cause failed to apply for registration under section 9 of the Act. Whereas it appears to me that in accordance with the provisions of subsection (5) of section 4 of the Orissa Sales Tax Act, you have become liable to pay tax on sales and/or purchases from the date of commencement of the business but that you have nevertheless without sufficient cause failed to apply for registration under section 9 of the Act. Whereas I have reason to believe that your turnover of sales and/or purchases for the quarter/year ending 1994-95 on which tax payable under the Orissa Sales Tax Act, 1947 has escaped assessment/has been underassessed/has not been assessed due to the tax having been compounded when composition is not permissible. You are hereby required to submit within one calendar month from the date of receipt of this notice a return in form IV (enclosed) showing the particulars of your turnover for the quarter ending . . . . . You are also hereby required to attend in person or by agent at my office at . . . . . . . . on January 22, 1999 at 11. 00 A. M. and thereto produce or cause to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere has been no independent application of mind by the S.T.O. nor any reason has been recorded to show any application of mind. (iv) It was also urged that since the petitioner became entitled to refund of a sum of Rs. 66,775/- as a result of the assessment order for the year 1994-95 and since the petitioner made an application for refund, the S.T.O. set in motion a proceeding for reopening the assessment. 4. In paragraph 11 of the writ petition the following averments have been made: 11. A careful scrutiny of the order sheet and the 12(8) notice brings out some interesting facts. Opposite party No. 2 on October 24, 1998, noted in the order sheet for issuance of notice under section 12(8) of the OST Act, whereas, one would find in that notice under section 12(8) of the OST Act in fact was issued much earlier, i.e., on September 23, 1998. On September 23, 1998, no reasons are given for such an action and why. While dealing with those averments the Revenue replied as under in paragraph 9 of its counter: 9. That as regard to paragraph 11 of the writ petition, it is humbly submitted that notice was first issued on October 24, 1998 at Banharpali address and later on December 23, 1998 it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason in section 12(8) of the OST Act gives wider powers to the authorities to reopen assessment than the words reasons to believe and whether the exercise of power under section 12(8) of the OST Act has to be consistent with the statutory rules and in accordance with the statutory forms framed under the said Act? 7. Question No. (iv) raises some points of statutory interpretation and is taken up first for consideration. For a proper appreciation of the points involved, the provision of section 12(8) of the OST Act is set out below: 12. Assessment of tax.- x x x (8) If for any reason the turnover of a dealer for any period to which this Act applies has escaped assessment or has been underassessed or where tax has been compounded when composition is not permissible under this Act and the Rules made thereunder the Commissioner may at any time within five years from the expiry of the year to which that period relates call for return under sub-section (1) of section 11 and may proceed to assess the amount of tax due from the dealer in the manner laid down in sub-section (5) of this section and may also direct, in cases where such escapement or underassessment or composition is due to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In fact, it was not so exercised and the impugned notice was issued under the statutory form, the relevant part of which has been set out previously. Certain decisions have been cited at the bar. Reliance was placed on the judgment of the Supreme Court in the case of Sales Tax Officer v. Uttareswari Rice Mills reported in [1972] 30 STC 567. The point of controversy in that case was whether in a notice under section 12(8) of the OST Act reasons for reopening are to be indicated in the notice. The court ultimately held that there is nothing in the language of section 12(8) of the OST Act which postulates the recording of reasons in the notice which is issued to the dealer under the above provision of law . While reaching the aforesaid conclusion, the apex Court held: (a) The difference in phraseology between if for any reason and if the sales tax authority has reason to believe does not make material difference . (b) In coming to this conclusion, the apex Court took into consideration rule 23 of the said Rules and form VI, referred to in rule 23 and also the relevant recitals in form VI, which have been set out above Whereas I have reasons to believe . (c) The sales tax authority iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Bench judgment of the Orissa High Court in State of Orissa v. Ugratara Bhojanalaya reported in [1993] 91 STC 76, in my judgment, explains the requirement of section 12(8) of the OST Act, in consonance with the views of the apex Court in Uttareswari Rice Mills [1972] 30 STC 567 since the judgment in Uttareswari Rice Mills [1972] 30 STC 567 (SC) was cited before the division Bench. Accordingly, the division Bench held that the legislative intent in section 12(8) of the OST Act is apparent from the words used in form VI , in which the words Whereas I have reasons to believe find place. Therefore, the division Bench held following the dicta of the apex Court in Uttareswari Rice Mills [1972] 30 STC 567 that the difference in phraseology between for any reason and If the sales tax authority has reasons to believe does not make any material difference. The division Bench in Ugratara Bhojanalaya [1993] 91 STC 76 (Orissa) scrutinised the notice in form VI and came to the conclusion that the notice is vague, having been issued under sections 11(1), 12(5) and 12(8) of the OST Act. The court held that a proposed action by the Revenue cannot be both under section 12(5) and 12(8) of the OST A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1). There can be no dispute with the way the Full Bench explained the meaning of the expression turnover but the same is of very little relevance in the context of the issues raised in this case. (a) The next decision of the division Bench of the Madras High Court in the case of Dinod Cashew Corporation [1986] 61 STC 1 relied on the Full Bench judgment in Louis Dreyfus [1955] 6 STC 318 (Mad) and was concerned with the question whether cashewnut and cashew kernels are the same goods for the purpose of section 5(3) of the Central Sales Tax Act, 1956. In deciding the question, incidentally the division Bench referred to section 16(1)(a) of the Tamil Nadu General Sales Tax Act, 1959. In section 16(1)(a) of the Act, the words for any reason find place. The court held that power under section 16 is a wide power and the words are of wide import. The court also found that in Bihar Agricultural Income-tax Act, similar words have been used. There can be no dispute with the aforesaid principles. But the impact of the relevant statutory rules and statutory forms regulating the exercise of such wide power does not appear to have been considered by the learned Judges. So the interpretation give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to words reasons to believe since the words reasons to believe are incorporated in the statutory form in which notice of assessment is to be issued. The court also holds that while exercising power under section 12(8) of the OST Act, the authority has to act consistently with the statutory norms prescribed under the statutory rules and the forms. In Uttareswari [1972] 30 STC 567, section 12(8) of the OST Act, the apex Court held that the Sales Tax Officer issuing the notice should have reason to believe that the turnover of a dealer has escaped assessment or has been under-assessed . The apex Court further held that the approach has to be practical. 15. Following that judgment of the apex Court, the division Bench of the Orissa High Court held in Ugratara [1993] 91 STC 76 that some basis for reopening has to be disclosed in the notice. (a) Here, no basis has been disclosed either in the notice or in the records. Rather, the records show that the issuance of the notice preceded any recording of an order in the file. So it is clear that the notice has been issued mechanically and at a point of time when there could not be even any formation of opinion. So the notice was mechanically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been expressed by the apex Court in the case of Orient Paper Mills Ltd. v. Union of India reported in AIR 1969 SC 48. The court held that the directions issued by the Central Board of Revenue cannot control the exercise of power by the Collector. In paragraph 8, page 51 of the Report, Justice Hegde, speaking for the apex Court, held that no authority however high placed can control the decision of a judicial or quasi-judicial authority and the learned Judge found this principle as important as being of the essence of our judicial system . 18. The importance of this doctrine lies in the fact that if a statutory functionary is vested with a power to act, it is that statutory authority alone who will form the necessary objective opinion for exercising its powers. In doing so, it may take into consideration whatever is relevant. As in the instant case, audit objection may be a relevant consideration. Taking that objection into consideration, the Sales Tax Officer has to form his objective opinion. But the Sales Tax Officer cannot totally abdicate or surrender his discretion to the objection of the audit party by mechanically reopening assessment under section 12(8) as has been do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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