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TMI Blog2011 (12) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... the Orissa Value Added Tax Act, 2004 (for short, "the OVATAct") as well as the Central Sales Tax Act, 1956 (for short, "the CST Act") having TIN No. 21241702847. The audit assessment proceedings commenced on October 5, 2010 basing on tax audit visit report dated September 30, 2010. This report covers the period from July 6, 2006 to March 31, 2009 suggesting for assessment and demand of tax to the tune of Rs. 2.98 crores. According to the provisions of rule 12(3)(h) of the CST (O) Rules, the assessment proceeding on the basis of tax audit report has to be completed within a period of six months from the date of receipt of the audit visit report provided if for any reason the assessment is not completed within six months the Commissioner may on the merit of each case allow such further time not exceeding six months for completion of the assessment proceedings. The petitioner believed that the assessment order would be passed by the opposite party No. 3 before April 6, 2011, i.e., within the period of limitation of six months as provided under rule 12(3) of the CST(O) Rules. However, the assessing authority did not pass any assessment order by that date. While the matter stood thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied to the petitioner the list of specific documents as mentioned in annexure 18 pursuant to the order of this court dated August 29, 2011 passed in W.P.(C) No. 21697 of 2011 (Bhushan Power & Steel Ltd. v. Deputy Commissioner of Sales Tax). The assessing authority on September 12, 2011 had sought for freight payments details and weighment slips which were already produced before opposite-party No. 3. No reasonable opportunity of hearing was afforded to the petitioner as directed by this court in the earlier writ petition. It is settled law that if any person is likely to be affected by the use of any material against him that is to be brought to his notice for rebuttal. This is the requirement of natural justice. The impugned order of assessment has been passed in gross violation of principles of natural justice as the learned assessing authority supplied the report dated May 2, 2011 on September 14, 2011 in 20 volumes containing 4,000 pages and completed the assessment within eight days, i.e., on September 22, 2011. The impugned assessment order has not been passed on the basis of the audit visit report dated September 30, 2010 but on the basis of the vigilance report dated May ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings, the petitioner has reversed an input-tax credit of Rs. 7.55 crores for the relevant transactions. The petitioner has effected stock transfer and collected the declaration form F and duly filed with the Department. Instead of effecting stock transfer, had the petitioner effected inter-State sales against declaration form C, the total tax for the disputed transaction would have been Rs. 13.08 crores, and in that case, the petitioner would have utilized entire amount of CST by utilizing input tax credit. Thus, there is no revenue loss to the State of Orissa. In addition to the reversal of ITC in the State of Orissa, the petitioner had paid local VAT in all States across the country and there is no loss to the Government exchequers in any manner. On the contrary, there is surplus contribution of revenue by the petitioner-company. 5. M. R.P. Kar, learned counsel appearing for the Revenue, supporting the order of the assessment passed by the assessing authority vehemently argued that there is no infirmity or illegality in the impugned assessment order. The assessment having been completed under rule 12(3) of the CST (O) Rules read with section 42 of the OVATAct, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable to such assessment? (iii) Whether the assessing authority is justified in utilizing the fraud report dated May 2, 2011 submitted by the Vigilance Department while making audit assessment on the basis of the audit visit report dated September 30, 2011? (iv) Whether the impugned assessment order has been passed in gross violation of the principles of natural justice and disobedience to the order passed by this court on August 29, 2011 in W.P.(C) No. 21697 of 2011 (Bhushan Power & Steel Ltd. v. Deputy Commissioner of Sales Tax)? (v) Whether the assessing authority is justified to pass the impugned assessment order by generalizing the entire claim of stock transfer on the strength of findings arrived at on scrutinizing some transactions of stock transfer? 8. Question Nos. (i) to (iii) being interlinked, they are dealt with together. The scheme of the VATAct provides various types of assessment for the purpose of determination of tax liability under the OVATAct. Such assessments are self-assessment (section 39), provisional assessment (section 40), audit assessment (section 42), escaped assessment (section 43), assessment of dealer who being liable to pay tax fails to registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules read with section 42 of the OVATAct. Since in the present case the impugned assessment order has been passed under rule 12(3) of the CST (O) Rules, the assessment is certainly an audit assessment and the assessing authority is obliged under the statute to make the audit assessment on the basis of materials available in audit report. The assessing authority cannot travel beyond the materials available in the audit report. Utilization of any other materials from any other sources in audit assessment is completely foreign to audit assessment and the same is not permissible. 11. Apart from the above, under the scheme of assessment, audit assessment under rule 12(3) of the CST (O) Rules read with section 42 of the OVATAct and escaped assessment under rule 12(4) of the CST (O) Rules read with section 43 of the OVATAct are separate and distinct. So far as assessment of escaped turnover is concerned, it is only where, after a dealer is assessed under sub-rule (1), (2) or (3) of rule 12 for any tax period, the assessing authority, on the basis of any information in his possession is of the opinion that the whole or any part of the turnover of the dealer in respect of any perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, the assessing authority is not justified in utilizing the fraud report dated May 2, 2011 against the petitioner-dealer while making audit assessment on the basis of audit visit report dated September 30, 2010. 15. Question No. (iv) is as to whether the impugned assessment order has been passed in gross violation of principles of natural justice and disobedience to the order passed by this court on August 29, 2011 in W.P.(C) No. 21697 of 2011 (Bhushan Power & Steel Ltd. v. Deputy Commissioner of Sales Tax). Undisputedly, the petitioner was supplied with a copy of the report dated May 2, 2011 on September 14, 2011 and the assessment was completed on September 22, 2011, i.e., within eight days from the date of supply of copy of the report. It is stated by the learned Senior Advocate for the petitioner that the said report comprises of 20 volumes covering more than 4,000 pages. There is no denial by the Revenue to such statement. From the assessment order we also find that one of the reasons given by the assessing authority to complete the assessment hurriedly is that since the extended period of assessment allowed under rule 12(3)(h) of the CST (O) Rules by the C.C. T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys lies upon the taxing authority to show that a particular sale or sales is/are exigible to tax under the Act. Therefore, while examining the genuineness of the stock transfer, each individual transaction has to be examined. The honourable Supreme Court in Tata Engineering and Locomotive Co. Ltd. [1970] 26 STC 354 (SC), held as follows (page 381 in 26 STC): "Another serious infirmity in the order of the Assistant Commissioner was (a matter which even the Advocate-General quite fairly had to concede) that instead of looking into each transaction in order to find out whether a completed contract of sale had taken place which could be brought to tax only if the movement of vehicles from Jamshedpur had been occasioned under a covenant or incident of that contract the Assistant Commissioner based his order on mere generalities. It has been suggested that all the transactions were of similar nature and the appellant's representative had himself submitted that a specimen transaction alone need be examined. In our judgment this was a wholly wrong procedure to follow and the Assistant Commissioner, on whom the duty lay of assessing the tax in accordance with law, was bound to examine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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