TMI Blog2015 (4) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... power would become co-extensive with that of the trial Court or the subordinate Tribunal which is never the case. The classic statement in Dattonpant that revisional power under the Rent Control Act may not be as narrow as the revisional power Under Section 115 of the Code but, at the same time, it is not wide enough to make the High Court a second Court of first appeal, commends to us and we approve the same. In view of legal position emerged out, and upon examination of the materials available on record in conjunction with Section 87 of the RST Act, learned Commissioner has over-stepped its jurisdiction in finding fault with the orders passed by the Assessing Authority for non-imposition of penalty. As a matter of fact, there is nothing on record to show that the Assessing Authority has exercised its discretion arbitrarily or capriciously and therefore interference with the discretionary orders of the Assessing Authority by the learned Commissioner is per-se a decision based on mere ipse-dixit or change in the opinion. While upholding the said order, the learned Tax Board has not at all cared to examine the nature of powers of the revisional authority under Section 87 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding of mens rea is a condition precedent for levying penalty under Section 10(b) read with Section 10-A of the Act. The learned Tax Board, while rejecting the contention of the assessee, has simply referred to Rule 34 of the Rules of 1995 without discussing the point in issue threadbare. The rival parties have joined issue on this question and requisite material is also available to embark on this question. I have also made endeavor to examine this question de-novo on the touchstone of relevant provisions governing the said province. Insofar as Assessment Years 1997-98 and 1998-99 are concerned, the Assessing Authority has passed the order on 11th August 2000 and revision under Section 87 is admittedly laid by the Assessing Authority to the learned Commissioner prior to expiry of five years. The revision petition is decided by the learned Commissioner on 10th of August 2005. Therefore, in terms of sub-sec.(2) of Section 87 of the RST Act, revisional power has been exercised by the learned Commissioner within five years. A plain reading of sub-sec.(2) of Section 87 makes it crystal clear that learned Commissioner can exercise revisional powers under sub-sec.(1) of Section 87 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to the conditions mentioned therein and the scheduled appended thereto. The said exemption was allowed for a period of five years from the date of first transaction of raw material purchased during the period from 15th June 1994 to 31st March 1997. The Notification further envisaged the unit to issue declaration in Form ST-17 to the selling dealer. As per Schedule, units having investment of Rupees fifteen crores or more were declared entitled to 100% exemption of tax and the units having investment between Rupees five crores to less than Rupees fifteen crores were declared eligible for 50% tax exemption. As the petitioner unit was fulfilling the requisite conditions incorporated in the Notification, it became eligible for tax exemption on the purchase of raw material, viz. yarn requisite for manufacturing fabrics. Petitioner has pleaded that it was under a bonafide belief that being a 100% Export Oriented registered unit, it is entitled to 100% exemption of tax payable and as such it purchased raw material i.e. yarn without paying tax by issuing Form ST-17 in terms of the Notification. The process continued in the interregnum period during which the Notification for 100% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther reiterating that the assessee has not misused declaration forms in any manner, the petitioner has prayed that it is not liable to be exposed for penalty either under Section 64 or 65 of the Act. The respondent subsequent thereto passed provisional assessment order for the Assessment Years 1998-1999 to 2000- 2001 on 11th August 2000 determining tax liability @1% on purchase of raw material as well as surcharge thereon and the petitioner-assessee was asked to deposit tax @1% on purchase of raw material with surcharge. The Assessing Authority, while resorting to Section 58 of the Act also fastened liability of interest on the petitioner-assessee for delay in depositing the requisite tax. Tax, surcharge and interest, as determined by the Assessing Authority, are detailed as under: Assessment Year Tax @1% Surcharge Interest 1998-99 5,21,156 42,095 2,48,952 1999-2000 5,61,430 74,876 1,28,483 2000-2001 1,47,247 22,087 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applications under Section 87 of the RST Act for the Assessment Years 1997-1998 to 2000-2001. In its order, the Commissioner has found that the assessee has availed 100% exemption on purchase of raw material by giving declaration in Form ST-17 against its entitlement for 50% in gross violation of Section 64 of the RST Act. With this finding, the Commissioner has observed that the Assessing Authority ought to have levied penalty under Section 64 on account of misuse of declaration by the assessee. Finally, the Commissioner concluded that all the orders passed by the Assessing Authority dropping penalty proceedings against the assessee are erroneous and due to its omission, loss has been caused to the State revenue. Thus, all the applications under Section 87 of the RST Act were accepted by the Commissioner. Feeling disgruntled with the order of the Commissioner, the petitioner-assessee laid an appeal before the Tax Board, Ajmer, which was registered as Appeal No.2923/2005/Bhilwara. When the proceedings in Appeal No.2923 of 2005 were in vogue, the petitioner-assessee was served with assessment order dated 16th December 2005 alongwith demand notices pertaining to Assessment Years 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeals were pending, on being threatened by the Assessing Authority for coercive proceedings for recovery, further 5% of the demand in question was deposited by the assessee on 20th March 2006. Therefore, in totality, the petitioner has deposited 10% of the demand of penalty. After dismissal of the appeals by the appellate authority, the petitioner-assessee laid four separate appeals before the Rajasthan Tax Board, Ajmer alongwith stay petitions for the Assessment Years 1997-1998 to 2000-2001 respectively. When these four appeals were laid, the appeal which was earlier filed by the assessee against the order of the Commissioner was pending, and therefore, all the five appeals were clubbed together and decided by a common judgment and order by the learned Tax Board on 31st January 2007 by rejecting all the appeals. It is in that background, the petitioner-assessee has laid these five revision petitions. At the threshold on 23rd of October 2007, the Court was pleased to club all these revision petitions. Subsequently, on 21st of May 2008, the revision petitions were admitted on following questions of law: 1. Whether the learned Commissioner has erred in interfering with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner, thus, submits that a very vital issue relating to scope of revision, under Section 87 of the RST Act, by the Commissioner against dropping penalty, has not been appreciated by the learned Tax Board in the impugned order, which is essentially the edifice for the consequential assessment order to petitioner's detriment for the Assessment Years 1997-98 to 2000-01, and therefore, the impugned order is vitiated in law. Learned counsel for the petitioner, Mr. Singhvi, would contend that the very assumption of revisional jurisdiction by the Commissioner under Section 87 is dehors the statute inasmuch as exercise of such powers pre-supposes loss or pilferage of revenue, and from any stretch of imagination penalty cannot be categorized as a source of revenue. Assailing imposition of penalty under Section 64 of the RST Act, learned counsel submits that when the Assessing Authority has invoked the revisional jurisdiction of the Commissioner by taking shelter of Section 64 of the RST Act, resorting to Section 64 for imposition of penalty by Commissioner is a patent error of law, which is completely eschewed by the learned Tax Board in the impugned order. While resorting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d culpability of the assessee in construing Notification dated 13th June 1994, and the learned Tax Board, in upholding the said laconic order, has failed to exercise the jurisdiction so vested in it. Taking shelter of the principles of natural justice, learned Senior Counsel submits that after order of remand by the learned Commissioner, the Assessing Authority has straightway passed the order imposing penalty against the assessee without giving any notice or opportunity of being heard. With this submission, learned counsel has urged that the Assessing Authority has violated the principles of natural justice and the first appellate authority as well as learned Tax Board has also not at all cared to examine the matter in right perspective. Mr. Singhvi submits that the order of the Assessing Authority, after remand for imposition of penalty, is clearly vitiated in law being violative of principles of natural justice, was a very vital issue on which there is no whisper in the impugned order, which is sufficient to annul the impugned order. Learned counsel for the petitioner has also urged that the revisional authority under Section 87 of the RST Act has seriously erred in clubbing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, Anti Evasion, Zone-I [(2007) 10 VST 535 (Raj.)]. Hindustan Steel Ltd. Vs. State of Orissa [1969 (2) SCC 627] Commissioner of Income Tax Vs. Jain Construction Co. [(2013) 257 CTR (Raj) 336] E converso, learned counsel for the Revenue, Mr. D.K. Godara for Mr. V.K. Mathur, submits that Notification dated 13th June 1994 is clear and unequivocal, prescribing the criteria of unit and extent of exemption of tax, and therefore, the very act of the petitioner-assessee in furnishing declaration in Form ST-17 is a deliberate attempt by it to use the Declaration Form dehors the provisions of the RST Act and the rules made thereunder, and as such the learned Commissioner and the learned Tax Board have rightly fastened the liability to pay penalty against assessee under Section 64 of the RST Act. Mr. Godara would contend that legal position is no more res-integra that taxing statutes require strict interpretation and any act of felony by an assessee cannot be excused. Learned counsel for the Revenue next contended that revisional jurisdiction of the Commissioner under Section 87 of the RST Act is very wide to protect the interest of the State Revenue in case any order, pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Tax Board, and thoroughly scanned the entire record. Rival counsels have made sincere endeavour to bring home the issues they have canvassed to elicit favourable answers on the questions of law formulated by the Court. Now I propose to deal with the questions of law framed in the backdrop of facts and circumstances as well as the rival submissions. Question No.1 Question No.5 are almost interrelated, therefore, these questions are taken up together. With a view to find a plausible answer to these two questions, it is worthwhile to examine the revisional powers and jurisdiction of the learned Commissioner under Section 87 of the RST Act. Section 87 of the RST Act reads as under: 87 Revision by the commissioner- (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by Assistant Commissioner, Commercial Taxes Officer, Assistant Commercial Taxes Officer or in-charge of a checkpost is erroneous or is prejudicial to the interests of the State revenue, he may, after having made or after having caused to be made, such enquiry as he considers necessary, and after having given to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purport of the Notification dated 13th June 1994, the Assessing Authority in all the assessment orders has concluded that the petitioner unit is having an investment of ₹ 5 Crores or more but less than ₹ 15 crore in land, new factory building and new plant and machinery, and accordingly, applying the ratio of extent of exemption of tax, has levied 50% tax to enrich the coffers of the revenue. As such, the Assessing Authority has discharged its quasi judicial function to protect the interest of the revenue by imposing interest on the amount of tax under Section 58 of the RST Act. While adverting to imposition of penalty under Section 65 of the RST Act, the Assessing Authority has observed that prima facie it is not satisfied that the assessee has made an attempt to avoid or evade payment of tax, and as such in its discretion declined to impose penalty on it. For exercising its discretion, the Assessing Authority has also taken note of the fact that the assessee has furnished the books of accounts for each assessment year, showing sale and purchase without concealing any material, and non-payment of tax by the assessee is bonafide in not properly construing the Notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f both the jurisdictions and defined ambit and scope of the respective jurisdictions. The Court held: We are in full agreement with the view expressed in Sri Raja Lakshmi Dyeing Works that where both expressions appeal and revision are employed in a statute, obviously, the expression revision is meant to convey the idea of a much narrower jurisdiction than that conveyed by the expression appeal . The use of two expressions appeal and revision when used in one statute conferring appellate power and revisional power, we think, is not without purpose and significance. Ordinarily, appellate jurisdiction involves a re-hearing while it is not so in the case of revisional jurisdiction when the same statute provides the remedy by way of an 'appeal' and so also of a 'revision'. If that were so, the revisional power would become co-extensive with that of the trial Court or the subordinate Tribunal which is never the case. The classic statement in Dattonpant that revisional power under the Rent Control Act may not be as narrow as the revisional power Under Section 115 of the Code but, at the same time, it is not wide enough to make the High Court a second Court o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposition of penalty against the assessee under Section 64 of the RST Act, this order has not ipso facto conferred jurisdiction on the Assessing Authority to impose penalty without adhering to principles of natural justice. After remand order, the Assessing Authority has imposed penalty twice the amount of tax for each assessment year against the assessee without giving any notice or opportunity of hearing to it. Every action which visits someone with evil and civil consequences is required to be in strict adherence of audi-altrem[ partem. Observance of principles of natural justice, in the instant case, has acquired significance for obvious reasons. In that background, if the application of the Assessing Authority addressed to the Commissioner for invoking its jurisdiction under Section 87 of the RST Act is examined, then it would ipso facto reveal that the application refers to Section 65 of the RST Act and not Section 64 of the RST Act. As observed supra, Section 64 envisage penalty for violation of declaration whereas Section 65 authorizes Assessing Authority to impose penalty for avoidance or evasion of tax. Both the sections are covering two aspects for fastening penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overlooked, may it be, under the RST Act - a taxing statute. The tax proceedings are no-doubt quasi judicial proceedings and the sales-tax authorities are not bound strictly by rules of evidence, nevertheless, the authorities must base their orders on materials, which are known to the assessee, and after he is given a chance to rebut the same. The folly, which is apparently clear from the order passed by the learned Commissioner under Section 87 of the RST Act, has been further perpetuated by the Assessing Authority after the remand order, inasmuch as the Assessing Authority has also not cared to issue any notice to the assessee before imposing penalty under Section 64 of the RST Act. It is clearly apparent that after remand order, all the assessment orders were passed by the Assessing Authority castigating the assessee for violation of declaration exposing it for the penalty envisaged therein without affording opportunity of being heard. Non-observance of principles of natural justice in the backdrop of facts and circumstances of the instant case has not been properly addressed by the first appellate authority as well as by the learned Tax Board and this vital issue has been de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construing the penalty provisions under Section 9(1), 12(5) and Section 25(1)(a) of the Orissa Sales Tax Act 1947, has concluded that for imposing penalty under these provisions, proceedings undertaken by the competent authority is of quasi criminal nature. The Court held: Under the Act penalty may be imposed for failure to register as a dealer : Section 9(1) read with Section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-sec. (5) of Section 78 of the RST Act makes it crystal clear that an authorized officer, or incharge of the check-post, after making inquiry shall impose fine on owner of the goods, or person authorized in writing by such owner, or the person incharge of the goods, for possession or movement of goods, whether seized or not, in violation of the provisions of clause (a) of sub-sec.(2), or for submission of false or forged documents or declaration. The penalty envisaged under sub-sec.(5) of Section 78 is 30% of the value of such goods. If the provisions of Section 64 65 of the RST Act are examined vis- -vis the provisions under Section 78(5) of the RST Act, then it will ipso facto reveal that the provision for penalty envisaged under these Sections is not mandatory but discretionary. As such, this judgment is of no avail to the revenue. In Sanjiv Fabrics (supra), Hon ble Apex Court examined the requirement of mens-rea in relation to the taxing statute and has held: 35. The Court in Cement Marketing case finally held that it was elementary that Section 43 of the State Act which provided for imposition of penalty is penal in character and unless the filing of an inaccura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions by the assessee, is sufficient to dispel the conclusion that assessee has misused the declaration forms. This sort of situation has persuaded the Assessing Authority while passing provisional assessment order to conclude that the alleged act or omission of the assessee was bonafide and it has not intended to use declaration forms for the purpose other than mentioned therein. Furthermore, there is nothing on record to show any concealment on the part of the assessee and the tax exemption claimed by the assessee was approved after through scanning of record by the Assessing Authority. Therefore, in totality, the explanation tendered by the assessee in construing Notification dated 13th June 1994 to claim 100% exemption from tax appears to be a bonafide act and not a contumacious or a deliberate act to use the declaration form dehors the provisions of the RST Act and the rules made thereunder, or an attempt was made to avoid or evade payment of tax. It is an admitted fact that in terms of provisional assessment, the petitioner assessee has deposited the requisite amount of tax as well as interest and therefore there is no question of any loss to the revenue. The contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed to be made attractive source of revenue or a target fulfilling method and the departmental authorities cannot be made to go out of the way to impose and collect illegally imposed penalties leaving the traders and transporters to sort out their grievances in the departmental remedies or even the remedies before this Court and even up to the apex Court, the very foundation of which from the side of Revenue was never so legally sustainable. The indirect loss of trade volume by such an atmosphere of Penalty Raj or Inspector Raj cannot be lost sight of and imposition of penalties on such technical or venial breaches if at all they can be said to be even that, cannot be allowed in a welfare State governed by the rule of law. The outcome of the above discussion is that this question deserves answer in favour of assessee and against the department, and consequently, in my opinion, the department is not justified in imposing penalty against the assessee. The last question, namely question No.8, relates to clubbing of all the assessments by the revisional authority, more particularly two assessments for the Assessment Years 1997-98 and 1998-99. The objection regarding limita ..... X X X X Extracts X X X X X X X X Extracts X X X X
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