9911796707
TMI Blog2023 (4) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... r Annexure-1 imposing tax and penalty of Rs.1,83,078.00 under Rule 12(4) of the Central Sales Tax (Odisha) Rules, 1957, pertaining to the tax periods from 01.04.2010 to 31.03.2012. 2. The petitioner before this Court is a dealer and an assessee being assigned with TIN 21331601578. As per the tax evasion report received from the Deputy Commissioner of Sales Tax, Vigilance, Koraput Division, Jeypore, proceedings under Section 43 of the Odisha Value Added Tax Act (for short "OVAT Act") and Rule 12(4) of the Central Sales Tax (Odisha) Rules, 1957 (for short "CST (O) Rules, 1957") were initiated against the dealer. For assessment under the CST Act, notice in Form-IVA under the CST (O) Rules, 1957 was issued. In response to the said notice, the dealer appeared and produced its books of accounts. On examination of the same, it was found that the dealer processed cashew nut to produce cashew kernel and its by-products and also effected purchase of cashew nuts from both inside and outside the State of Odisha. During the period of assessment, the dealer had disclosed its total sale under inter-State at Rs.2,86,41,600/-, CST of Rs.9,33,802/- and shown adjustment of Rs.56,041/- against VAT IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.1,22,052/- and accordingly allowed the appeal in part and reduced the assessment to Rs.91,026/-. The calculation is detailed hereunder:- As determined by STO As claimed by Appellant As determined by JCST Gross turnover Rs.2,86,41,600.00 Rs. 2,86,41,600.00 Taxable turnover Rs.2,86,41,600.00 Rs.2,86,41,600.00 Tax assessed Rs. 9,94,828.00 Rs. 9,94,828.00 Tax paid Rs. 9,33,802.00 Rs. 9,33,802.00 Balance tax Rs. 61,026.00 Rs. 61,026.00 Penalty imposed Rs. 1,22,052.00 Rs. 30,000.00 Total to pay Rs. 1,83,078.00 Rs. 91,026.00 2.2 Against the aforesaid order of the appellate authority, viz., Joint Commissioner of Sales Tax, Koraput Range, Jeypore, the petitioner preferred S.A. No. 90 (C) of 2013-14 and, as such, the State of Orissa also preferred S.A. No. 143 (C) of 2013-14 before the Odisha Sales Tax Tribunal, Cuttack. The tribunal heard both the appeals together and by a common order dated 04.02.2017, while dismissing the appeal preferred by the petitioner, allowed the appeal preferred by the revenue and set aside the order passed by the Joint Commissioner of Sales Tax, Koraput Range, Je ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the petitioner laid emphasis on the question No.B and contended that on perusal of the order of the first appellate authority it would be evident that he has categorically found that there was no suppression of any turnover by the petitioner nor was any fraud established nor was the petitioner found to have illegally deducted any turnover as exempted sale to affect the tax liability. It is further contended that neither the order of the assessing authority nor the order of the Sales Tax Tribunal indicates that there was "escapement" of any turnover or any fraud was established or the petitioner was found to have illegally deducted any turnover as exempted sale so as to impose penalty. His further contention is that when there was no escapement of turnover and the adjustment of excess tax paid under the OVAT Act against the CST payable, imposition of penalty under Rule 12(4)(c) of the CST (O) Rules, 1957 is without jurisdiction and without any authority of law. 6. Sri Susanta Kumar Pradhan, learned Addl. Standing Counsel appearing for the Revenue justifies the order passed by the tribunal and contended that no illegality or irregularity has been committed by the second appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e return has been escaped assessment so as to entitle the assessing authority to impose penalty under Rule12(4)(c) of CST (O) Rules, 1957. But the assessing authority imposed penalty in exercising his discretion and such discretion has been exercised without any reasonable cause. There is a specific finding that the petitioner has not suppressed any turnover which will affect the revenue. It is no doubt true that a discretionary power has been vested with the assessing officer for imposing penalty under Rule 12(4)(c), but when suppression of any turnover or commission of any fraud has not been established, nor the petitioner has been found to have illegally deducted any turnover as exempted sale to affect the tax liability, in that case imposition of penalty under Rule 12(4)(c) cannot have any justification. 9. It may be relevant to extract the relevant provisions of Rule 12(4) of the CST (O) Rules as it existed during the relevant tax periods with respect to which returns were furnished and assessment was undertaken: "12. Assessment.- (4) (a) Where, after a dealer is assessed under sub-rule (1), (2) or (3) for any period, the Assessing Authority, on the basis of any informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f aforesaid eventualities, the Assessing Authority is empowered to serve a notice in Form IVA on the dealer. 11. So far as imposition of penalty for the present context is concerned, upon adherence to the principles of natural justice, the Assessing Authority shall assess the amount of tax payable by the dealer in respect of such period or periods for which assessment proceedings has been initiated. Upon determination of tax liability upon assessment, the Assessing Authority is bestowed with power to apply his mind whether to impose penalty. For invoking power under Rule 12(4)(c) for imposition of penalty, it is mandated as follows: i. The Assessing Authority is required to be satisfied that: a. There has been escapement of turnover; b. Such escapement was without any reasonable cause. ii. Upon fulfilment of said requirements, the Assessing Authority may exercise his discretion by directing the dealer to pay, by way of penalty, a sum equal to twice the amount of tax additionally assessed. 12. When the aforesaid provisions are juxtaposed with the factual position of the present case, without ascertaining whether the amount of Rs.56,041/- disallowed on account of adjustment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r words, it would be power of free decision or choice within certain legal bounds. 15. Necessity, thus, arises to state from K.K. Gopalan & Co. Vrs. Assistant Commissioner (Assessment), (2000) 118 STC 111 (Ker), wherein it has been observed that 'discretion' means use of private and independent thought. When anything is left to be done according to one's discretion the law intends it to be done with sound discretion and according to law. Discretion is discerning between right and wrong and one who has power to act at discretion is bound by rule of reason. Discretion must not be arbitrary. The very term itself stands unsupported by circumstances imports the exercise of judgment, wisdom and skill as contra distinguished from unthinking folly, heady violence or rash injustice. When applied to a Court of Justice or Tribunal or quasi-judicial body, it means sound discretion guided by law. It must be governed by rule, not by humor; it must not be arbitrary, vague and fanciful but legal and regular. Discretion must be exercised honestly and in the spirit of the statute. It is the power given by a statute to make choice among competing considerations. It implies power to choose between al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause. Therefore, reduction of penalty by the first appellate authority appears to be improper, when such determination of liability against the petitioner is absolutely based on no record. 18. A pari materia provision is contained in Section 43(2) of the Odisha Value Added Tax Act, 2004 giving discretion to the assessing officer to impose penalty, wherein it has been provided that it is imperative for the assessing officer to be satisfied that the escapement or under assessment of tax "is without any reasonable cause." This was considered by this Court in National Aluminium Co. Ltd. v. Deputy Commissioner of Commercial Taxes, (2012) 56 VST 68 (Ori) = 2013 (I) ILR-CUT 595 read with clarificatory order dated 08.03.2021 in RVWPET Nos. 211, 212 and 213 of 2013 (National Aluminium Co. Ltd. v. Deputy Commissioner of Commercial Taxes), 2021 (I) OLR 828, wherein it has been enunciated as follows: "6. While considering the second question viz., whether imposition of penalty under Section 43(2) of the Orissa Value Added Tax Act, 2004 (OVAT Act) can only be levied if the escapement is "without any reasonable cause", an observation was made in paragraph 36 of the judgment that "penalty is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the OVAT Act the levy of penalty in the event of turnover escaping assessment, or under assessement, is not automatic. The AO has to be satisfied that escapement or under assessment of tax "is without reasonable cause". Further upon arriving at such conclusion, the AO 'may direct the dealer to pay, by way of penalty, a sum equal to twice the amount of tax additionally assessed under the Section.' The word 'may', in this context gives the AO a discretion, which is unavailable to him under Section 42(5) of the OVAT Act. 13. The Court, therefore, finds merit in the contention of the learned counsel for the Petitioner that the observation in the judgment dated 9th October 2012, on the aspect of penalty under Section 42 (5) of the OVAT Act was not warranted. All that was required to be observed was that since the question had been rendered academic in view of the finding on issue No.1, the imposition of penalty under Section 43(2) of the OVAT Act, was not automatic and that there is a discretion in the AO in this regard upon finding that there has been an escapement or under assessment of tax." 19. While considering pari materia provision contained in Section 10(2) of the Odisha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Tax Credit (ITC)', the Sales Tax Officer (STO), Ganjam-I Circle, Berhampur proceeded to impose penalty under Section 43(2) of the Odisha Value Added Tax Act, 2004 (OVAT Act) without actually coming to any conclusion that ITC with differential tax wrongly availed by the Petitioner-Assessee was 'without reasonable cause'. 3. As explained by this Court in National Aluminium Co. Ltd. v. Deputy Commissioner of Commercial Taxes, (2012) 56 VST 68 (Ori) read with clarificatory order dated 8th March, 2021 in RVWPET Nos.211, 212 & 213 of 2013 (National Aluminium Co. Ltd. Vrs. Deputy Commissioner of Commercial Taxes), 2021 (I) OLR 828, there is a discretion in the Assessing Officer under Section 43(2) of the OVAT Act to impose penalty. It is imperative for the Assessing Officer to be satisfied that the escapement of under assessment of tax 'is without any reasonable cause'. 4. As far as present case is concerned, the assessment order of the Assessing Officer does not record the satisfaction of the Assessing Officer that wrongful availment of ITC by the Petitioner was 'without reasonable cause'. Thus, the essential component of Section 43(2) of the OVAT Act for attracting the penalty, vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Assessing Authority as to the reasonableness of the cause is imperative. In absence of such material borne on record, the very invocation of exercise of power to impose penalty is considered to be flawed. In Khemka and Co. (Agencies) Pvt. Ltd. Vrs. State of Maharashtra, (1975) 2 SCC 22 Constitution Bench (5-Judge) of the Hon'ble Supreme Court has been pleased to render the conceptual understanding of "penalty" qua Section 9(2) of the CST Act in the following manner: "25. Penalty is not merely sanction. It is not merely adjunct to assessment. It is not merely consequential to assessment. It is not merely machinery. Penalty is in addition to tax and is a liability under the Act. *** penalty is not a continuation of assessment proceedings and that penalty partakes of the character of additional tax. *** 28. *** A penalty is a statutory liability. The Central Act contains specific provisions for penalty. Those are the only provisions for penalty available against the dealers under the Central Act. Each State Sales Tax Act contains provisions for penalties. These provisions in some cases are also for failure to submit return or failure to register. It is rightly sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of place where the legislation has a fiscal mission. Be it noted that individual cases of hardship and injustice do not and cannot have any bearing for rejecting the natural construction by attributing normal meanings to the words used since hard cases do not make bad laws. A fiscal statute shall have to be interpreted on the basis of the language used therein and not de hors the same. No words ought to be added and only the language used ought to be considered so as to ascertain the proper meaning and intent of the legislation. 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. Reference be had to Cooke Vrs. Charles A Vogeler Co., (1901) AC 102 (HL); Cape Brandi Syndicate Vrs. Inland Revenue Commrs., (1921) 1 KB 64; Canadian Eagle Oil Co. Vrs. King, (1945) 2 AllER 499 (HL); Inland Commrs. Vrs. Ross & Coulter, Re Bladnoch Distillery Co., (1948) 1 AllER 616 (HL); Keshavji Ravji & Co. Vrs. CIT, (1990) 183 ITR 1 (SC); Orissa State Warehousing Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 21999 of 2014 disposed of on 10.03.2016." 27. Aforesaid salutary principle has been noticed by this Court while dealing with assessment under the OVAT Act in the matter of Patitapabana Bastralaya Vrs. Sales Tax Officer and Others, (2015) 79 VST 425 (Ori) = 2015 (I) OLR 183 and Balaji Tobacco Store Vrs. Sales Tax Officer, 2015 SCC OnLine Ori 85; . 28. The demand raised in the assessment order also seen to have on account of non-submission of declaration in Form C. As an illustrative case, viz. General Traders Vrs. State of Odisha, STREV No.64 of 2017, vide Judgment dated 08.12.2022, needs to be taken note of, where this Court was in seisin of imposition of penalty under Rule 12(3)(g) of the CST (O) Rules, which is pari materia with the provision in Section 42(5) of the OVAT Act, in connection with non- submission of declaration forms. It has been held by referring to benevolent Circular bearing No. 42/III(I)38/09/CT, dated, 20.04.2015 issued by the Commissioner of Commercial Taxes that even though the language of said provision employed in the mandatory sense and the imposition of penalty is construed to be automatic, no penalty is required to be insisted upon by the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
