TMI Blog2023 (4) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... over as exempted sale to affect the tax liability, in that case imposition of penalty under Rule 12(4)(c) cannot have any justification. The discretionary exercise of power amounts to something that is not compulsory, but it is left to discretion of the person or authority involved, such as a discretionary grant. It is opposite to mandatory. Therefore, discretionary is a term which involves an alternative power, i.e., a power to do or refrain from doing a certain thing. In other words, it would be power of free decision or choice within certain legal bounds. If Rule 12(4)(c) provides for exercise of discretionary power for imposition of penalty, the assessing officer should have exercised such discretionary power reasonably. In absence of any rationality or reasonability, exercise of discretionary power can be construed as arbitrary and unreasonable exercise of power by the authority. Therefore, when the first appellate authority examined the fact vis- -vis contention raised by the parties and came to a definite finding that the petitioner has not suppressed any turnover which will affect the revenue and the discretionary power has been vested with the assessing officer while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to mitigate harshness - 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. The question of law as framed by this Court is answered in the negative, i.e., in favour of the petitioner-assessee and against the State of Odisha-Revenue - the sales tax revision petition allowed. - STREV NO. 47 OF 2017 - - - Dated:- 29-3-2023 - HONOURABLE DR. JUSTICE B.R. SARANGI AND HONOURABLE MR. JUSTICE M.S. RAMAN For Petitioner : M/s. Bhabani Prasad Mohanty, Niranjan Paikray, Rudra Prasad Kar and Aditya Narayan Ray, Advocates For Opp. Parties : Mr. Susanta Kumar Pradhan, Addl. Standing Counsel (CT GST Organisation) DR. B.R. SARANGI,J. M/s. Sri Padmavati Cashew Industries, a proprietorship concern of Sri M. Nagabhusan Rao, hasfiled this revision to quash the order dated 04.02.2017 under Annexure-3 passed by the Odisha Sales Tax Tribunal, Cuttack in dismissing S.A. No. 90 (C) of 2013-14 preferred by the petitioner-dealer and allowing S.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.2,10,99,800/- (sale without C form of cashew kernel) came to Rs.9,94,828/-, against which the dealer had already paid Rs.9,33,802/- through challans. Therefore, the tax dues came to Rs.61,026/-. As such, an amount of Rs.1,22,052/- was imposed as penalty under Rule 12(4)(c) of the CST (O) Rules, 1957. Therefore, the total tax and penalty together came to Rs.1,83,078/- to be paid by the petitioner-dealer. Consequentially, the demand notice was issued to the petitioner-dealer. 2.1 Against the aforesaid order of assessment demanding Rs.1,83,078/- which includes penalty of Rs.1,22,052/- under Rule 12(4)(c) of the CST (O) Rules, 1957, the petitioner-dealer preferred an appeal under Section 9(2) of the CST Act and Rule 22 of the CST (O) Rules read with Section 77(1) of the OVAT Act, 2004 which was registered as AAC (KOR) 20/12-13. The appellate authority, upon hearing, vide order dated 30.10.2013, came to a definite finding that, so far as imposition of maximum penalty under Rule 12(4)(c) of the CST (O) Rules, 1957 is concerned, the petitioner had not suppressed any turnover which would affect the revenue. The appellate authority also held that no suppression of any turnover or fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances of the case, the order of the Tribunal is perverse and erroneous? (B) Whether on the facts and circumstances of the case, the Tribunal was justified in upholding the penalty equal to twice the amount of tax particularly when there was no suppression of any turnover by the petitioner nor any fraud has been established nor the petitioner is found to have illegally deducted any turnover as exempted sale which affects the tax liability? (C) Whether on the facts and in the circumstances of the case, the Tribunal is justified in upholding the levy of tax and penalty imposed under clause (c) of sub-rule (4) of Rule 12 of the CST (O) Rules particularly when the order of assessment has been made under Rule 12(4) (a) of the CST (O) Rules on the basis of the scrutiny of returns without completion of assessment under sub-rule (1), (2) or (3) of Rule 12 of the CST (O) Rules? (D) Whether on the facts and in the circumstances of the case, the Tribunal has committed gross illegality in upholding the levy of penalty undisputedly when the first appellate authority has satisfied that there was no escapement of tax and the adjustment of VAT against CST payable was with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vrs. Chandrakanta Jayantilal, Cuttack, STREV No.69 of 2012, vide Order dated 05.07.2022, wherein earlier decisions in National Aluminium Company Ltd. Vrs. Deputy Commissioner of Commercial Taxes, Bhubaneswar-III Circle, Bhubaneswar, 2021 (I) OLR 828 and Jindal Stainless Ltd. Vrs. State of Odisha, (2012) 54 VST 1 (Ori) are taken note of, and harped on the point that the penalty as was imposed by exercising judicious discretion on the finding that there was erroneous adjustment of tax touching the liability under the CST Act, the assessment order restored by the learned Odisha Sales Tax Tribunal does not deserve indulgence in the present proceeding. 7. Escaped Assessment can be understood in common parlance as that the turnover cannot be said to have escaped assessment except in the case where an assessment has been made which does not include the turnover. At all events, such turnover has not escaped assessment if they are pending at the time proceedings for the assessment of the assessee s figures disclosed in the return which have not yet terminated in a final assessment thereof. More so, the words for any reason placed before the expression escaped assessment clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wrongly any deduction from his turnover or exemption under the Act or has been wrongly allowed set off of input tax credit in excess of the amount admissible under clause (c) of sub- rule (3) of Rule 7 of these rules, he shall serve a notice in Form IVA on the dealer. (b) The hearing of the dealer shall be concluded in accordance with the provisions of clauses (b) and (d) of sub-rule (3). (c) The Assessing Authority shall, after hearing the dealer in the manner specified in clause (b), assess the amount of tax payable by the dealer in respect of such period or periods for which assessment proceedings has been initiated and if he is satisfied that the escapement is without any reasonable cause , he may direct the dealer to pay, by way of penalty , a sum equal to twice the amount of tax additionally assessed. *** 10. Bare perusal of aforesaid provisions of Rule 12(4) which enables the Assessing Authority to initiate action for assessment is dependent on certain pre- conditions, namely: i. Initiation of the assessment under Rule 12(4) should be preceded by assessment under sub-rule (1), (2) or (3); ii. The basis for action is information in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12(4)(c) of the CST (O) Rules. Neither the Assessing Authority has assigned any reason nor does the Assessment Order reveal recording of his satisfaction. Said amount of Rs.56,041/- ex facie emanates from the turnovers disclosed by the petitioner in the returns. This fact is returned by the Assessing Authority in his Assessment Order in the following words: *** On verification it is found that the dealer processes cashew nut to cashew kernel and its by-products. He has effected purchase of cashew nuts from both inside and outside the State of Odisha. During the period of assessment he disclosed his total sale under inter-State at Rs.2,86,41,600/-, i.e., sale against C Form for Rs.82,56,800.00, without C Form for Rs.2,03,84,800.00, CST of Rs.9,33,802.00 and shown adjustment of Rs.56,041.00 against VAT ITC. But on verification it is found that the dealer has no input tax credit for that tax period to adjust. As the dealer has paid excess amount of tax under the OVAT Act, he cannot adjust the same against the CST dues. *** 13. Against imposition of penalty, the assessee has submitted by way of grounds of appeal before the First Appellate Authority as follows, which forms p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u) reference has been made to Kumaon Mandal Vikas Nigam Ltd. Vrs. Girja Shankar Pant, (2001) 1 SCC 182 to observe that discretion means when it is said that something is to be done within the discretion of the authorities, that something is to be done according to the rules of reason and justice, not according to private opinion, according to law, and not humour. It is to be, not arbitrary, vague, and fanciful, but legal and regular. And it must be exercised within the limit, to which an honest man competent to the discharge of his office ought to confine himself. 17. Therefore, if Rule 12(4)(c) provides for exercise of discretionary power for imposition of penalty, the assessing officer should have exercised such discretionary power reasonably. In absence of any rationality or reasonability, exercise of discretionary power can be construed as arbitrary and unreasonable exercise of power by the authority. Therefore, when the first appellate authority examined the fact vis- -vis contention raised by the parties and came to a definite finding that the petitioner has not suppressed any turnover which will affect the revenue and the discretionary power has been vested with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed as under: *** once the Assessing Officer comes to the conclusion that the dealer is indulged in fraudulent activities and assesses him under Section 43 of the OVAT Act, there is no need for the Assessing Officer to make further investigation to find out whether the escapement is without reasonable cause for the purpose of imposition of penalty under Section 43(2) of the OVAT Act. 9. The grievance of the NALCO is to the limited extent of the manner in which the second question has been dealt with by this Court in the aforementioned judgment. Mr. Mishra, learned counsel for the NALCO points out that this Court has in the above judgment while placing reliance on the decision of the Supreme Court in Union of India Vrs. Dharamendra Textile Processors and others (2008) Volume-18 VST 180 (SC), not considered the subsequent decision of the Supreme Court in Union of India Vrs. Rajasthan Spinning and Weaving Mills 2009 (Vol.238) ELT Page-3, both of which were in the context of Section 11 AC of the Central Excise Act, 1944. The wording of the said provision was not on par with the wording of Section 43(2) of the OVAT Act. The further grievance is that there was no occasio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Company Limited, 2021 (I) OLR 828 stated in the case of Shree Plastics Pvt. Ltd., Berhampur Vrs. State of Odisha, STREV No. 15 of 2013, vide Order dated 13.07.2022 as follows: 10. Section 10(2) of the OET Act reads as under: (2) If the assessing authority is satisfied that the escapement or under assessment of tax on account of any reason(s) mentioned in sub-section (1) above is without any reasonable cause, he may direct the dealer to pay in addition to the tax assessed under sub-section (1), by way of penalty, a sum equal to twice the amount of tax additionally assessed under this section. 11. That can be no doubt that the levy of penalty does not have to be automatic. It is contingent on the STO being satisfied that the escapement of tax was without any reasonable cause . *** 20. Applying the above ratio to the present context, the essential component of Section 43(2) of the OVAT Act for attracting the penalty, i.e., satisfaction of the assessing officer that the escapement of tax was without reasonable cause, if the same principle will apply to the provisions contained under Rule 12(4)(c) of the CST (O) Rules, 1957, nothing has been placed on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in the present case. 23. The counsel for the Revenue failed to cite recording of satisfaction that the dealer did not discharge his liability under the CST Act without reasonable excuse. Rather it is not disputed that the petitioner-dealer while discharging liability under the CST Act adjusted the excess tax paid under the OVAT Act and such fact is supported by explanation that instead of deposit being made through challan relating to CST, the dealer had made it through challan relating to VAT. The reasoning so assigned appears to be reasonable one. The record does not bear allegation of mischief like fraud, collusion, wilful misstatement or suppression of fact or deliberate breach of law, much less contumacious conduct on the part of the assessee. Therefore, it can be said that there was reasonable cause shown by the petitioner-assessee in connection with the discharge of tax liability, but there is no intention to evade payment of tax. Unless the assessing authority records satisfaction as provided under clause (c) of Rule 12(4) to the effect that the escapement was without any reasonable cause , he should not have imposed penalty. 24. Penalty is not prescribed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause the Central Act makes similar provisions. The Central Act is a self- contained code which by charging section creates liability for tax and which by other sections creates a liability for penalty and imposes penalty. Section 9(2) of the Central Act creates the State authorities as agencies to carry out the assessment, re-assessment, collection and enforcement of tax and penalty payable by a dealer under the Act. 25. Since penalty is a statutory liability and is substantive in nature, the provisions for imposition thereof are to be strictly construed. It is, therefore, pertinent to put forth the well-accepted principle with regard to strict interpretation. In a taxing statute one has to look at what is clearly said. There is no equity about a tax. There is no intendment. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly on the language used. If the meaning of the provision is reasonably clear, Courts have no jurisdiction to mitigate harshness. A Court of law, has nothing to do with the reasonableness or unreasonableness of a provision of a statute except so far as it may hold it in interpreting what the Legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shankar Modern Rice Mill, (2006) 147 STC 370 (AP). 26. This Court at this juncture wishes to take cognizance of well-settled proposition of law as restated in Zuari Cement Limited Vrs. Regional Director, Employees Insurance Corporation, Hyderabad and Others, (2015) 7 SCC 690 , wherein it has been laid down that it is the basic principle of law long settled that if the manner of doing a particular act is prescribed under any statute, the act must be done in that manner or not at all. This Court in Rudra Prasad Sarangi Vrs. State of Odisha and Others, 2021 (I) OLR 844 has observed as follows: 10. In Nazir Ahmed Vrs. King Emperor, AIR 1936 PC 253, law is well settled where a power is given to do a certain thing in a certain way the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden. The said principles have been followed subsequently State of Uttar Pradesh Vrs. Singhara Singh, AIR 1964 SC 358, Dhananjay Reddy Vrs. State of Karnataka, AIR 2001 SC 1512, Chandra Kishore Jha Vrs. Mahabir Prasad, AIR 1999 SC 3558, Gujrat Urja Vikas Nigam Ltd. Vrs. Essar Power Ltd., AIR 2008 SC 1921, Ram Deen Maurya Vrs. State of U.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of declaration forms in order to avail concessional rate of tax. On the same principle, for non- submission of declaration form in the present case, the penalty imposed under Rule 12(4)(c) is liable to be deleted. In the instant case, therefore, the learned Odisha Sales Tax Tribunal has not taken care of the provisions contained in Rule 12(4) of the CST (O) Rules in proper perspective. 29. In the above view of the matter, the order dated 04.02.2017 passed by the Odisha Sales Tax Tribunal, Cuttack in S.A. No. 90 (C) of 2013-14 and S.A. No. 143 (C) of 2013-14, as well as the order of the 1st appellate authority dated 30.10.2013 and the order passed by the assessing authority, so far as it relates to imposition of penalty of Rs.1,22,052/- on the petitioner under Rule 12(4)(c) of the CST (O) Rules, 1957, cannot be sustained in the eye of law and the same are liable to be quashed and are, hereby, quashed. 30. As a consequence thereof, the question of law as framed by this Court is answered in the negative, i.e., in favour of the petitioner-assessee and against the State of Odisha-Revenue. Thereby, the sales tax revision petition succeeds, but, in the circumstances, with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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