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TMI Blog2023 (4) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... .2015 under Section 43 of said Act, 2004 read with Rule 50 of the Odisha Value Added Tax Rules, 2005 by the Joint Commissioner of Sales Tax, Ganjam Range, Berhampur pertaining to the tax periods from 01.03.2009 to 31.03.2012. FACTS OF THE CASE: 2. The assessee-petitioner being a registered dealer under the Odisha Value Added Tax Act, 2004 (for short referred to as "OVAT Act"), carries on its business in edible oil, pulses, dal, sugar, coconut oil, vanaspati ghee and wheat on wholesale-cum-retail basis. On the allegations contained in the Fraud Case Report bearing No.12/2011-12 submitted by the Assistant Commissioner of Sales Tax, Enforcement Range, Berhampur, proceeding for assessment under Section 43 of the OVAT Act was initiated. Consequent upon participation of the dealer in the said proceeding and furnishing explanation(s) in respect of the objection/allegation, the Joint Commissioner of Sales Tax, Ganjam Range, Berhampur (for brevity referred to as "Assessing Authority") passed Assessment Order dated 19.08.2015 by raising demand to the tune of Rs.1,57,878/- comprising tax of Rs.52,626/- and penalty of Rs.1,05,252/- imposed under Section 43(2). 2.1. Aggrieved, the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Sales Tax Tribunal observed that the dealer failed to produce delivery challan for 10.56 MT of peas out of 50.56 MT of peas sent for cleaning purpose to M/s. Sai Ram Enterprises, which the petitioner claimed to have received by making own arrangement. 2.5. Upholding the allegations of suppression with regard to above counts, the learned Tribunal quantified total suppression to be of Rs.6,00,332/- and by applying rate of tax @ 4% tax was calculated to Rs. 24,013/-. 2.6. Besides aforesaid amount of tax, the learned Tribunal also imposed penalty of Rs. 48,027/- under Section 43(2) of the OVAT Act, which is equal to twice the amount of tax so determined. 2.7. Thus, the learned Odisha Sales Tax Tribunal interfered with the confirming order of the Appellate Authority and thereby reduced the demand accordingly. 3. Still aggrieved, the petitioner-dealer, with a prayer to set aside the Order-in-Second Appeal dated 11.05.2017 (Annexure-3) moved this Court by way of instant revision under Section 80 of the OVAT Act, and posited the following questions of law: I. Whether on the facts and in the circumstances of the case, the learned Odisha Sales Tax Tribunal is correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices were prepared after the sale being materialized. Further, with regard to slip Nos. 53 and 54, it was clarified before the authority by the petitioner that though amount of payments were reflected, since the petitioner did not receive full payments, the sales were not fructified and no despatches were made. As regards slip Nos. 55 to 89, they are mere orders received from brokers and such transactions were taken into account books after sales got materialised with the customers. The learned Tribunal while discarding such explanation with regard to aforesaid 89 slips, determined the sale suppression to the tune of Rs. 4,20,812/-. Sri Kar argued that such finding of fact is based on surmises and conjectures, as the said Tribunal in respect of Seizure No. 4 relating to 19 numbers of written slips, wherein similar nature of transactions were recorded, has accepted that the allegation of suppression could not be established by the taxing authorities. He pressed into service the following observation made by the Tribunal (paragraph-7 of its Order): "*** As because the appellant-dealer did not produce the relevant documents before the visiting officials or failed to counter the alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing paltry, the matter does not deserve consideration. However, in reply to the contentions raised in the revision petition based on which the arguments were advanced by the counsel for the petitioner, Sri Sunil Mishra, learned Additional Standing Counsel brought to the notice of this Court that the assessee-dealer did not discharge its burden at the time of inspection and in order to escape the rigours of penalty under Section 43(2) on account of tax liability determined in the assessment, the petitioner has taken false pleas before the taxing authorities. As against total demand of Rs.1,57,878/- inclusive of penalty raised in the assessment which was confirmed by the Appellate Authority, the learned Sales Tax Tribunal having intervened with concurrent finding, the impugned order needs no further consideration. Factual disputes settled by the learned Sales Tax Tribunal does not get attracted to be considered in the present proceeding under revisional jurisdiction of this Court under Section 80 of the OVAT Act. QUESTIONS OF LAW POSED FOR ADJUDICATION: 8. At the time of hearing of the matter, Sri Rudra Prasad Kar, learned counsel confined his arguments with respect to the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kers were accounted for as and when the sales were fructified. 9.1. Section 2(45) of the OVAT Act stipulates that it is "transfer of property in goods" for "cash, deferred payment or other valuable consideration" attracts attributes of "sale" and as per Section 2(46), "sale price" is the consideration received or receivable for the sale of any goods. 9.2. The learned Sales Tax Tribunal confirmed the finding of the Assessing Authority that the Investigating Officials on verification found signatures of transporters on the slip Nos.1 to 51 and evidences of consideration being received on account of the transactions reflected in slip Nos.53 and 54 as also slip Nos.55 to 89 were on record. Such is the factual finding which seldom gives scope for this Court to re-appreciate the evidence. 9.3. Much emphasis has been laid by the learned counsel for the petitioner in connection with slip Nos.55 to 89 which contained alleged transactions of sale effected by procuring orders through brokers. It is submitted that the alleged suppression in the same course of conduct of inspection under similar context of procurement of orders for supply through brokers as contained in small bound book cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout delivery challan) has been disbelieved by the learned Tribunal. 10.1. It may be pertinent to say that aforesaid observations of the learned Odisha Sales Tax Tribunal are essentially facts based on analysis of material particulars on record. Having regard to the evidence on record, the learned Tribunal has interfered with the concurrent finding of the statutory authorities and reduced the demand of tax to Rs.24,013.28P. 10.2. The factual dispute before the statutory authorities including the Tribunal has been considered on the basis of material on record and the factum of receipt of consideration has also not been successfully dispelled by the petitioner. Therefore, the fact of suppression of turnover to the extent of Rs.6,00,332/- has been found to be established by all the fora below. Such questions of fact cannot be re-adjudicated in the revision proceeding before this Court, as they are not questions of law. 11. It is further contended that the best judgment assessment could not have been made by the Assessing Authority without rejecting books of account. A general statement of this nature has no bearing on the facts of the present case. On close scrutiny of the Orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indings recorded by the lower authorities are perverse or based on an apparently erroneous principles which are contrary to law or where the finding of the lower authority was arrived at by a flagrant abuse of the judicial process or it brings about a gross failure of justice. Refer, Agarwal Oil Refinery Corporation Vrs. Commissioner of Trade Tax, (2011) 13 SCC 275. 12.4. All the questions at issue had to be tried in the light of evidence, oral or otherwise, and surrounding circumstances, before the lower authorities. Where High Court's jurisdiction is confined to questions of law, if appellate Court recorded definite findings, it is not open to the High Court to attempt to re-appreciate that evidence. See, Raruha Singh Vrs. Achal Singh, AIR 1961 SC 1097; Commissioner of Sales Tax Vrs. Kumaon Tractors & Motors, (2002) 9 SCC 379; Commissioner of Sales Tax Vrs. Mohan Brickfield, (2006) 148 STC 638 (SC). 12.5. The position of law that issues of fact determined by the Tribunal are final and the High Court in exercise of its reference/revision jurisdiction should not act as an appellate Court to review such findings of fact arrived at by the Tribunal by a process of re-appreciation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the weight of evidence. So also, it can be said to be perverse if material evidence was missed out for consideration or a totally irrelevant and immaterial aspect formed the foundation for such a finding. Regard may be had to Hero Vinoth (Minor) Vrs. Seshamal, (2006) 5 SCC 545, wherein the following principle has been laid down: "*** in a case where from a given set of circumstances two inferences of fact are possible, the one drawn by the lower appellate Court will not be interfered by the High Court in second appeal. Adopting any other approach is not permissible. ***" 12.9. On noticing above principles, this Court is of the view that interference with the finding of fact is not warranted if it involves re-appreciation of evidence. This Court, therefore, does not find perversity in concurrent finding of fact by the authorities including the learned Odisha Sales Tax Tribunal that the transactions recorded in the seized documents being supported by the evidence of signature of transporter(s) and consideration received on account of transactions to the extent discussed above. Hence, this Court answers the question Nos. I to III accordingly. 13. Given the limited scope for this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of collecting sales tax under which tax is collected in each stage on the value added to the goods. The basic object of VAT Scheme is to provide voluntary and self-compliance. It goes without saying that to plug the leakage of revenue, the Legislature enacted law authorizing imposition of penalty for infraction of any statutory provision. We are conscious that generally penalty proceedings are quasi judicial in nature. Quantification of penalty under Section 43 of the OVAT Act is dependent upon the tax assessed under that Section. For the purpose of assessing tax, opportunity of hearing was afforded to the assessee, the explanation of the assessee and its books of account were examined and considered. Penalty is only quantified on the basis of the tax assessed. No discretion is left with the Assessing Officer for levying any lesser amount of penalty. Penalty is not independent of the tax assessed. If the tax is assessed, imposition of penalty under 42(5) is warranted. 37. The matter may be looked at from different angle. Section 43 of the OVAT Act deals with escaped assessment. As stated above, imposition of penalty is dependent upon the quantum of tax assessed under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral 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 occasion for the Court to have made any observations as regards the imposition of penalty under Section 42 (5) of the OVAT Act as the said provision was in the context of audit assessment and differently worded from Section 43(2) of the OVAT Act. *** 11. The Court notes that under Section 42(5) of the OVAT Act the penalty levied is "equal to twice the amount of tax assessed" under Section 42(3) or 42(4) pursuant to an audit assessment. There is no discretion with the Assessment Officer (AO) to reduce this amount of penalty. On the other hand, Section 43(2) of the OVAT Act is under the heading "Turnover escaping assessment", and is differently worded. It reads thus: '43 (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, by way of penalty, a sum equal to twice the amount of tax additionally assessed under this section." 12. It is seen under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside to the extent described above. The appellant dealer is directed to pay the tax demand of Rs. 24,013.28 along with penalty of Rs. 48,026.56 in accordance with law. The cross-objection is disposed of accordingly." 14.1. Aforesaid conclusion as recorded by the learned Tribunal in its second appellate order does not reveal that the discretion conferred under Section 43(2) has been utilized by assigning reason. It is manifest from the said order that the Odisha Sales Tax Tribunal straightway imposed penalty after determining the tax component on recording the finding that the suppression of turnover was established to the tune of Rs. 6,00,332/- 14.2. The discretionary exercise of power amounts to something that is not compulsory, but it is left to the 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. 14.3. Necessity, thus, arises to state from K.K. Gopalan & Co. Vrs. Assistant Commissioner (Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. Discretion is the power delegated specially or implied from the wordings of the statute is oft coupled with responsibility and duty. 14.6. The significant words employed in Section 43(2) of the OVAT Act are "he may direct the dealer to pay, by way of penalty". The language itself gives clear indication of application of discretion. Discretion, as it appears from generic sense, may be unrestricted, but in its application it demands certain rule of law to be followed and reposes conduct and application of mind, testing whether the delegates of it acted rationally, fairly without fear and favour taking all relevant fact and material considerations. Discretion conferred, if unqualified and untrammelled, it has to be exercised sparingly with abundant caution when facts and circumstances warrant. Absolute discretion of unbridled and unlimited discretion may create restraint in enforcing law. In its proper perspective discretion which is demonstrably groundless or exercised in ignorance or at random is not in the eye of law "discretion", but mere caprice. The Court, when feels the authority has exercised the power of discretion in capricious and arbitrary manner and decided the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise of discretionary power involves two elements- (i) objective, and (ii) subjective; and existence of the exercise of an objective element is a condition precedent for exercise of the subjective element. 14.10. Such being conceptual understanding of the term "discretion" based on well-settled dicta of different Courts and its application to fact-situation of given case, considering the present case in the said perspective, it seems that the learned Odisha Sales Tribunal, while considering certain allegations out of eight categories as reflected in the Assessment Order based on the contents of Fraud Case Report as unsustainable but for two, failed to apply its judicial discretion while imposing penalty by invoking powers under Section 43(2) of the OVAT Act. Discretion as applied by the Tribunal should have been supported by independent reason for exercise of said power. 14.11. "Reason", being heartbeat of every decision making process, it has been restated in Nareshbhai Bhagubhai Vrs. Union of India, (2019) 15 SCC 1 as follows: "In Kranti Associates (P) Ltd. Vrs. Masood Ahmed Khan, (2010) 9 SCC 496 this Court held that: "12. The necessity of giving reason by a bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person deciding is faithful to the doctrine of precedent or to principles of incrementalism. (l) Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or "rubber-stamp reasons" is not to be equated with a valid decision-making process. (m) It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision-making not only makes the Judges and decision-makers less prone to errors but also makes them subject to broader scrutiny. [See David Shapiro in "Defence of Judicial Candor", (1987) 100 Harvard Law Review 731-37]. (n) Since the requirement to record reasons emanates from the broad doctrine of fairness in decision-making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See Ruiz Torija Vrs. Spain [Ruiz Torija Vrs. Spain, (1994) 19 EHRR 553], EHRR, at p. 562 para 29 and Anya Vrs. University of Oxford [Anya v. University of Oxford, 2001 EWCA Civ 405 (CA)], wherein the Court referred to Article 6 of the European Convention of Human Rights which requires, 'adequate and intelligent reasons must be given for judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in State Bank of India Vrs. Ajay Kumar Sood, 2022 SCC OnLine SC 1067 that individual judges can indeed have different ways of writing judgments and continue to have variations in their styles of expression. The expression of a judge is an unfolding of the recesses of the mind. However, while recesses of the mind may be inscrutable, the reasoning in judgment cannot be. While judges may have their own style of judgment writing, they must ensure lucidity in writing across these styles. 14.14. Looking at the impugned Order in such perspective, it can be safely said that the learned Tribunal has missed to ascribe reason for the conclusion as to why it has chosen to exercise power under subsection (2) of Section 43 of the OVAT Act for imposing penalty equal to the amount of tax determined under Section 43(1). 15. Glance at provisions of sub-section (1) and sub-section (2) of Section 43 of the OVAT Act indicate that both are distinct powers for exercise involving independent considerations. While sub-section (1) is relating to making assessment to the best of judgment of the Assessing Authority under certain contingencies specified therein, sub-section (2) empowers the said authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 13.07.2022, wherein while considering pari materia provision contained in Section 10(2) of the Odisha Entry Tax Act, 1999 vis-à-vis Section 43(2) of the OVAT Act, 2004, following interpretation in National Aluminium Company Limited, 2021 (I) OLR 828, this Court stated 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 subsection (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'. ***" 16. Applying the above ratio to the present context, the essential component of Section 43(2) of the OVAT Act for exercising power to impose penalty, i.e., satisfaction of the Assessing Officer that the escapement of tax was without reasonable cause, is conspicuously absent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision in a statute is clear, it is impermissible to vary the language unless the plain and unambiguous language leads to an absurd result. The language of Section 43(2) in unequivocal terms spells out that satisfaction 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. 18.2. 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. ***" 18.3. Since penalty is a statutory liability and is substantive in nature, the provisions f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 Corporation Vrs. CIT, (1999) 4 SCC 197; State of Andhra Pradesh Vrs. Gouri Shankar Modern Rice Mill, (2006) 147 STC 370 (AP). 19. 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. It has been laid down in the said reported case 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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her a penalty should be imposed and if it decides to impose a penalty the extent of the penalty liable to be imposed has been fixed in the statutory provision under Section 43(2) of the OVAT Act. Sri Rudra Prasad Kar, learned counsel for the petitioner laid stress upon the fact that the learned Tribunal accepted the explanation proffered by the petitioner with respect to 29 written pages contained in small note book which related to transactions procured through brokers and held that the allegation in the Fraud Case Report is not established. Nonetheless, the learned Tribunal supported the concurrent finding of the authorities below in upholding suppression established in respect of similar transactions which formed part of slip Nos.1 to 89. In the former case the learned Tribunal observed that the allegation is shrouded with doubt. Agreeing with the contention of the learned counsel for the petitioner, there is no warrant for imposition of penalty under Section 43(2) of the OVAT Act. DECISION AND CONCLUSION: 20. For the discussions made above and the reasons stated supra, since this Court held that there is little scope in interfering with the factual adjudication made by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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