1989 (11) TMI 297 - HC - VAT and Sales Tax

Court quashes tax orders lacking jurisdiction, penalties unsustainable due to good faith conduct

Food Corporation of India Versus Sales Tax Officer, Bhubaneswar Circle, Bhubaneswar

Food Corporation of India Versus Sales Tax Officer, Bhubaneswar Circle, Bhubaneswar - [1990] 78 STC 58 (Ori) Issues Involved:1. Legality of the orders passed under section 13(4)(a) of the Orissa Sales Tax Act, 1947.2. Sustainability of penalties imposed under section 13(5) of the Orissa Sales Tax Act, 1947.3. Jurisdiction of the Commissioner to revise the Additional Commissioner's order.Issue-Wise Detailed Analysis:1. Legality of the Orders Passed Under Section 13(4)(a):The petitioner, a Government of India undertaking, filed returns for January to March 1973, paying tax at 3% instead of the 7% rate, claiming a rebate. The Sales Tax Officer initiated action under section 13(4)(a) of the Orissa Sales Tax Act, 1947, for the reduced tax payment. The petitioner argued that section 13(4)(a) was inapplicable as there was no admitted tax payable or due. The court analyzed sections 11 and 13 of the Act, concluding that section 13(4)(a) applies only when returns are furnished without showing full payment of tax admitted to be due. The court found that the Sales Tax Officer's orders were unauthorized since section 13(4)(a) did not involve any determination of tax payable by an assessee. This view was supported by a previous decision in Mahadev Ram Udmi Ram v. Sales Tax Officer. The court held that the orders purportedly passed under section 13(4)(a) were without jurisdiction.2. Sustainability of Penalties Imposed Under Section 13(5):The petitioner contended that it acted in good faith, believing it was entitled to a 4% rebate, paying tax at 3%. The court referred to the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, emphasizing that penalties should not be imposed unless the party acted deliberately in defiance of law or was guilty of contumacious conduct. The Assistant Commissioner had annulled the penalty under section 11(3), accepting the petitioner's contention that there was no default in paying the admitted tax. However, the Additional Commissioner upheld the penalty under section 13(5) without considering the petitioner's bona fides or the cancellation of the penalty under section 11(3). The court found this approach to be lackadaisical and showed non-application of mind, vitiating the order.3. Jurisdiction of the Commissioner to Revise the Additional Commissioner's Order:The Commissioner refused to revise the Additional Commissioner's order, citing a decision in Orient Paper Mills v. State of Orissa, which held that the Commissioner had no jurisdiction to revise an order passed by the Additional Commissioner. The court upheld this view, agreeing that the Commissioner was right in refusing to exercise revisional power over the Additional Commissioner's order.Conclusion:The court quashed the orders and demand notices as contained in the annexures, allowing the writ applications. It directed the parties to bear their respective costs, concluding that the orders under section 13(4)(a) were without jurisdiction and the penalties under section 13(5) were unsustainable due to the petitioner's bona fide conduct.