2021 (9) TMI 945 - HC - VAT and Sales Tax

Sales Tax Officer's Actions Ruled Unlawful Under OVAT Act; Refund Ordered

Banamali Prusty Versus The Commissioner of Sales Tax, Odisha, Cuttack and others

Banamali Prusty Versus The Commissioner of Sales Tax, Odisha, Cuttack and others - TMI Issues involved:Violation of Section 73(10) of the OVAT Act - Collection of tax and penalty upfront without assessment order.Analysis:The petitioner, a dealer registered under the Orissa Value Added Tax Act, 2004 (OVAT Act), questioned the Sales Tax Officer's (STO) authority to collect tax and penalty upfront during a surprise inspection without passing an assessment order. The petitioner, engaged in the jewelry business, alleged coercion by the inspecting party, leading to the payment of Rs. 3,29,787 as penalty without proper documentation. Subsequently, the petitioner's revision petition was rejected, prompting the filing of the present petition seeking a refund of the amount collected illegally.In the legal proceedings, the petitioner's counsel cited a previous judgment where upfront collection without a show cause notice (SCN) was deemed illegal under Section 73(10) of the OVAT Act, leading to a refund. The Revenue Department's counsel argued that the petitioner's admission of facts during the inspection negated the need for an SCN or assessment order, referencing a Supreme Court judgment. However, the court found a clear violation of Section 73(10) of the OVAT Act, emphasizing the necessity of giving the dealer an opportunity to be heard before imposing penalties.The court distinguished the Revenue Department's reliance on a different provision from the Orissa Sales Tax Act, highlighting the mandatory nature of issuing an SCN under the OVAT Act before imposing penalties. The court concluded that collecting tax and penalty upfront, as done in this case, was unlawful, ordering the refund of the amount with applicable interest. The judgment clarified that the department could initiate fresh proceedings in compliance with the law. The writ petition was allowed without costs, and the revision petition record was returned to the Revenue Department.This detailed analysis of the judgment showcases the court's interpretation of the legal provisions, application of precedents, and the decision's implications on the petitioner's case regarding the collection of tax and penalty without due process.