2022 (11) TMI 998 - HC - VAT and Sales Tax

Reassessment order overturned due to lack of statutory authority and independent opinion

The court set aside the reassessment order dated 28.01.2014 and the subsequent order dated 29.07.2015, concluding that the reassessment was initiated ... Availability of alternative remedy - Review of own order in the guise of reassessment - change of opinion - exemption of penultimate sale in course of export under Section 5(3) of the CST Act - appreciation of Certificate of Export in Form H required to be furnished under Rule 12(10) of the Central Sales Tax (Registration and Turnover) Rules, 1957 HELD THAT:- It is ex facie manifest that the Sales Tax Officer has not formed any “opinion” as required in Rule 12(4). Rather the context is indicative of fact that the Assessing Authority sought to review the Order dated 29.07.2011 passed under Rule 12(3) in the garb of exercise of power under Rule 12(4) of the CST(O) Rules - Neither any reason is assigned prior to issue of said notice contemplating initiation of proceeding under Rule 12(4) of the CST(O) Rules nor the record of proceeding indicated independent application of mind. As is manifest from bare reading of provision as it existed in Rule 12(4) of the CST(O) Rules, 1957, at the relevant point of time that the Assessing Authority is empowered to serve notice in Form IVA on the dealer to proceed with the reassessment, if “on the basis of any information in his possession” he is “of the opinion” that the whole or any part of the turnover of the dealer in respect of any period(s) has escaped assessment, or has been under-assessed, or has been assessed at a rate lower than the rate at which it is assessable or that the dealer has been allowed 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 - In the instant case, scrutiny of Order Sheet at Annexure-7 shows that vide Order dated 24.08.2013 the Assessing Authority merely directed for issue of notice in Form IVA without forming any “opinion” much less ascribing “reason”. This is indicative of non-application of mind and mechanical application of mind. In absence of power of review conferred by or under the statute, in the garb of reassessment, the concluded assessment could not be reopened by the Assessing Authority. As the material available on record does not show independent application of mind of the Assessing Authority having regard to the material in his possession, if any, merely based on objection of Auditor General, Odisha issue of notice in Form IVA in exercise of power under Rule 12(4) of the CST(O) Rules for reopening Audit Assessment concluded under Rule 12(3) on examination of books of account, etc. is impermissible in law and such an action is without jurisdiction. Availability of alternative remedy - HELD THAT:- Conspectus of enunciation of law on the subject as discussed in the preceding paragraphs applied to the fact-situation of the instant case vis-à-vis Order dated 24.08.2013 as maintained in the Order Sheet vide Annexure-7 drives this Court to safely conclude that the initiation of proceeding for reassessment was not in consonance with the statutory requirement - there is no quarrel over the proposition that availability of alternative remedy under the statute is not absolute bar for exercise of power under Article 226 of the Constitution of India, moreso when the facts are not disputed and in identical fact-situation this Court earlier accepted the writ petition. The Hon’ble Supreme Court of India in the case of DR. SMT. KUNTESH GUPTA VERSUS MANAGEMENT OF HINDU KANYA MAHAVIDYALAYA, SITAPUR (UP) &ORS. [1987 (9) TMI 302 - SUPREME COURT] held that “review” by quasi judicial authority in absence of statutory prescription being without jurisdiction, exercise of power under Article 226 of the Constitution of India is permissible - This Court has already found that the Assessing Authority has reviewed order of assessment dated 29.11.2011 (Annexure-4) passed under Rule 12(3) of the CST(O) Rules and passed order of reassessment dated 28.01.2014 under Rule 12(4) ibid. reconsidering same transaction. The Assessment Order dated 28.01.2014 passed under Rule 12(4) of the Central Sales Tax (Odisha) Rules, 1957, by the Sales Tax Officer, Barbil Circle, Barbil pertaining to tax periods from 01.07.2007 to 31.03.2010 is set aside - Petition allowed. Issues Involved:1. Legality of invoking reassessment under Rule 12(4) of the CST(O) Rules based on an audit objection.2. Validity of the reassessment order dated 28.01.2014.3. Competence of the Sales Tax Officer to review the Audit Assessment under Rule 12(3).4. Application of mind by the Sales Tax Officer in issuing reassessment notice.5. Availability of alternative remedy and exercise of writ jurisdiction.Detailed Analysis:1. Legality of Invoking Reassessment Under Rule 12(4) of the CST(O) Rules Based on an Audit Objection:The petitioner challenged the reassessment initiated under Rule 12(4) of the CST(O) Rules, arguing that it was based solely on an audit objection without the Sales Tax Officer forming an independent opinion. The court noted that Rule 12(4) requires the assessing authority to form an 'opinion' based on information in its possession. The court found that the Sales Tax Officer had not formed any opinion independently but acted on the audit objection, which is not permissible as per the legal precedents. The court referenced several cases, including Indure Limited v. Commissioner of Sales Tax and State of U.P. v. Maharaja Dharmander Prasad Singh, to emphasize that reassessment cannot be initiated merely on audit objections without independent application of mind.2. Validity of the Reassessment Order Dated 28.01.2014:The reassessment order dated 28.01.2014 was scrutinized, and it was found that the Sales Tax Officer had not provided reasons for reopening the assessment. The court observed that the reassessment was essentially a review of the earlier audit assessment, which is not allowed unless explicitly provided by the statute. The court cited the Supreme Court's decision in State of Uttar Pradesh v. Aryaverth Chawl Udyog, which held that reassessment based on a mere change of opinion is not valid. The court concluded that the reassessment order was invalid as it was based on the same material that had already been considered during the original assessment.3. Competence of the Sales Tax Officer to Review the Audit Assessment Under Rule 12(3):The petitioner argued that the Sales Tax Officer had no authority to review the audit assessment under Rule 12(3) as the statute does not confer such power. The court agreed, stating that the reassessment was a review in disguise, which is not permissible without statutory provision. The court referred to the case of Dr. (Smt.) Kuntesh Gupta v. Management of Hindu Kanya Mahavidyalaya, where it was held that a quasi-judicial authority cannot review its own order unless expressly provided by the statute.4. Application of Mind by the Sales Tax Officer in Issuing Reassessment Notice:The court examined the order sheet and found that the Sales Tax Officer had issued the reassessment notice mechanically without forming any opinion or assigning reasons. The court emphasized that the formation of an opinion is a prerequisite for issuing a reassessment notice. The court cited the case of Essel Mining & Industries Ltd. v. State of Odisha, which held that the absence of reasons in the order indicates non-application of mind, rendering the reassessment notice invalid.5. Availability of Alternative Remedy and Exercise of Writ Jurisdiction:The counsel for the Revenue argued that the petitioner should have availed the alternative remedy of appeal. However, the court noted that the writ petition was maintainable as the reassessment was initiated without jurisdiction and in violation of statutory provisions. The court referenced the Supreme Court's decision in Commissioner of Income Tax v. Chhabil Dass Agarwal, which allows for writ jurisdiction in cases where the statutory authority has not acted in accordance with the law or has violated principles of natural justice.Conclusion:The court set aside the reassessment order dated 28.01.2014 and the subsequent order dated 29.07.2015, which rejected the petitioner's request for rectification. The court allowed the writ petition, concluding that the reassessment was initiated without proper application of mind and in the absence of statutory authority to review the original audit assessment.