Assessment notices in Form E-24 invalid; taxpayers must rely on self-assessed returns; interest under Section 7(5) directed for withheld amounts

HC held that assessment notices in Form E-24 were not in conformity with statutory requirements and cannot be sustained; petitioners must determine their liability from their self-assessed returns rather than be remitted for fresh scrutiny after long delay. While interest under Section 7(5) is not payable where sufficient cause exists and the 1/3 deposit was treated as such, because petitioners ultimately failed before the Supreme Court the HC directed payment of interest as compensatory relief for the withheld 2/3rds from 2010 to 28.03.2017 and issued a writ of mandamus to that effect, disposing the petitions.

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Issues: (i) Whether notices in Form E-24 issued under Rule 10(6)(b) and the consequent revision order could be sustained where statutory scrutiny procedure under Section 7(10)-(11) was not followed; (ii) Whether interest under Section 7(5) of the Odisha Entry Tax Act, 1999 is chargeable on the balance entry tax withheld by dealers for the period 2010 to 2017 when interim orders of the Supreme Court treated partial deposits as "deposits" and litigation on exigibility was pending; (iii) Whether penalty is enforceable in respect of amounts withheld under the interim regime arising from paragraph 30 of Reliance Industries Ltd. (2008) 16 VST 85 (Ori).

Issue (i): Whether notices in Form E-24 and the revisional order based thereon were validly issued when the assessing authority did not follow statutory scrutiny and notice procedure under Section 7(10)-(11) and Rule 10.

Analysis: The Act mandates that each return be subject to scrutiny under Section 7(10) and that if mistakes are detected the assessing authority must serve notice under Section 7(11) in the prescribed form; Rule 10 prescribes the sequence and forms (E22/E23/E24) and the manner of imposing penalty. The Court applied Toyo Engineering and related precedents to the facts and found that the Assessing Authorities initiated demand by issuing Form E-24 without adhering to the statutory pre-conditions and sequence of notices and procedures.

Conclusion: The notice(s) in Form E-24 and the consequential revisional order are quashed; this conclusion is in favour of the Assessee.

Issue (ii): Whether interest under Section 7(5) is chargeable on the balance entry tax withheld between 2010 and 2017 where partial deposits were made pursuant to Supreme Court interim orders and the legal position on exigibility was uncertain.

Analysis: Section 7(5) penalises failure to pay the amount of "tax due as per the return" "without sufficient cause". The Court examined the interim orders of the Supreme Court (which treated certain deposits as "deposits" and not "tax"), the subsequent Nine-Judge pronouncement clarifying law, the Committee report and principles on "sufficient cause". Applying precedent on interest and restitution, and recognising the interim jurisprudential eclipse over paragraph 30 of Reliance, the Court concluded that the withholding of tax in the specified circumstances constituted "sufficient cause" and that the statutory condition for charging interest under Section 7(5) was not satisfied for the period in question.

Conclusion: Interest under Section 7(5) is not chargeable for the period 20102017 on amounts withheld under the interim regime; this conclusion is in favour of the Assessee.

Issue (iii): Whether penalty should be imposed for non-payment of amounts withheld under the interim orders and Committee recommendations.

Analysis: The constituted Committee recommended waiver of penalty for withheld amounts except in cases of suppression. The Court considered the Committee's recommendations, earlier interim directions, and the absence of findings of suppression; it also applied principles that subordinate authorities must follow higher court orders and that penalty cannot be mechanically imposed where sufficient cause is shown.

Conclusion: Penalty is not to be enforced in respect of amounts falling within paragraph 30 (as dealt with) except where suppression is established; this conclusion is in favour of the Assessee.

Final Conclusion: The writ petitions are partly allowed departmental notices in Form E-24 and the revisional order are quashed and penalties for the specified period are waived, while the petitioners are directed to determine and pay the outstanding self-assessed balance tax and to comply with the Court's directions regarding payment/instalments and interest as ordered by the Court to balance equitable rights.

Ratio Decidendi: Where interim judicial orders and genuine litigation uncertainty caused dealers to withhold part of self-assessed tax, such circumstances can constitute "sufficient cause" within Section 7(5) preventing levy of statutory interest for that period; procedural compliance with statutory scrutiny and notice requirements is a mandatory precondition to validly issue Form E-24 demands.

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