2025 (5) TMI 1359 - HC - VAT / Sales Tax

Tax Authorities Overstepped Jurisdiction in VAT Revision Petitions, Court Invalidates Orders and Protects Taxpayer's Appellate Rights Under Section 77

M/s. Toyo Engineering India Limited Versus Commissioner of Sales Tax, Orissa, Cuttack and others

The HC examined revision petitions under the Odisha VAT Act, finding tax authorities lacked jurisdiction to entertain revisions against rectification ... Seeking rectification of error in the assessment order - mistakenly availed revision remedy instead of the appellate remedy under Section 77 of the OVAT Act - preferred due to inadvertence and on account of wrong advice - mistake of counsel - petition filled under Section 81 of the OVAT Act - Jurisdiction to entertain petitions under Section 79(2) - HELD THAT:- Faced with such situation, this Court deems it appropriate to hold that order dated 07.03.2019 passed by the Additional Commissioner of Sales Tax, Territorial Range, Cuttack-II, Cuttack and order dated 11.12.2014 passed by the Commissioner of Sales Tax, Odisha, Cuttack are nullity, inoperative and ineffective inasmuch as the said orders are passed without jurisdiction and authority under the statute. Therefore, this Court quashes the orders dated 07.03.2019 and 11.12.2014. Considering the nature of transactions reflected in the assessment order dated 16.01.2017 passed under Section 42 of the OVAT Act and having regard to high stake demand of tax with imposition of penalty, the petitioner is entitled to avail opportunity to ventilate its grievance before the forum provided under the OVAT Act. Therefore, liberty is reserved to the petitioner to avail appropriate alternative remedy as available under the OVAT Act, if it is so advised. Thus, the writ petition stands disposed of. 1. ISSUES PRESENTED and CONSIDERED- Whether the revision petitions preferred under Section 79(2) of the Odisha Value Added Tax Act, 2004 ('OVAT Act') against the order of rectification passed under Section 81 of the OVAT Act were maintainable and within the jurisdiction of the Additional Commissioner of Sales Tax and the Commissioner of Sales Tax.- Whether the petitioner, having mistakenly availed revision remedy instead of the appellate remedy under Section 77 of the OVAT Act against the rectification order, can be granted indulgence by the Court to pursue the correct remedy.- The effect of orders passed by the tax authorities without jurisdiction and the appropriate relief or remedy available to the petitioner in such circumstances.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Jurisdiction to entertain revision petitions under Section 79(2) against an order of rectification passed under Section 81 of the OVAT ActRelevant legal framework and precedents: The OVAT Act provides a structured mechanism for assessment, rectification, revision, and appeal. Section 42 empowers assessment of tax liability. Section 81 allows rectification of errors in assessment orders. Section 79(2) confers power to the Commissioner or Additional Commissioner to entertain revision petitions against certain orders, but the scope of such revision is circumscribed by the nature of the impugned order. Section 77 provides the appellate remedy against assessment orders and orders relating thereto.Court's interpretation and reasoning: The Court noted that the rectification order under Section 81 is integrally connected to the assessment order and forms part of it. The authorities under the OVAT Act, namely the Additional Commissioner and Commissioner, do not have jurisdiction to entertain revision petitions under Section 79(2) against rectification orders. This is because the statutory scheme envisages that grievances against rectification orders should be pursued by appeal under Section 77.Key evidence and findings: The petitioner had filed revision petitions under Section 79(2) against the order of rectification dated 05.05.2018, which were dismissed by the Additional Commissioner and Commissioner respectively. Both parties conceded that such revision petitions were not maintainable and were entertained due to inadvertence and wrong advice of counsel.Application of law to facts: The Court held that the orders passed by the Additional Commissioner and Commissioner on the revision petitions were without jurisdiction and authority under the statute, rendering them null and void.Treatment of competing arguments: While the petitioner sought indulgence on account of mistake of counsel, the Revenue opposed the grant of any relief on the ground that the petitioner had chosen an improper remedy and should not benefit from such mistake, especially after a considerable lapse of time.Conclusions: The Court concluded that the revision petitions under Section 79(2) against the rectification order were not maintainable and the orders passed thereon were nullities.Issue 2: Grant of indulgence to the petitioner to pursue the correct remedy despite prior mistake in preferring revision petitionsRelevant legal framework and precedents: The principle that a litigant should not suffer for mistake of counsel is well recognized in law, subject to the facts and circumstances of each case. The OVAT Act provides for an appellate remedy under Section 77 against assessment orders and related rectification orders.Court's interpretation and reasoning: The Court acknowledged the petitioner's inadvertence and wrong advice of counsel in preferring revision petitions instead of appeals. Given the high stake demand of tax and penalty involved in the assessment order dated 16.01.2017, the Court deemed it appropriate to allow the petitioner an opportunity to ventilate grievances before the proper forum.Key evidence and findings: The assessment order involved a tax period spanning five years and included imposition of penalty, indicating significant financial consequences for the petitioner.Application of law to facts: The Court exercised its discretion under Articles 226 and 227 of the Constitution of India to quash the invalid revision orders and grant liberty to the petitioner to avail the appellate remedy under Section 77 of the OVAT Act.Treatment of competing arguments: The Court balanced the Revenue's argument against allowing relief on account of delay and procedural irregularity with the petitioner's right to access the correct statutory remedy and the interest of justice.Conclusions: The Court held that the petitioner is entitled to avail the appropriate alternative remedy under the OVAT Act and reserved liberty accordingly.3. SIGNIFICANT HOLDINGS- 'The Additional Commissioner of Sales Tax, Territorial Range, Cuttack-II, Cuttack and the Commissioner of Sales Tax, Odisha, Cuttack have no jurisdiction to entertain petitions under Section 79(2) of the OVAT Act against an order of rectification passed invoking power under Section 81 of the said Act, inasmuch as the rectification relates to the assessment order.'- 'Order dated 07.03.2019 passed by the Additional Commissioner of Sales Tax, Territorial Range, Cuttack-II, Cuttack and order dated 11.12.2014 passed by the Commissioner of Sales Tax, Odisha, Cuttack are nullity, inoperative and ineffective inasmuch as the said orders are passed without jurisdiction and authority under the statute.'- 'Considering the nature of transactions reflected in the assessment order dated 16.01.2017 passed under Section 42 of the OVAT Act and having regard to high stake demand of tax with imposition of penalty, the petitioner is entitled to avail opportunity to ventilate its grievance before the forum provided under the OVAT Act.'- The Court quashed the orders passed without jurisdiction and granted liberty to the petitioner to avail the appellate remedy under Section 77 of the OVAT Act.