TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 372
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....t order dated October 20, 2008 for the assessment year 2005-06 and consequent demand notice(s) under the Orissa Value Added Tax Act, 2004. (v) Quash the impugned communication notice No. 2177 dated May 16, 2008 under the OVAT in form VAT 306 issued by the assessing authority and the enclosed audit visit report dated March 31, 2008." The petitioner's case in a nutshell is that it is a company incorporated and registered under the Companies Act, 1956, having its registered office at O. P. Jindal Marg, Hisar-125 005 (Haryana) and its unit within the State of Orissa at Kalinganagar Industrial Complex, Duburi, P.O. Danagadi, Dist : Jajpur, Odisha State. The petitioner is engaged in setting up of an integrated stainless steel plant as well as manufacture of ferro alloys. It is a registered dealer under the Odisha Value Added Tax Act, 2004 (for short, "the OVAT Act"). It is paying substantial amount of tax and is listed as a Large Tax Unit (LTU). The officers of the Investigation Wing of the Commercial Taxes Department visited the business premises of the petitioner on October 1, 2007 without disclosing their identity and authorization. On objection and protest, the petitioner was ....
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....eal is the first available opportunity to the petitioner to agitate against and raise any grievance against an impugned assessment order like in the present case wherein an audit assessment under section 42 of the OVAT Act has been done. A condition of deposit of admitted tax in full and twenty per centum of tax or interest or both, in dispute, at the threshold bereft of any relieving provision renders the provision as oppressive and onerous, unreasonable and unsustainable in law. Such situation militates against the very spirit and concept of the OVAT Act and defeats the very purpose of the statute. Such a provision especially in cases of unsustainable demands makes the provision unreasonable, illegal and ultra vires articles 14, 19, 21 and 265 of the Constitution of India. The workability of the statute is defeated and the entire appeal provision is rendered illusory and nugatory as the opposite parties artificially and on flimsy grounds inflate the assessed amount and thereby burden the assessee and realize twenty per cent of the inflated tax or interest or both through the provision of pre-deposit in appeal and the balance of tax, interest and penalty for conditional stay at th....
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.... take steps for making audit assessment. There exists no case for satisfaction of the mandate of rule 41(3) of the OVAT Rules and no case can possibly be made out for dispensing with prior notice of tax audit under section 42 of the OVAT Act read with rule 41 of the OVAT Rules. There exists no revenue risk either on the basis of objective analysis or on the basis of any intelligence report. The petitioner verily believed that no prior approval of the next higher authority has been taken in terms of rule 44(3) of the OVAT Rules. The condition precedent for acquisition of jurisdiction under rule 41 of the OVAT Rules does not exist and therefore, exercise of jurisdiction to dispense with the pre-requisite notice of audit visit is an arbitrary exercise of power and is grossly vitiated and fatally hit by inherent lack of jurisdiction in the hands of opposite party No. 6. The contents, findings and prejudicial material in the audit visit report and lack of any opportunity to the petitioner to contend, rebut and reply to the allegations in the said materials clearly violate the principles of natural justice and render the consequent prejudicial finding leading to the audit visit report an....
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.... section 42(6) of the OVAT Act, no extension of time for completion of assessment has been granted by the Commissioner. The audit visit dated October 1, 2007 was followed by a report dated March 31, 2008. The report reveals that the entire audit was for the period April, 2005 till March, 2006. The notice in form 306 enclosing the audit visit report is for the period April 1, 2005 to March 31, 2007, (i.e., 2005-06, 2006-07 and 2007-08) (up to September 30, 2007). The notice thus travels/transgresses beyond the period in the audit visit report and it is therefore, ab initio void and non est in the eye of law and without jurisdiction. This clearly demonstrates that the order has been antedated and the assessment order dated October 20, 2008 is fabricated document inasmuch as in the order dated October 20, 2008 the materials submitted on October 24, 2008 and November 15, 2008 are incorporated. The interpretation of the provisions relating to the input-tax credit and disallowance thereof are wholly misconceived and are based on an erroneous interpretation of law and therefore the same ought to be deleted. The impugned assessment order ignores the details submitted to opposite party No. ....
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.... Act, 2004 read with sub-rule (6) of rule 49 of the OVAT Rules, 2005 authorizing imposition of penalty equal to twice the amount of tax assessed under section 42(3) and (4) of the OVAT Act are arbitrary, unreasonable, oppressive and ultra vires the Constitution of India? (iii) Whether the authorized officer has not submitted audit visit report to the assessing authority within seven days from the date of audit as provided under section 41(4) of the OVAT Act and thereby the impugned audit report dated March 31, 2008 and audit assessment dated August 20, 2008 would be non est/unsustainable in the eye of law? (iv) Whether the audit visit report is vitiated on the ground that the same has been submitted by an officer who was neither a part of nor is the head of the team of audit? (v) Whether statutory period of 30 days allowed in section 42(2) of the OVAT Act, 2005 has not been extended to the petitioner in form VAT 306 and thereby the audit assessment proceedings are vitiated? (vi) Whether the Investigation Wing of the Commercial Taxes Department without disclosing their identity and authorization in their favour visited the business premises of the petitioner on October 1, 2007 a....
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....visit report and it also ignores the materials on record, therefore, the impugned order of assessment is liable to be quashed? (xvi) Whether in response to notice/direction given by the assessing officer, the petitioner appeared and complied with the direction of opposite party No. 6 and provided all materials/data for the purpose of assessment and therefore, in law the best judgment cannot be permissible? Many points have been urged on behalf of the petitioner and many decisions have also been cited in the written argument submitted on behalf of the petitioner. It is not necessary to burden this judgment by referring to all the decisions cited. Question No. (i) is with regard to requirement of pre-deposit of 20 per cent of tax or interest or both in dispute in addition to payment of admitted tax for entertaining the appeal. Section 77(4) of the OVAT Act provides that no appeal against any order shall be entertained by the appellate authority, unless it is accompanied by satisfactory proof of payment of admitted tax in full and twenty per centum of the tax or interest or both in dispute. According to Mr. Mahanti, learned senior advocate, this provision is very harsh. There is n....
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....r the OVAT Act is concerned. According to Mr. Kar, in view of the judgment of the honourable Supreme Court in the case of Smt. Har Devi Asnani [2011] 6 Supreme 596 that right of appeal or right of revision is not an absolute right and it is a statutory right which can be circumscribed by the conditions in the grant made by the statute. Therefore, precondition of depositing 20 per cent of tax or interest or both in dispute is constitutionally valid. Needless to say that appeal is a creation of the statute and it cannot be created by acquiescence of the parties or by order of court. Law is well-settled that right of appeal/revision cannot be absolute and the Legislature can put conditions for maintaining the same. In Vijay Prakash D. Mehta & Jawahar D. Mehta v. Collector of Customs (Preventive), Bombay [1989] 175 ITR 540 (SC); [1989] 72 STC 324 (SC); [1989] 66 Comp Cas 30 (SC); AIR 1988 SC 2010, the honourable Supreme Court held as under: "Right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudications. The right to appeal is a statutory right and it can be circumscribed b....
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....hat case. In view of the above, we are of the considered view that the provisions of section 77(4) of the OVAT Act requiring deposit of 20 per cent of the tax or interest or both in dispute as a precondition for entertaining an appeal against the order enumerated under section 77(1) of the OVAT Act does not make the right of appeal illusory and such a condition is within the legislative power of the State Legislature and cannot be held to be unreasonable and violative of article 14 of the Constitution. Question No. (ii) is with regard to imposition of penalty under section 42(5) which is equal to twice the amount of tax assessed under sub-section (3) or sub-section (4) of section 42 of the OVAT Act which according to the petitioner is arbitrary, unreasonable, oppressive and ultra vires the provisions of articles 14, 19(1)(g), 21 and 265 of the Constitution of India. Section 42 of the OVAT Act deals with "audit assessment". Section 42(5) provides that without prejudice to any penalty or interest that may have been levied under any provision of this Act, an amount equal to twice the amount of tax assessed under sub-section (3) or subsection (4) shall be imposed by way of penalty ....
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....ere provided under the Statute that is different from the nature of penalty envisaged under section 42(5) of the OVAT Act. Therefore, the question of double jeopardy does not arise. The matter may be looked into from different angle. Section 42 of the OVAT Act deals with "audit assessment". As stated above, imposition of penalty is dependent upon the quantum of tax assessed in audit assessment under section 42 of the OVAT Act. If such a penal provision is not provided then fraudulent dealers would seriously venture to evade tax and whenever they will be caught hold of they will simply pay the tax and escape. Therefore, the provision for imposing penalty twice the amount of tax assessed, under section 42 of the OVAT Act has been made so that a dealer-assessee would refrain himself from taking any step to avoid payment of legitimate tax. If, however, any dealer indulges himself in any fraudulent activities to evade tax, then in addition to tax assessed he would pay penalty which is twice the amount of tax assessed and therefore, it cannot be said that the provision in this regard is arbitrary and unreasonable. Against the assessment of tax and penalty there is a provision for appea....
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....mplied with. Therefore, the said audit visit report has no validity. It is unfortunate that while under OVAT Act section 41(4) provides for submission of audit visit report within seven days from the date of audit and audit assessment is to be completed within six months from the date of receipt of AVR by the assessing authority, the action of the authorised officer in submitting the AVR to the assessing authority after six months from the date of audit visit not only violates the statutory provisions contained in section 41(4) but also is against the scheme and spirit of audit visit and audit assessment provided under the OVAT Act. Question No. (iv) is whether the audit visit report is vitiated on the ground that the same has been submitted by an officer who was neither a part of nor is the head of the team of audit. Mr. Mahanti, learned senior advocate submitted that the audit visit report has been submitted by a person who was neither a part of nor is the head of the team of audit visit on October 1, 2007. The audit visit report has been submitted under the seal and signature of the Sales Tax Officer, Investigation Unit, Bhubaneswar as head of the audit team. But as a matter ....
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....at both the factory premises as well as the registered office premises of the company located at Jajpur and Bhubaneswar. While a team of officials led by ACST-Enforcement Range, Berhampur visited the factory premises, the registered office premises was visited by STO(I), Berhampur and ASTOs of Investigation Unit of Bhubaneswar under the supervision of the ACST, Enforcement Range, Balasore. Thus, the ACST, Enforcement Range, Berhampur was incharge of the audit team conducting audit in factory premises. But the audit visit report reveals that the same has been submitted by the S.T.O., Investigation Unit, Bhubaneswar as head of the audit team. Thus, the audit visit report has not been submitted by the officer in-charge of the audit team authorized to conduct the audit in the factory premises as required under section 41(4) of the OVAT Act read with rule 45(3) of the OVAT Rules. Therefore, the said report is vitiated in law. Further, irregularity noticed from the audit visit report is that while the registered office premises was visited by STO (I), Berhampur and ASTO's of Investigation Unit, Bhubaneswar under the supervision of ACST, Enforcement Range, Balasore, the said audit vi....