TaxTMI 
TaxTMI 
2023 (9) TMI 1742
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....n the revision petition filed under Section 80: "I. Whether the constitution of Audit Team under Rule 43 of the OVAT Rules read with Section 41 of the OVAT Act, in absence of Assistant Commissioner, the Audit Visit Report out of such Audit Team and the consequential demand thereof is proper. correct and survive in the eye of the law, when the constitution of Audit Team is invalid one? II. Whether the Sales Tax Officer as reporting official and who prepares the Audit Visit Report, can approve his own report as the Head of the Audit Team and became a judge of his own cause? III. Whether, the goods under question i.e. plates, discs, angles, rings, washers, wire rods of iron and steel shall be classifiable under Entry Sl.No.68 of Part-II of Schedule-B, subject to VAT @ 4% or classifiable under the residuary part i.e. Part-III of Schedule-B and subject to VAT @ 12.5 ? IV. Whether, credit notes raised in the OVAT regime (01.04.2005 to 30.11.2006) for the sales effected under OST regime (01.04.2003 to 31.03.2205), due to return of goods by purchasing dealers, shall be allowed as deduction under OVAT regime? V. Whether the appellant being a Publ....
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....cted on the ground that they are treated not to fall within the meaning of "capital goods" in view of Section 2(8) read with Schedule-D of the OVAT Act and accordingly, such turnover was levied with tax @ 12.5% as per Part-III of Schedule-B classifying the goods as "machinery spares". The Assessing Authority raised the demand to the tune of Rs.59,23,943.59 comprising tax of Rs.19,41,405.43, interest Rs.99,727.00 under Section 34(1) for late payment of tax and Penalty of Rs.38,82,810.00 under Section 42(5). 2.5. In the appeal under Section 77 of the OVAT Act preferred by the company, the Additional Commissioner of Sales Tax, North Zone, Cuttack ("Appellate Authority", for convenience) though did not interfere with the aspect of classification of commodity and with respect to imposition of penalty under Section 42(5), held that the imposition of interest @ 2% was not in conformity with provisions of the statute and recomputed quantum of interest. 2.6. Aggrieved, the petitioner carried the matter before the the Odisha Sales Tax Tribunal, Cuttack, in Second Appeal bearing No.254 (VAT) of 2010-11, which came to be disposed of on 01.11.2022 with certain modifications in the first a....
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....to be served on him. Accordingly matter was posted today for hearing of the matter. 3.2. Sri Chittaranjan Das, learned Advocate for the petitioner at the outset with his usual humility submitted that question of law No.(I) as posed herein above is squarely covered by the interpretation put forth by a coordinate Bench of this Court in the case of State of Odisha Vrs. Daehsan Trading (India) Ltd., STREV No.117 of 2013, vide Order dated 13th July, 2022. He has, hence, urged that in such an eventuality, other questions of law need not be answered, as the entire proceeding for assessment under Section 42 of the OVAT Act gets vitiated. 3.3. On the consent of both the sides, the matter is taken up for final hearing. 3.4. This Court heard Sri Chittaranjan Das, learned counsel appearing for the petitioner-BEML and Sri Sunil Mishra, learned Standing Counsel (Commercial Tax and Goods and Services Tax Organisation) for the opposite party. ARGUMENTS: 4. Sri Chittaranjan Das, learned Advocate for the petitioner having taken this Court to the provisions contained in Rule 43 of the Odisha Value Added Tax Rules, 2005 (referred to as "OVAT Rules"), as it existed prior to substitution ....
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.... the basis of invalid Audit Visit Report, assessment proceeding as undertaken under Section 42 cannot withstand judicial scrutiny. 4.4. Under Section 42 of the OVAT Act, audit assessment has to be completed on the basis of the materials available in the Audit Visit Report. There was no scope for the Assessing Authority to utilize any material other than the materials available in the audit report while making the audit assessment. (See Bhusan Power & Steel Ltd. Vrs. State of Orissa, (2012) 47 VST 466 (Orissa). Therefore, it is urged that when the Audit Visit Report submitted by a team not duly constituted as required under Rule 43 of the OVAT Rules is itself incompetent, the Assessment Order based on such invalid Audit Visit Report cannot be held to be tenable in law. 5. Sri Sunil Mishra, learned Standing Counsel appearing for the opposite party with his vehemence contended that the Audit Visit Report in Form VAT-303 as submitted by the Sales Tax Officer as Head of the Audit Team being outcome of threadbare examination of books of account with reference to claims made in the returns furnished by the petitioner, subject matter of which got culminated in finding of fact in the ....
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....ax audit on random basis or on the basis of risk analysis or on the basis of any other objective criteria, at such intervals or in such audit cycle, as may be prescribed. (2) After identification of individual dealers or class of dealers for tax audit under sub-section (1), the Commissioner shall direct that tax audit in respect of such individual dealers or class of dealers be conducted in accordance with the audit programme approved by him : Provided that the Commissioner may direct tax audit in respect of any individual dealer or class of dealers on out of turn basis or for more than once in an audit cycle to prevent evasion of tax and ensure proper tax compliance. (3) Tax audit shall ordinarily be conducted in the prescribed manner in the business premises or office or godown or warehouse or any other place, where the business is normally carried on by the dealer or stock in trade or books of account of the business are kept or lodged temporarily or otherwise. (4) After completion of tax audit of any dealer under sub-section (3), the officer authorised to conduct such audit shall, within seven days from the date of completion of the audit, su....
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....nd appeal before the learned Odisha Sales Tax Tribunal (vide Annexure-4), that "the Audit Visit Report submitted in VAT-303 is not maintainable for initiating assessment proceedings being inherently violative of the clear directives of the law" and explained such a stand (as already extracted in the foregoing paragraphs), the learned Odisha Sales Tax Tribunal has ignored to deal with the same. 7.2. Under Section 80 of the OVAT Act, this Court is vested with the power to adjudicate any question of law arising out of order of the Tribunal. As the question of law was raised before the Odisha Sales Tax Tribunal, but it failed to decide the same, question of law arises for this Court to deal with. In Commissioner of Income Tax Vrs. Scindia Steam Navigation Co. Ltd., AIR 1961 SC 1633 = (1961) 42 ITR 589 (SC) = (1962) 1 SCR 788, the principles propounded by the Constitution Bench of the Hon'ble Supreme Court of India are as follows: "39. The result of the above discussion may thus be summed up: (1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order. (2) When a question of law is raised before the ....
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....such further enquiry as may be directed." 7.5. Sri Chittaranjan Das, learned Advocate for the petitioner on specific query by the Bench during the course of hearing asserted that he having appeared before the learned Tribunal in connection with hearing of second appeal has raised the specific plea taken. He has submitted that the tax audit under Section 41 of the OVAT Act being conducted prior to substitution of Rule 43 by virtue of the Odisha Value Added Tax (Amendment) Rules, 2009, the constitution of Audit Team was not in conformity with the provisions of the statute. Such a fact is apparent from the order of the Appellate Authority, who had interpreted said provision erroneously and repelled the contention of the counsel for the dealer. The present petitioner reiterated the same stand before the Tribunal vide ground No.3 to the Second Appeal which has not been considered. To fortify his ground, he placed reliance on the Order dated 13.07.2022 of this Court in the case of State of Odisha Vrs. Daehsan Trading (India) Pvt. Ltd., STREV No.117 of 2013. This Court, considering that ground taken, but not dealt with by the Tribunal, would have remanded the matter to the Odisha Sales....
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.... work adversely to the assessee and pass an order which makes his position worse than it was under the order appealed against. It may be stated for benefit that though the Appellate Authority can consider the issues allied to the main issue raised in the appeal, the appellate authority cannot consider an issue which is totally unconnected to the issue raised in the appeal. 7.8. In the instant case, the revision-petitioner has categorically assailed the competence of the Assessing Authority to proceed with the assessment under Section 42 of the OVAT Act when the Audit Visit Report in Form VAT-303 was submitted by the Sales Tax Officer as Head of the Audit Team inasmuch as the constitution of Audit Team is not in consonance with the manner prescribed under Rule 43 of the OVAT Act. Therefore, this Court is inclined to address the question of law No.(I) as posed by the petitioner. 8. Looking at the grounds of appeal before the Appellate Authority it is transpired that the petitioner-dealer has taken a specific stand as to maintainability of assessment proceeding questioning the framing of Audit Visit Report by an audit team incompetent to submit. Dealing with such a stance, the A....
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....s. Kamal Sharma, (2004) 2 SCC 759; Indian Bank's Association Vrs. Devkala Consultancy Service, AIR 2004 SC 2615]." 8.3. Said principle has also been repeated many times in taxation matters by this Court; namely, Bhusan Power & Steel Ltd. Vrs. State of Odisha, (2012) 47 VST 466 (Ori) = 2012 (Supp.-I) OLR 564; Patitapabana Bastralaya Vrs. Sales Tax Officer, (2015) 79 VST 425 (Ori) = 2015 (I) OLR 183; and Balaji Tobacco Store Vrs. Sales Tax Officer, Cuttack-I East Circle, Cuttack, 2015 (I) OLR 880 = (2015) 81 VST 170 (Ori) = 2015 (I) ILR-CUT 1079 = 2015 SCC OnLine Ori 85. 9. Rule 43 of the OVAT Rules prescribes the constitution of "audit team" which is required to be comprised of "one or more Assistant Commissioner, Sales Tax Officer and Assistant Sales Tax Officer". The learned Standing Counsel for the Commercial Tax and Goods and Services Tax Organisation suggested that the word "may" used in Rule 43 being directory, it is not necessary for every Audit Team to be Headed by Assistant Commissioner. If such construction is accepted, then the conjunction "and" used in the expression "one or more Assistant Commissioner, Sales Tax Officer and Assistant Sales Tax Officer" shall be re....
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....ely joins together two sentences and sometimes word 'and' is disjunctive. No doubt, at times to give effect to clear legislative intent gathered from the context, 'and' may be read as 'or' in place of conjunctive or vice versa, but if such reading of 'and' as 'or' produces grammatical distortion; absurd results and makes no sense of the portion following 'and', 'or' cannot be read in place of 'and'. [Ajay Construction Vrs. ACTO, (2006) 147 STC 396 (MP)]. 9.4. The word "or" is normally disjunctive and "and" is normally conjunctive (Union of India Vrs. Kamlabhai Harjiwandas Parekh, (1968) 1 SCR 463). However, there may be circumstances where these words are to be read as vice versa to give effect to manifest intention of the Legislature as disclosed from the context. Of course, these two words normally "or" and "and" are to be given their literal meaning, unless some other part of same statute or the clear intention of it requires that to be done. However, wherever use of such a word, viz., "and"/"or" produces unintelligible or absurd results, the Court has power to read the word "or" as "and" and vice versa to give effect to the intention of the Legislature which is otherwise qui....
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....stant Commissioner of Commercial Taxes (Administration) and Assistant Commissioner of Commercial Taxes (VAT) are re-designated as Deputy Commissioner of Commercial Taxes; and all the posts of Commercial Tax Officer in O.F.S.-I (J.B.) are re-designated as Assistant Commissioner of Commercial Taxes. By the Resolution of Finance Department bearing No. CTD-30/2008- 37805/F., dated the 8th August, 2008, inter alia 12 (twelve) posts of Assistant Commissioner of Commercial Taxes in O.F.S.-I (SB) grade in charge of 12 (twelve) Territorial Ranges, 3 (three) posts of Assistant Commissioners of Commercial Taxes, O.F.S.-I (SB) grade in the office of Commissioner of Commercial Taxes, Odisha, Cuttack namely Assistant Commissioner of Commercial Taxes (Law), Assistant Commissioner of Commercial Taxes (Administration) & Assistant Commissioner of Commercial Taxes (VAT) are upgraded to (O.F.S. Super Time) grade and re-designated as Joint Commissioner of Commercial Taxes; 13 (thirteen) posts of Additional Commercial Tax Officer in O.F.S.-II are upgraded to Commercial Tax Officer, O.F.S.-I (JB) exclusively for VAT Audit in the Territorial Ranges (except Cuttack- II Range, Puri Range and Sambalpur Range....
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....ses 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 STO, 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. *** 49. In the fact situation, completion of audit assessment on the basis of AVR which has been submitted in violation of statutory provisions of Section 41(4) of the OVAT Act read with Rule 45(3) of the OVAT Rules and upon issuance of notice in Form VAT-306 in violation of Section 42(2) is not sustainable in law. Accordingly, we set aside the impugned assessment order dated October 20, 2008 and the consequent demand notice." 11.2. Taking note of definitions of the terms "Assessment" a....
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....ations. A similar view had been reiterated by the Apex Court in Ambika Quarry Works etc. Vrs. State of Gujarat and others, (1987) 1 SCR 562; Purushottam Vrs. Chairman, Maharashtra State Electricity Board and another, (1999) 6 SCC 49 and Sultan Sadik Vrs. Sanjay Raj Subba and others, AIR 2004 SC 1377. 9. Therefore, it is evident that when the action of the instrumentalities of the State is not as per the Rules and Regulations and supported by the statute, the Court must exercise its jurisdiction to declare such an act illegal and invalid. It becomes the duty of the Court to ensure compliance of such Rules and Regulations for the reason that they are binding on the authorities. Any order or action done by the authority in violation of the statutory provisions is constitutionally illegal and this cannot claim any sanctity in law. There can be no obligation on the part of the Court to sanctify such illegal act." 11.5. When it is observed that the Audit Visit Report has been submitted by the Sales Tax Officer in the capacity of Head of Audit Team, who is part of the team which is not duly constituted in terms of Rule 43 of the OVAT Rules, the Assessment under Section 42 of t....