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IN THE HIGH COURT OF ORISSA
V. Gopala Gowda, B.N. Mahapatra, JJ.
M/S. TATA SPONGE IRON LTD. - APPELLANT
Versus
COMMISSIONER OF SALES TAX, ORISSA AND OTHERS - RESPONDENT
Writ Petition (C) Nos. 6701 and 6702 of 2011
Decided On : 06-09-2011
OVAT Act - Assessment Orders - Section 42
Fact of the Case:
The petitioner, a Public Limited Company, challenged the assessment orders passed under Section 42 of the Orissa Value Added Tax Act, 2004 (OVAT Act) for the periods 2006-2007 and 2007-2008. The petitioner contended that the assessment orders were passed without assigning any reason, by an authority not competent to assess, and in violation of the principles of natural justice. The petitioner also argued that the orders were time-barred and raised demands without valid reasons.
Finding of the Court:
The court found that the Joint Commissioner of Sales Tax, who approved the audit visit report, also passed the assessment orders, violating the principles of natural justice. The court held that the assessment orders were time-barred and remanded the matter for fresh assessment by a competent authority not connected with the tax audit of the petitioner.
Issues: Competency of the assessing authority, time-barred assessment, validity of demands based on suppression of sale
Ratio Decidendi: The court held that an officer involved in the audit process should not be the assessing officer to maintain transparency and avoid violation of natural justice. The court interpreted the limitation period to run from the date of receipt of the audit visit report by the dealer. The court also emphasized the need for a competent assessing authority not connected with the tax audit of the petitioner.
Final Decision: The assessment orders were set aside, and the matter was remanded for fresh assessment by a competent assessing authority not connected with the tax audit of the petitioner.
JUDGMENT :
B.N. Mahapatra, J. - In W.P.(C) No. 6701 of 2011 challenge has been made to the order of assessment dated 21.01.2011 (Annexure-1) passed u/s 42 of the Orissa Value Added Tax Act, 2004 (for short, "OVAT Act") by opposite party No. 2-Joint Commissioner of Sales Tax, Jajpur Range, Jajpur Road for the period from 01.04.2006 to 31.03.2007. In W.P.(C) No. 6702 of 2011 challenge has also been made to the order dated 21.01.2011 (Annexure-1) passed u/s 42 of the OVAT Act for the period 01.04.2007 to 31.03.2008 by the said opposite party No. 2.
2. Since the issues involved are identical in the aforesaid writ petitions, they are disposed of by this common judgment.
3. The Petitioner's case in a nutshell is that it is a Public Limited Company incorporated under the Companies Act, 1956 and carries on business in manufacturing and selling of sponge iron at Beleipada, Joda in the District of Keonjhar. It is registered as a dealer with opposite party No. 3-Sales Tax Officer, Barbil Circle, Barbil under the provisions of the OVAT Act, Orissa Entry Tax Act, 1999 (for short, OET Act) and Central Sales Tax Act, 1956 (for short, CST Act). On 05.11.2008, tax audit was conducted for the period 2007-08 and again on 16.05.2009 tax audit was conducted for the period 01.04.2006 to 31.03.2008. The audit visit report in Form-303 was prepared on 05.12.2009. Opposite party No. 2-Joint Commissioner of Sales Tax has approved the said audit visit report on 18.01.2010. Pursuant to the notice issued in Form VAT-306 for assessment of tax as a result of audit prescribed under Rule 49(1) of the Orissa Value Added Tax Rules, 2005 (for short, "OVAT Rules"), the Petitioner produced the relevant books of account as well as the documents before opposite party No. 2 and submitted its written note of submission. The assessment proceeding was concluded on 07.07.2010. The Petitioner received the assessment orders dated 21.01.2011 on 14.02.2011. Being dissatisfied with the said assessment orders, the Petitioner has filed the present writ petitions.
4. Mr. B.K. Mahanti, learned Senior Advocate appearing for the Petitioner submitted that the orders of assessment having been passed raising huge demands coupled with penalty without assigning any reason are liable to be annulled. It was vehemently argued that opposite party No. 1-Commissioner of Sales Tax, Orissa in exercise of powers conferred on him under Rule 4(7) of the OVAT Rules assigned the records of the Petitioner-dealer to the jurisdiction of Jajpur Range, the Larger Taxpayers' Unit (for short, 'LTU') constituted in the said Range vide Notification No. 14394-III(III) 32/2007-CT dated 05.09.2007. The impugned orders of assessment have been passed by opposite party No. 2-Joint Commissioner of Sales Tax, Jaipur Range, who is not competent to assess the Petitioner. The orders of assessment being passed by an authority who is not vested with authority and jurisdiction to assess, the same are liable to be quashed.
5. It is further submitted that the orders of assessment have been passed violating the principles of natural justice. A close glance at the audit visit report under Annexure-2 and notice in Form VAT-306 for audit assessment under Annexure-3 series would reveal that conspicuously the opposite party No. 2-Joint Commissioner of Sales Tax himself having approved the audit visit report on 18.01.2010 has proceeded to assess the Petitioner. It is a clear case of bias as opposite party No. 2 has acted both as the investigator and adjudicator. In support of his contention, Mr. Mahanti, learned Senior counsel relied upon a judgment of this Court in the case of National Trading Company v. Asst. Commissioner of Sales Tax, Cuttack 2001 (122) STC 212 and Falcon Marine Export Ltd. in W.P.(C) No. 91 of 2011.
6. It was further argued that the orders of assessment passed are time-barred having been passed beyond the prescribed time stipulated under Sub-section (6) of Section 42 as well as Sub-section (7) of Section 42 of the OV
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