The Tribunal's enhancement of turnover without compliance to rules and lack of evidence for sales suppression were not justified.

JUDGMENT :

R.K. Pattanaik, J

1. This is an application under Section 24(1) of the Orissa Sales Tax Act, 1947 (Repealed Act) (hereinafter referred to as ‘the OST Act’) read with Section 104 of the Orissa Value Added Tax Act, 2004 filed by the Petitioner assailing the impugned order dated 11th April, 2007 (Annexure-3) passed in S.A. No.1051 of 2000-01 by the Orissa Sales Tax Tribunal, Cuttack (shortly as ‘the Tribunal’) for having enhanced the tax demand on the grounds inter alia that the same is beyond jurisdiction and not based on material facts on record and thus, liable to be set aside.

2. Taking into account the issues involved, the following questions of law are hereby taken up for consideration, namely,

(a) Whether, in the facts and circumstances of the case, the order of the Tribunal enhancing the assessment without taking recourse to Rule 50(3) of the Orissa Sales Tax Rules, 1947 (in short ‘the Rules’) is sustainable in law?

(b) Whether enhancement of turnover in absence of any materials to establish that the goods found short have been sold is justified in view of the ratio decided in the case of Mahabir Rice Mill v. State of Orissa reported in 1983 54 STC 218 (Ori)?

(c) Whether the determination of sales turnover by the Tribunal can be held to be based on lawful and valid nexus and sustainable in law?

(d) Whether, in the facts and circumstances of the case, disposal of second appeal by the Tribunal without compliance of Rule 57 of the Rules for service of notice inviting cross-objection is justified in view of Section 23(3)(b) of the OST Act read with Rule 52 of the Rules?

3. In fact, in the present case, fraud case reports alleging purchase and sales suppression of paddy, rice and broken rice by the Petitioner were received, whereafter, proceeding under Section 12(4) of the OST Act for the period 1997-98 was initiated. As a result, the Sales Tax Officer, Sambalpur-I Circle, Sambalpur (in short ‘the STO’) recomputed the tax and directed the Petitioner to pay the balance amount of Rs.3,41,352/-. The said demand was challenged by the Petitioner before the Assistant Commissioner of Sales Tax, Sambalpur Range, Sambalpur (in short ‘the ACST’) which was partly allowed and the assessment was reduced by Rs.2,51,748/-with a direction to refund the excess payment, if any made. Against the aforesaid order of the ACST, appeal was carried to the Tribunal by the State which was allowed in part enhancing the assessment by Rs.2,46,937/-. So to say, the enhancement was upheld to the extent indicated and the Petitioner was directed to pay the balance tax under Annexure-3.

4. According to the Petitioner, the reports submitted by the Vigilance Unit, Sambalpur alleged shortage of 18.85 Quintals of paddy and 0.51 Quintals of rice which was explained away before the authorities for being on account of drainage which is within the permissible limit and in respect of the other report on purchase suppression of 1899.15 Quintals of paddy and sales suppression of 4.88 Quintals of rice besides 01 Quintal of broken rice, the same was clarified by stating that the discrepancies have been due to improper stock taken on sampling basis by the inspecting officers and also on account of driage but then, the STO without accepting the above explanation, estimated suppression at Rs.9,00,204.75 and suppressed sales turnover at Rs.62,93,699.35 for the year 1997-98 by applying a multiplier of seven which resulted in extra tax demand of Rs.3,41,352/-. Such additional tax was directed to be paid by the Petitioner under the assessment order dated 4th September, 1998 (Annexure-1). The Petitioner preferred an appeal under Section 23 of the OST Act before the ACST, which, as earlier mentioned, was allowed partly and the assessed demand was reduced by Rs.2,51,748/-. In other words, the ACST accepted the stand of the Petitioner with regard to the allegation on purchase suppression. On the sales suppression, basing on detection of shortages or excess stock of paddy, rice, bro