Orissa High Court
M/S. Patitapabana Bastralaya vs The Sales Tax Officer on 24 September, 2014
Author: I.Mahanty
Bench: I.Mahanty
HIGH COURT OF ORISSA : CUTTACK
W.P.(C) No.14696 of 2009
In the matter of an application under Articles 226, 227 of the Constitution
of India.
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M/s. Patitapabana Bastralaya,
Proprietor Sri Debendra Mohapatra,
aged about 47 years,
S/o. Narasingha Mohapatra,
Main Road, Pipili, Puri ... Petitioner
-Versus-
The Sales Tax Officer,
(Head of the audit team),
Puri Circle, Puri and others ... Opp. Parties
For Petitioner : Mr. B. Panda, Sr. Advocate,
B.B. Sahu & S.C. Nanda
For Opp. Parties : Mr. R.P.Kar,
Standing Counsel
(O.Ps.-Sales Tax Dept.)
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P R E S E N T:
THE HONOURABLE SHRI JUSTICE I.MAHANTY
AND
THE HONOURABLE SHRI JUSTICE B.N.MAHAPATRA
Date of Judgment: 24.09.2014
B.N. Mahapatra, J.The present writ petition has been filed inter alia challenging validity of the order of assessment dated 06.07.2009 (Annexure-4) passed under Section 9C of the Orissa Entry Tax Act, 1999 (for short, "OET Act") for the period 01.04.2005 to 13.05.2009.
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2. Though several prayers as well as grounds have been made/taken in the writ petition, Mr. Panda, learned Senior Advocate for the petitioner confined his argument to one ground to challenge validity of the assessment order. According to Mr. Panda, the notice for assessment of tax dated 19.06.2009 (Annexure-2), which is foundation of the assessment proceeding, having been issued without allowing 30 days time as provided under sub-section (2) of Section 9C of the OET Act, the said notice is invalid and consequentially, the order of assessment and demand notice are bad in law. In support of his contention, he relied upon the judgment of this Court in the case of Jindal Stainless Ltd. -v- State of Orissa and others, (2012) 54 VST 1 (Orissa).
It was further contended that the assessing officer being the creature of the statute cannot act contrary to or de hors the provisions of the OET Act.
3. Mr. Kar, learned Standing Counsel for opposite party-Revenue submitted that on the date fixed for production of books of account, the petitioner appeared and produced the books of accounts and did not raise any objection to the validity of the notice and therefore, no prejudice is caused to the petitioner for not allowing him a minimum period of 30 days' time as prescribed under Section 9C(2) of the OET Act. Therefore, the notice not providing 30 days' time is not invalid. Further, notice for assessment of tax issued in Form E-30 as a result of audit, does not require to allow 30 days time to the dealer to produce books of account. Hence, liberty has 3 been given to the Assessing Officer to grant time less than 30 days in the notice. It is further submitted that the provision of Section 9C(2) of the OET Act is not mandatory, it is directory in nature.
4. Placing reliance upon the judgment of this Court in the case of Chintamani Industries vs. Commissioner of Sales Tax, Orissa and others, [2009] 25 VST 220 (Orissa), Mr. Kar submitted that unless it is established that violation of a directory provision has resulted in loss and/or prejudice to the party, no interference is warranted. Even in the case of violation of a mandatory provision, interference does not follow as a matter of course.
Further, placing reliance upon the judgment of the Hon'ble Supreme Court in the case of Commissioner of Customs, Mumbai vs. Virgo Steels, Bombay and another, (2002) 4 SCC 316, it was submitted that even though a provision of law is mandatory in its operation if such provision is one which deals with the individual rights of the person concerned and is for his benefit, the said person can always waive such a right and in the present case the petitioner has waived his right of getting 30 days time to produce the books of account for the purpose of assessment.
Placing reliance upon the judgment of the Hon'ble Supreme Court in the case of Mahadev Govind Gharge and others vs. Special Land Acquisition Officer, Upper Kirishna Project, Jam Khandi, Karnataka, (2011) 6 SCC 321, it was submitted that if the consequence of non-compliance of any statutory provision is not provided, the requirement may be held to be directory.
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Concluding his argument, Mr. Kar made a prayer for dismissal of the writ petition.
5. On the rival contentions of the parties, the following questions fall for consideration by this Court:
(i) Whether notice dated 19.06.2009 for assessment of tax issued in Form E-30 for production of books of account and documents without complying with the mandate of sub-section (2) of Section 9C of the OET Act, by not allowing minimum period of 30 days for production of books of account and documents vitiates the assessment proceedings?
(ii) Whether in absence of a valid notice for assessment of tax in terms of sub-section (2) of Section 9C of the OET Act, the Assessing Officer lacks jurisdiction to pass the order of assessment on the basis of audit visit report?
(iii) Whether the Assessing Officer who is the creature of the OET Act can act contrary to or de hors the provisions of the said Act?
(iv) Whether the order of assessment dated 06.07.2009 passed under Section 9C of the OET Act for the period 01.04.2005 to 31.05.2009 is sustainable in law?
(v) What order?
6. Question Nos.(i) and (ii) being interlinked, they are dealt with together.
7. To deal with the above questions, it is necessary to extract sub-
sections (1) and (2) of Section 9C of the OET Act.
"9C. Audit Assessment.--
(1) Whether the tax audit conducted under Section 9B results in the detection of suppression of purchases 5 or sales, or both, erroneous claims of deductions, evasion of tax or contravention of any provisions of this Act affecting the tax liability of the dealer, the assessing authority notwithstanding the fact that the dealer may have been assessed under Section 9 or Section 9A, serve on such dealer a notice in the form and manner prescribed along with a copy of the Audit Visit Report, requiring him to appear in person or through his authorized representative on a date and place specified therein and produce or cause to be produced such books of account and documents relying on which he intends to rebut the findings and estimated loss of revenue in respect of any tax period or periods as determined on such audit and incorporated in the Audit Visit Report.
(2) Where a notice is issued to a dealer under sub-
section (1), he shall be allowed time for a period of not less than thirty days for production of relevant books of account and documents."
(Underlined for emphasis)
8. As per sub-section (1) of Section 9C of the OET Act, where the tax audit conducted under Section 9B results in the detection of suppression of purchases or sales, or both, erroneous claims of deductions, evasion of tax or contravention of any provisions of this Act affecting the tax liability of the dealer, the assessing authority serves on such dealer a notice in the form and manner prescribed along with a copy of the Audit Visit Report, requiring him to appear in person and produce or cause to be produced such books of account and documents relying on which he intends to rebut the findings and estimated loss of revenue in respect of any tax period or periods as determined on such audit and incorporated in the Audit Visit Report.
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Sub-section (2) of Section 9C provides that where a notice is issued to a dealer under sub-section (1) he "shall" be allowed time for a period "not less than thirty days" for production of relevant books of account and documents. The use of the expressions "shall" and "not less than thirty days" in sub-section (2) make it amply clear that the Assessing Officer is bound to allow minimum thirty days' time for production of books of account and documents. On a plain reading of sub-section (2) it further reveals that discretion is vested on the Assessing Officer to allow time more than thirty days for production of books of account but he has no discretion to allow less than thirty days' time for production of books of account.
9. Law is well-settled that when the statute requires to do certain thing in certain way, the thing must be done in that way or not at all. Other methods or mode of performance are impliedly and necessarily forbidden. The aforesaid settled legal proposition is based on a legal maxim "Expressio unius est exclusion alteris", meaning thereby that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner and following other course is not permissible. [See Taylor v. Taylor, (1876) 1 Ch.D.426; Nazir Ahmed v. King Emperor, AIR 1936 PC 253; Ram Phal Kundu v. Kamal Sharma; and Indian Bank's Association v. Devkala Consultancy Service, AIR 2004 SC 2615, Gujarat Urja Vikas Nigam Ltd. -v- Essar Power Ltd., (2008) 4 SCC 755)].
10. If the notice issued is invalid for any reason, then the proceeding initiated in pursuance of such notice would be illegal and invalid. 7 Section 9C(2) is a mandatory provision not with regard to any procedural law but with regard to a substantive right. Any infirmity or invalidity in the notice under Section 9C(2) of the Act goes to the root of jurisdiction of the Assessing Authority. Issue of Notice under Section 9C(2) is a condition precedent to the validity of any assessment under Section 9-C of the Act. If the notice issued for assessment is invalid, the assessment would be bad in law. Therefore, the notice for assessment of tax without allowing the minimum period of 30 days for production of the books of account and documents is invalid in law and consequentially, the order of assessment and demand notice passed/issued are not sustainable in law.
11. Our above view is fortified by the following judicial pronouncements:
12. The Hon'ble Supreme Court in the case of Y. Narayana Chetty
-vs- Income-tax Officer, (1959) 35 ITR 388 (SC) at 392, held as under:
"The notice prescribed by section 34 cannot be regarded as a mere procedural requirement, it is only if the said notice is served on the assessee as required that the Income-tax Officer would be justified in taking proceedings against him. If no notice is issued or if the notice issued is shown to be invalid, then the validity of the proceedings taken by the Income-tax Officer without a notice or in pursuance of an invalid notice would be illegal and void. That is the view taken by the Bombay and Calcutta High Courts in Commissioner of Income-tax -v- Ramsukh Motilal (1955) 27 I.T.R. 54) and R.K. Das & Co. -v-
Commissioner of Income-tax, ((1956) 30 I.T.R. 439) and we think that that view is right."
(underlined for emphasis) 8
13. This Court in the case of Sri Krupasindhu Behera -v- State of Orissa, (1985) 59 STC 269 (Ori.), has held as under:
"The proceeding under the Public Demands Recovery Act is a very strict proceeding and the form prescribed under the statute is of substantial significance. Any mistake in the form, particularly in regard to a material particular, would certainly vitiate the proceeding. The same principle is applicable to collection under the Orissa Sales Tax Act."
14. In M. Reddanna -vs- Revenue Division Officer, (1980) 46 STC 232 (AP)(FB), the Andhra Pradesh High Court has held as under:
"No reasons were recorded for giving 7 days time for payment of the tax as required by the second proviso to section 16(1) of the A.P. General Sales Tax Act, as against the minimum 15 days time which the petitioner was entitled to under the section. Therefore, the notice of demand in breach of the statutory mandate contained in section 16(1) was invalid".
15. In S.K. Manekia -v- Commissioner of Sales Tax, (1977) 39 STC 426 at 442 (Bom), the Bombay High Court has held as under:
"(1) Under section 15(1) of the Bombay Sales Tax Act, 1953, the reassessing authority would acquire jurisdiction only if a valid notice under that section was issued and duly served upon the assessee.
(2) Not only a defect in the notice under section 15(1) but also wrong service of the notice under section 15(1) would invalidate the notice and would confer no jurisdiction upon the reassessing authority to initiate proceedings in pursuance of such notice and to pass an order of reassessment."
16. In Jamna Dhar Potdar -v- CIT, (1935) 3 ITR 112 (lar): AIR 1935 Lah 201, it has been held as follows:
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"Apparently, this notice is illegal as it could seem that under section 22(2) of the Act, 30 clear days must be given for furnishing of the return from the date of service. It was held in Kajorimal Kalyan Mal, In re, (1930) ITC 451 (All) = AIR 1930 All 209 that under section 22(2) the Income Tax Officer must give the proposed assessee at least thirty days time within which to furnish his return." If this minimum is denied the notice becomes entirely illegal and no subsequent extension of time will cure the defect that initially lay till the notice issued."
17. In the instant case, notice for assessment of tax as a result of audit in Form E-30 dated 19.06.2009 was issued requiring the petitioner to appear in person or through his authorized agent before the Assessing Officer on 06.09.2009 at 11 A.M. to produce or cause to be produced books of account for the period 2005-06 to 2009-10. Thus, notice in Form E-30 itself shows that minimum thirty days time as provided under sub-section (2) of Section 9C of OET Act has not been granted to the petitioner. Thus, it is a case of clear violation/infraction of the mandatory provisions of Section 9C of the OET Act and proceedings initiated by the Assessing Officer in pursuance of such invalid notice would be illegal and void.
18. The contention of Mr. Kar, learned Standing Counsel for opposite party-Revenue is that the petitioner has not objected to the notice issued for production of the books of account and documents allowing less than 30 days time and therefore, the assessment order passed in pursuance of such notice is not invalid. We are afraid how there can be a waiver of the condition precedent, compliance of which alone can confer jurisdiction upon 10 an Assessing Authority for making assessment. The order of assessment having been passed in pursuance of an invalid notice, it could not be validated by participation of the assessee-petitioner in the assessment proceeding. Consent, acquiescence, participation etc. would not confer jurisdiction when the proceeding initiated on the basis of an invalid notice.
19. In Commissioner of Income-tax, Bombay City I -v- Ramsukh Motilal, (1955) 27 I.T.R. 54 (Bom) at 63, it has been held as under:
"....... it is difficult to understand how there can be a waiver of the condition precedent, compliance with which alone can confer jurisdiction upon an authority or a tribunal. It is well-settled that no consent can confer jurisdiction upon a court if the court has no jurisdiction, and if we take the view that the Income- tax Officer can have jurisdiction only provided he complies with the conditions laid down in section 34 (of the Indian Income-tax Act, 1922), then no consent by the assessee or no waiver on his part can confer jurisdiction upon the Income-tax Officer."
20. Question No. (iii) is whether the Assessing Officer who is the creature of the OET Act can act contrary to or de hors the provisions of the said Act.
Admittedly, the Assessing Authority who has issued the notice for assessment of tax as a result of audit in Form E-30 is the creature of the OET Act. Therefore, he cannot in any manner act contrary to or de hors the provisions of the OET Act. Since sub-section (2) of Section 9C of the OET Act mandates that the dealer shall be allowed time for a period of not less than thirty days for production of relevant books of account and documents, the assessing officer being the creature of the statute cannot allow time less 11 than thirty days. On this score, the notice issued under Annexure-2 for assessment of tax as a result of audit is invalid.
21. At this juncture, it would be profitable to refer to the judgment of the Hon'ble Supreme Court in the case of Krushna Chandra Sahoo -v- Bank of India, AIR 2009 Ori 35 : 106 (2008) CLT 713, wherein it has been held as follows:
"8. A Constitution Bench of the Hon'ble Supreme Court in Sukhdev Singh and others -v- Bhagatram Sardar Singh Raghuvanshi and another, (1975) AIR 1975 SC 1331 held that the statutory authorities cannot deviate from the statutory provisions and any deviation, if so made, is required to be enforced by legal sanction of declaration by the Courts invalidating such actions in violation of the statutory Rules and Regulations. A similar view had been reiterated by the Apex Court in Ambika Quarry Works etc. -v- State of Gujarat and others, (1987) 1 SCR 562; Purushottam -v- Chairman, Maharashtra State Electricity Board and another, (1999) 6 SCC 49 and Sultan Sadik -v- 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."12
22. The various decisions relied upon by Mr.Kar, learned Standing Counsel are of no assistance to the opposite party-Sales Tax Department for the reasons stated hereinabove. Moreover, the facts of those cases are completely different from the facts of the present case.
23. The decision in the case of Mahadev Govind Gharge and others (supra) delivered by the Hon'ble Supreme Court is in connection with an election matter and that too in appeal stage and not in original stage as in the present case.
24. The case in Chintamani Industries (supra), relates to cancellation of registration certificate of the applicant, when it had no business during the preceding three consecutive financial years and also in the year 1999-2000. In that case, this Court has placed reliance upon the judgment of the Hon'ble Supreme Court in the case of Rajendra Singh vs. State of Madhya Pradesh, AIR 1996 SC 2736, wherein it has been held that while examining complaints of violation of statutory rules and conditions, it must be remembered that violation of each and every provision does not furnish a ground for the court to interfere. The provisions may be directory one or a mandatory one. In the case of directory provision, substantial compliance would be enough. Unless it is established that violation of a directory provision has resulted in loss and/or prejudice to the party, no interference is warranted. Even in the case of violation of a mandatory provision, interference does not follow as a matter of course. Thus, neither the Hon'ble Supreme Court nor this Court has expressed any view that 13 under no circumstances the Court can interfere in case of violation of statutory rules and conditions.
25. The decision of the Hon'ble Supreme Court in the case of Virgo Steels, Bombay and another (supra) is under the Customs Act. In that case, the Hon'ble Supreme Court has held that even though a provision of law is mandatory in its operation if such provision is one which deals with the individual rights of the person concerned and is for his benefit, the said person can always waive such a right. In that case, the Company in its letter admitted to pay the duty chargeable on 24,326 MT of billets and 2300 MT of lead ingots along with any other penalty imposed on it and it did not want any show cause notice and personal hearing in the matter. In the present case, the petitioner has not made any such admission/submission.
26. Question No.(iv) is whether the order of assessment dated 06.07.2009 passed under Section 9C of the OET Act for the period 01.04.2005 to 31.05.2009 is sustainable in law.
For the reasons stated above, order of assessment passed in pursuance of notice in Form E-30 issued in violation of requirement of Section 9C(2) of the OET Act is not sustainable in law.
27. Accordingly, we set aside the impugned order dated 06.07.2009 (Annexure-4) passed under Section 9C of the OET Act for the period 01.04.2005 to 13.05.2009 and consequential demand notice. The matter is remanded to the Assessing Officer with a direction to complete the assessment afresh after affording reasonable opportunity of hearing to the 14 petitioner. For this purpose, the petitioner is directed to appear before the assessing officer on 14.10.2014. On his appearance, the assessing officer shall fix a date giving minimum thirty days time to the petitioner to produce the books of account, documents and complete the assessment proceeding within a period of four weeks thereafter in accordance with law.
28. In the result, the writ petition is allowed to the extent indicated above, but in the circumstances there is no order as to costs.
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B.N. Mahapatra, J.
I.Mahanty, J. I agree.
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I.Mahanty, J.
Orissa High Court, Cuttack
The 24th September, 2014/bks/skj/ss