Orissa High Court
M/S.Balaji Tobacco Store vs The Sales Tax Officer, Cuttack-I East ... on 18 March, 2015
ORISSA HIGH COURT: CUTTACK
W.P.(C) No.31251 of 2011
In the matter of an application under Articles 226 and 227 of the
Constitution of India.
__________
M/s Balaji Tobacco Store ... Petitioner.
-Versus-
The Sales Tax Officer,
Cuttack-I East Circle, Cuttack ... Opposite Party
For petitioner : Mr. B.P.Mohanty, N.Paikray,
K.K.Sahoo, J.J.Pradhan &
S.K.Patel
For Opp. Parties : Mr.M.S.Raman
Addl. Standing Counsel for
Commercial Taxes Deptt.
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P R E S E N T:
THE HONOURABLE MR. JUSTICE I.MOHANTY
AND
THE HONOURABLE MR. JUSTICE B.N. MAHAPATRA
Date of Judgment 18.03.2015
B.N.Mahapatra, J.This Writ Petition has been filed with a prayer for quashing the order of assessment dated 27.05.2011 passed under Section 42 of the Orissa Value Added Tax Act, 2004 (for short, 'OVAT Act') by the opposite party-Sales Tax Officer, Cuttack-1 East Circle, Cuttack (hereinafter referred to as 'Assessing Authority') for the period 29.03.2006 to 30.11.2008 under Annexure-1 on the ground that the Assessing Authority has no authority/jurisdiction to pass the said order. 2
2. In the Writ Petition, though several grounds have been taken to challenge the order of assessment, Mr.B.P.Mohanty, learned counsel for the petitioner confines his argument to one ground, i.e., the impugned order of assessment dated 27.05.2011 passed under Section 42 of the OVAT Act for the period 29.03.2006 to 30.11.2008 is not sustainable in law since the opposite party-Assessing Authority by order of assessment dated 25.09.2006 has already assessed the petitioner under Section 43 of the OVAT Act and levied tax at the rate of 4% on un-manufactured tobacco for the period 24.01.2006 to 31.07.2006, which was included in the present tax period. According to Mr. Mohanty no assessment order under Section 42 of the OVAT Act can be passed after completion of the assessment under Section 43 of the OVAT Act for the self same period. It was further submitted that this action of the opposite party also amounts to taxing the same turnover twice for which assessment order is bad in law.
3. Mr.M.S.Raman, learned Additional Standing Counsel for the Revenue submitted that both the Sections, i.e., Section 42 and Section 43 operate in different fields for the purpose of assessment under the OVAT Act. The Assessing Authority is vested with the jurisdiction/power to make assessment either under Section 42 or Section 43 of the OVAT Act, as the case may be. There is no legal bar to make assessment under Section 42 of the OVAT Act after completion of assessment under Section 43 of the said Act for the self-same period(s).
3
4. On rival contentions of the parties, the only question that falls for consideration by this Court is as to whether the Taxing authority has jurisdiction to make audit assessment under Section 42 of the OVAT Act after completion of the assessment under Section 43 of the said Act for the self-same tax period(s) ?
5. The dispute involved in the present writ petition lies in a narrow compass. Undisputed facts are that the petitioner is registered under the OVAT Act. The petitioner has been assessed under Section 43 of the OVAT Act for the period 24.01.2006 to 31.07.2006 vide assessment order dated 25.09.2006 and the said period is again included in the assessment order dated 27.05.2011 passed under Section 42 for the tax period 29.03.2006 to 30.11.2008 impugned in the present writ petition.
6. The Scheme of the OVAT Act read with OVAT Rules provides a complete mechanism for making different types of assessment for the purpose of determination of tax liability under the said Act. Such assessments, as provided under sub-section (5) of Section 2 of the OVAT Act, are self assessment (section 39), provisional assessment (section 40), audit assessment (section 42), assessment of escaped turnover (section 43), assessment of unregistered dealer liable to be registered (section 44) and assessment of casual dealer (section 45). In the present case, we are concerned with audit assessment and escaped assessment. 4
7. The relevant provisions of those two Sections necessary for our purpose are extracted hereunder:
"42. Audit assessment .--
(1) Where the tax audit conducted under sub-section (3) of Section 41 results in the detection of suppression of purchases or sales, or both, erroneous claims of deductions including input tax credit, evasion of tax or contravention of any provision of this Act affecting the tax liability of the dealer, the assessing authority may, notwithstanding the fact that the dealer may have been assessed under Section 39 or Section 40, 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."
xx xx xx
(Underlined for emphasis)
43. Turnover escaping assessment.--
(1) Where, after a dealer is assessed under Section 39, 40, 42 or 44 for any tax period, the assessing authority, on the basis of any information in his possession, is of the opinion that the whole or any part of the turnover of the dealer in respect of such tax period or tax periods has--
(a) escaped assessment, or
(b) been under-assessed, or
(c) been assessed at a rate lower than the rate at which it is assessable;5
or that the dealer has been allowed--
(i) wrongly any deduction from his turnover, or
(ii) input tax credit, to which he is not eligible, the assessing authority may serve a notice on the dealer in such form and manner as may be prescribed and after giving the dealer a reasonable opportunity of being heard and after making such enquiry as he deems necessary, proceed to assess to the best of his judgment the amount of tax due from the dealer.
xx xx xx"
(Underlined for emphasis)
8. It may also be necessary for our purpose to extract here the relevant portion of Rule 49 and Rule 50 of the OVAT Rules, 2005.
"49. Audit assessment.--
(1) If the tax audit conducted under Section 41 results in findings, which the assessing authority considers to be affecting the tax liability of a dealer for a tax period or tax periods, such authority shall serve a notice in Form VAT-306 along with a copy of the audit visit report, upon such dealer, directing him to appear in person or through his authorized representative on such date, time and place, as specified in the said notice for compliance of the requirements of sub-rules (2) and (3).
xx xx xx
50. Assessment of escaped turnover.-- (1) Where a dealer has already been assessed under Section 39, 40, 42 or 44 and it is required to reopen the assessment under sub-section (1) of Section 43 for occurrence of any or more of the events specified in that sub-section, the assessing authority shall serve a notice in Form VAT-307 upon the dealer.
xx xx xx"
(Underlined for emphasis)
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9. The language of Section 43 of the OVAT Act read with Rule 50 of the OVAT Rules contemplates that assessment under Section 43 of the OVAT Act can be made after a dealer is assessed either under Sections 39, 40, 42 or 44 for any tax period, on the basis of information in possession of the assessing authority, and he is of the opinion that the whole or any part of the turnover of the dealer in respect of such tax period or tax periods has
(i) escaped assessment, or (ii) has been under-assessed, or (iii) has been assessed at a rate lower than the rate at which it is assessable, or (iv) that the dealer has been allowed.-- (a) wrongly any deduction from his turnover,
(b) input tax credit to which he is not eligible.
Therefore, assessment of escaped turnover under Section 43 of the OVAT Act can be made even after completion of audit assessment under Section 42 of the said Act for selfsame tax period. But, this does not mean that no assessment under Section 43 of the OVAT Act can be made without completion of assessment under Section 42 of the said Act. As stated above, assessment under Section 43 can be made after a dealer is assessed under Sections 39, 40, 42 or 44 for any tax period on fulfillment of the condition (s) stated in Section 43.
10. Needless to say that escapement of turnover from assessment cannot be predicted before the assessment is completed. Therefore, only in case of completion of assessment either under Section 39, 40, 42 or 44, the escaped assessment as provided under Section 43 can be invoked for the 7 occurrence of any or more of the events stated in Section 43. Thus, a turnover cannot be said to be escaped assessment if proceeding in respect of assessment under either of the Sections referred to in Section 43 are pending and no final order of assessment has been passed. A proceeding is said to be pending as soon as it commences and until it is concluded. Only after final order of assessment, it can be said whether the whole or any part of the turnover of the dealer has escaped assessment.
11. At this juncture, it would be beneficial to look at the beginning words appearing in Section 43 of OVAT Act and Rule 50(1) of the OVAT Rules. Section 43 starts with "where, after a dealer is assessed under Section 39, 40, 42 or 44....." and Rule 50 starts with "where a dealer has already been assessed under Section 39, 40, 42 or 44 and it is required to reopen....". Use of the above words in Section 43 and Rule 50(1) makes the legislative intent clear that only after a dealer is assessed or has already been assessed under Sections 39, 40, 42 or 44 of the OVAT Act, reassessment proceeding can be initiated under Section 43 of the OVAT Act.
12. Now, if we closely look at Section 42, which speaks of audit assessment, we will find that where the tax audit conducted under sub- section (3) of Section 41 results in detection of suppression of purchase or sale or both, erroneous claims of deduction including input tax audit, evasion of tax or contravention of any provision of the Act affecting the tax 8 liability of the dealer, the assessing authority may notwithstanding the fact that the dealer may have been assessed under Section 39 or 40, serve on such dealer a notice as prescribed under the Rules along with a copy of the audit visit report for making an audit assessment. Therefore, if audit assessment has to be made after completion of any other assessment provided under the OVAT Act, the same is restricted to assessment made under Section 39 or Section 40 of the OVAT Act and all other types of assessment provided under the said Act are impliedly excluded. If the Legislature in its wisdom has taken away assessment as contemplated under Section 43 from Section 42 for the purpose of making audit assessment, after completion of any other assessment under the OVAT Act, Section 43 cannot be read into Section 42 by the State.
13. At this juncture, it would be beneficial to refer to the following decisions of the Hon'ble Supreme Court.
The Hon'ble Supreme Court in the case of P.K. Unni vs. Nirmala Industries and others, AIR 1990 SC 933, held as under:
"14. The Court must indeed proceed on the assumption that the legislature did not make a mistake and that it intended to say what it said: See Nalinakhya Bysack v. Shyam Sunder Haldar & Ors., [1953] SCR 533 at 545 : (AIR 1953 SC 148 at p.152).
Assuming there is a defect or an omission in the words used by the legislature, the Court would not go to its aid to correct or make up the deficiency. The Court cannot add words to a statute or read words into it which are not there, especially when the literal reading produces an intelligible result. "No case can 9 be found to authorise any court to alter a word so as to produce a casus omissus": Per Lord Halsbury, Mersey Docks v. Henderson. [1888] 13 App. Cas. 595,
602. "We cannot aid the legislature's defective phrasing of an Act, we cannot add and mend, and, by construction, make up deficiencies which are left there": Crawford v. Spooner, [1846] 6 Moore P.C. 1, 8,
9. Where the language of the statute leads to manifest contra- diction 489 Of the apparent purpose of the enactment, the Court can, of course, adopt a construction which will carry out the obvi- ous intention of the legislature. In doing so "a judge must not alter the material of which the Act is woven, but he can and should iron out the creases." : Per Denning, L.J., as he then was, Seaford Court Estates v. Asher, [1949] 2 All ER 155 (at 164). See the observation of Sarkar, J. in M. Pentiah & Ors. v.
Muddala Veeramallapa & Ors., [1961] 2 S.C.R. 295 at 314 : (AIR 1961 SC 1107 at page 1115)."
14. In Union of India vs. Deoki Nandan Aggarwal, AIR 1992 SC 96, the Hon'ble Supreme Court held as under:
"7.1. It is not the duty of the Court either to enlarge the scope of the legislation or the intention of the legislature when the language of the provision is plain and unambiguous. The Court cannot rewrite, recast or reframe the legislation for the very good reason that it has no power to legislate. The power to legislate has not been conferred on the courts. The Court cannot add words to a statute or read words into it which are not there. Assuming there is a defect or an omission in the words used by the legislature the Court could not go to its aid to correct or make up the deficiency. Courts shall decide what the law is and not what it should be. The Court of course adopts a construction which will carry out the obvious intention of the legislature but could not legislate itself. But to invoke judicial activism to set at naught legislative judgment is subversive of the constitutional harmony and comity of instrumentalities. [885A-D]"10
15. In view of the above settled legal position, Section 43 cannot be read into Section 42 by the State when the Legislature in its wisdom excluded Section 43 from the provisions of Section 42 of the OVAT Act. Consequentially, no assessment under Section 42 can be made after completion of the assessment under Section 43 for the self-same tax period.
16. The matter can be looked at from a different angle. 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. vs. State of Orissa and others, (2012) 47 VST 466 (Orissa).
17. Now, let us see the scope of the assessment under section 43. Scope of assessment under Section 43 is wider than the assessment provided under Section 42. In a proceeding under Section 43 of the OVAT Act, the Assessing Authority may bring to charge the turnover which had escaped assessment other than or in addition to that turnover which has led to issuance of the notice under Section 43. (See Commissioner of Income Tax vs. Sun Engineering Works Ltd. (1992) 198 ITR 297). 11
18. At this juncture, it will be relevant to refer to Section 41 of the OVAT Act which provides "Identification of tax payers for tax audit". Sub- Section (2) of Section 41 of the OVAT Act reads as follows:
"(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 dealers 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."
(Underlined for emphasis) Rule 41 of the OVAT Rules, 2005 deals with "Selection of dealers for tax audit". Sub-Rule (2) of Rule 41 provides as follows:
"(2) The Commissioner, where considers it necessary to safeguard the interest of revenue or where any enquiry is required to be conducted on any specific issue or issues relating to any dealer, or class or classes of dealer, on being referred by an officer appointed under sub-section (2) of Section 3, may direct audit to be taken up."
(Underlined for emphasis)
19. Perusal of the above provisions reveals that Section 41(2) of the OVAT Act read with Rule 41(2) of the OVAT Rules empowers the Commissioner to direct audit on any specific issue or issues relating to any dealer or class or classes of dealers on being referred to by subordinate officers to check tax evasion.
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Therefore, in case of an assessee, if the Revenue authorities decide not to exercise the power conferred under Section 41(2) of the OVAT Act read with Rule 41(2) of the OVAT Rules to make audit assessment for particular tax period and choose to proceed to complete the assessment under Section 43 of the OAVT Act, it is thereafter not permissible to assess the petitioner under Section 42 of the OVAT Act.
20. The Hon'ble Supreme Court in the case of Institute of Chartered Accountants of India vs. Price Waterhouse and Another, (1997) 6 SCC 312, held as under:
"15. .....It is settled rule of interpretation that all the provisions would be read together harmoniously so as to give effect to all the provisions as a consistent whole rendering no part of the provision as surplusage. Otherwise, by process of interpretation, a part of the provision or a clause would be rendered otiose."
21. Law is also well-settled that when the statute requires doing certain thing in certain way, the thing must be done in that way or not at all. Other methods or modes 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, (2004) 13 2 SCC 759; and Indian Bank's Association v. Devkala Consultancy Service, AIR 2004 SC 2615).
22. For the reasons stated above, we are of the considered view that audit assessment under Section 42 cannot be made after completion of the assessment of escaped turnover under Section 43 of the OVAT Act read with Rule 50 of the OVAT Rules for the self-same tax period(s).
23. In view of the above, the order of assessment dated 27.05.2011 passed under Section 42 of the OVAT Act for the period 29.03.2006 to 30.11.2008 under Annexure-1 is hereby set aside. However, it is open to the Assessing Authority to assess the petitioner under Section 42 of the OVAT Act excluding the period from 24.01.2006 to 31.07.2006 for which the dealer has already been assessed under Section 43 of the OVAT Act.
24. With the aforesaid observations and directions, the writ petition is allowed.
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B.N. Mahapatra, J.
I. Mahanty, J. I agree.
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I.Mahanty, J.
Orissa High Court, Cuttack
Dated 18th March, 2015/ss/skj/bks