Orissa High Court
M/S. Orissa Mining Corporation Ltd vs Sales Tax Officer And Others .... ... on 15 December, 2021
Author: A.K. Mohapatra
Bench: A.K. Mohapatra
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.13195 of 2010
M/s. Orissa Mining Corporation Ltd., .... Petitioner
OMC House, Bhubaneswar
Choudhury Satyajit Mishra, Advocate
-versus-
Sales Tax Officer and Others .... Opposite Parties
Mr. Sunil Mishra, Addl. Standing Counsel
CORAM:
THE CHIEF JUSTICE
JUSTICE A.K. MOHAPATRA
ORDER
Order No. 15.12.2021
Dr. S. Muralidhar, CJ.
03. 1. The challenge in the present petition is to the order dated 16th November, 1992 passed by the Sales Tax Officer (STO), Bhubaneswar-II Circle imposing a penalty of Rs.39,28,526/- under Section 10-A of the Central Sales Tax Act, 1956 (CST Act) for the period 22nd October, 1975 to 30th June, 1992 i.e. 17 years. The challenge in this petition is also to an order dated 20th February, 1995 passed by the Commissioner of Commercial Taxes, Odisha ('Revisional authority') reducing the penalty amount to Rs.14,38.093/- .
2. Notice. Mr. Mishra, learned Additional Standing Counsel (ASC) accepts notice on behalf of Opposite Party ('Department').
Page 1 of 63. Since the point involved in this petition is short, the matter is taken up for final hearing with the consent of the parties.
4. One of the principal grounds of challenge is that the period of seventeen years could have been clubbed together for imposing penalty on the Petitioner and, therefore, the impugned order of the STO is bad in law.
5. Learned counsel for the Petitioner submits that although there is no prescribed period of limitation under Section 10-A of the CST Act for imposition of penalty, it has to be interpreted in a reasonable manner and considering that the maximum period for reopening of an assessment under the CST Act is five years, no penalty should be levied for a period of greater than that period. Reliance is placed on the decisions of the Supreme Court of India in Government of India v. Citedal Fine Pharmaceuticals, Madras AIR 1989 SC 1771 and State of Punjab v. Bhatinda Districts Coop. Milk. P. Union Ltd. (2007) 11 SCC 363.
6. Mr. Mishra, learned ASC for the Department, on the other hand, submitted that on merits the penalty order is justified since there was a obvious violation of the statutory provisions. He submitted that by a subsequent and recent amendment to the CST Act reopening of an assessment is permitted up to a maximum of seven years after the expiry of the original assessment period, subject to the Department proving fraud.
Page 2 of 67. Section 10-A of the CST Act reads as under:
"10A. Imposition of penalty in lieu of
prosecution--
(1) If any person purchasing goods is guilty of an offence under clause (b) or clause (c) or clause (d) of section 10, the authority who granted to him or, as the case may be, is competent to grant to him a certificate of registration under this Act may, after giving him a reasonable opportunity of being heard, by order in writing, impose upon him by way of penalty a sum not exceeding one and a half times 3[the tax which would have been levied under sub- section (2) of section 8 in respect of the sale to him of the goods, if the sale had been a sale falling within that sub-section]: Provided that no prosecution for an offence under section 10 shall be instituted in respect of the same facts on which a penalty has been imposed under this section.] 4[(2) The penalty imposed upon any dealer under sub- section (1) shall be collected by the Government of India in the manner provided in sub-section (2) of section 9--
(a) in the case of an offence falling under clause (b) or clause (d) of section 10, in the State in which the person purchasing the goods obtained the form prescribed for the purposes of sub-section (4) of section 8 in connection with the purchase of such goods;
(b) in the case of an offence falling under clause (c) of section 10, in the State in which the person purchasing the goods should have registered himself if the offence had not been committed."
Page 3 of 68. While on a plain reading, Section 10A does not stipulate a period of limitation for exercise of the power to impose penalty thereunder, it is obvious that the said power has to be exercised within a reasonable time. In the present case the period for which the penalty is sought to be imposed is as long as seventeen years i.e. from 22nd October, 1975 to 30th June, 1992. Clearly the legislative intent was not to empower the Department to levy penalty in one go for a period of seventeen continuous years. Such an interpretation would render the power unreasonable and arbitrary.
9. The Supreme Court of India in Citedal Fine Pharmaceuticals (supra) explained the legal position thus:
"6. Learned counsel appearing for the respondents urged that Rule 12 is unreasonable and violative of Article 14 of the Constitution, as it does not provide for any period of limitation for the recovery of duty. He urged that in the absence of any prescribed period for recovery of the duty as contemplated by Rule 12, the officer may act arbitrarily in recovering the amount after lapse of long period of time. We find no substance in the submission. While it is true that Rule 12 does not prescribe any period within which recovery of any duty as contemplated by the Rule is to be made, but that by itself does not render the Rule unreasonable or violative of Article 14 of the Constitution. In the absence of any period of limitation it is settled that every authority is to exercise the power within a reasonable period. What would be reasonable period, would depend upon the facts of each case. Whenever a question regarding the inordinate delay Page 4 of 6 in issuance of notice of demand is raised, it would be open to the assessee to contend that it is bad on the ground of delay and it will be for the relevant officer to consider the question whether in the facts and circumstances of the case notice or demand for recovery was made within reasonable period. No hard and fast rules can be laid down in this regard as the determination of the question will depend upon the facts of each case.
10. Likewise, in Bhatinda District Coop. Milk P. Union Ltd. (supra) the Supreme Court while interpreting Section 21 of the Punjab General Sales Tax Act observed as under:
"16. A bare reading of Section 21 of the Act would reveal that although no period of limitation has been prescribed therefor, the same would not mean that the suo moto power can be exercised at any time.
17. It is trite that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors."
11. On the same analogy, even though no limitation period as such has been indicated in Section 10-A of the CST Act it does not mean that the Department can decide arbitrarily to invoke to the power thereunder to levy penalty at any time of its choosing. In the light of the law that such power must be exercised within a reasonable time, the impugned order seeking to levy penalty in one go for a period of 17 years is unsustainable in law.
Page 5 of 612. Considering that the maximum period for reopening an assessment under the CST Act is seven years, and that too in the case of proven fraud, and considering that in this case there is nothing on record to show that the Petitioner indulged in a fraud, the period for which the penalty can be permitted to be imposed cannot exceed three years prior the date of the order imposing penalty.
13. Accordingly, a direction is issued to the Opposite Parties to re- work the penalty amount on pro rata basis by restricting the period to three years prior to the date of the impugned order of penalty i.e. from 1st July 1989 to 30th June, 1992. The impugned orders of the STO and the Revisional authority shall stand modified accordingly.
14. The writ petition is disposed of in the above terms.
(Dr. S. Muralidhar) Chief Justice (A.K. Mohapatra) Judge S.K. Jena/P.A. Page 6 of 6