1971 (2) TMI 97 - HC - VAT and Sales Tax

Summary

Issues:
1. Jurisdiction of notice issued under section 16(1) of the Orissa Sales Tax Act.
2. Validity of the power under section 16(1) in the absence of prescribed conditions.

Analysis:

Issue 1: Jurisdiction of notice under section 16(1)
The petitioner contended that the notice issued under section 16(1) of the Orissa Sales Tax Act was illegal and without jurisdiction due to the absence of an assessment or escaped assessment proceeding. The Court rejected this contention, emphasizing the wide power conferred by section 16(1) on the taxing authorities to call for accounts and information necessary for the Act's purposes. The Court cited precedents to support that the power under section 16(1) can be exercised even before assessment proceedings start, with the objective of preventing tax evasion. The Court concluded that the notice in question was valid, as it aimed to verify potential suppression of taxable turnover.

Issue 2: Validity of power under section 16(1) without prescribed conditions
The petitioner argued that the power under section 16(1) could not be exercised in the absence of prescribed conditions. However, the Court held that the sub-section could be effectively implemented even without the prescribed conditions. By excluding the parenthetic clause, the Court noted that the power to require dealers to produce accounts or information necessary for the Act's purposes could operate independently. The Court found no merit in this contention, affirming the validity of exercising the power under section 16(1) without the prescribed conditions.

Additional Aspect:
The Full Bench reference arose from a ground in the writ application challenging the notice's legality due to lack of reasons provided. Although this ground was not pressed before the Full Bench, the Division Bench had referred to previous decisions questioning the validity of notices without reasons. Ultimately, as both contentions raised by the petitioner failed, the writ application was dismissed with costs.

In conclusion, the Court upheld the jurisdiction of the notice under section 16(1) of the Orissa Sales Tax Act, emphasizing the broad power granted to taxing authorities for verification purposes. Additionally, the Court affirmed the validity of exercising the power under section 16(1) even in the absence of prescribed conditions, dismissing the petitioner's contentions.