1970 (2) TMI 122 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of penalty imposition without assessment.
2. Analogous provisions in the Orissa Sales Tax Rules and the Central Sales Tax Rules.
3. Applicability of the Supreme Court decision in Income-tax Officer, Kolar Circle, Kolar, and Another v. Seghu Buchiah Setty.
4. Relevance of the explanation to rule 32 of the Orissa Sales Tax Rules.
5. Preliminary objection regarding the timing of the petition.

Issue-wise Detailed Analysis:

1. Validity of Penalty Imposition Without Assessment:
The court examined whether the penalty imposed under rule 16(2) of the Central Sales Tax (Orissa) Rules, 1957, could stand despite the absence of an assessment. The petitioner was initially assessed for sales tax, but the assessment was subsequently set aside for reassessment, leaving no current assessment. The court concluded that "there can be no demand of tax or penalty until an assessment is made." Therefore, without an assessment, the penalty could not be justified.

2. Analogous Provisions in the Orissa Sales Tax Rules and the Central Sales Tax Rules:
The court compared rules 16 and 17 of the Central Sales Tax (Orissa) Rules with rule 32 of the Orissa Sales Tax Rules, 1947. Both sets of rules have similar schemes regarding the imposition of penalties for non-payment of assessed tax. The court noted that "the schemes in both the Central Sales Tax Act and the Orissa Sales Tax Act are the same," emphasizing the consistency in the legislative framework for tax penalties.

3. Applicability of the Supreme Court Decision in Income-tax Officer, Kolar Circle, Kolar, and Another v. Seghu Buchiah Setty:
The court analyzed the Supreme Court's majority view, which held that if an assessment order is set aside, any penalty based on that assessment must also be set aside. The court stated, "the penalty can no longer be supported where the assessment is set aside." This decision rendered the previous judgment in Dwarika Prasad Sharma v. State of Orissa and Others untenable.

4. Relevance of the Explanation to Rule 32 of the Orissa Sales Tax Rules:
Mr. Mohapatra argued that the explanation to rule 32 should uphold the penalty despite the assessment being set aside. However, the court found this argument unpersuasive, stating that the explanation "merely enunciates the elementary law" and does not create higher rights or liabilities than those under general law or the Income-tax Act. The court concluded that the explanation does not differentiate the scheme from what is prescribed under the Income-tax Act.

5. Preliminary Objection Regarding the Timing of the Petition:
Mr. Mohapatra raised a preliminary objection that the petitioner did not challenge the original order of dismissal of the revision by the Commissioner in a timely manner. The court dismissed this objection, asserting its broad powers under articles 226 and 227 of the Constitution to intervene in cases where penalties are imposed without a valid assessment. The court stated, "we do not attach much importance to this technical objection."

Conclusion:
The court quashed the orders imposing penalties on the petitioner, issued a writ of certiorari to nullify the penalty orders, and directed the refund of any penalties paid. Additionally, the attachment of the security deposit was vacated. The application was allowed, with no order as to costs.