2008 (1) TMI 835 - HC - VAT and Sales Tax

Whether, in the facts and circumstances of the case, the reopening of the assessment under section 12(8) of the Orissa Sales Tax Act, 1947 is justified as no reason has been indicated in the notice issued under the said section and that the reassessment proceeding has not been initiated on change of opinion of the Sales Tax Officer? Whether, in the facts and circumstances of the case, the Sales Tax Tribunal, Orissa, is correct in holding that the subsequent sale effected by the petitioner to the Orissa Power Generation Corporation and the National Thermal Power Corporation is not in course of inter-State sale but intra-State sale and does not qualify for exemption as contemplated in section 6(2) of the Central Sales Tax Act, 1956? Whether, in the facts and circumstances of the case, the assessing officer is not justified to impose penalty under section 12(8) of the Orissa Sales Tax Act? Held that - The only dispute involved in the case is regarding dealer s claim for exemption under section 6(2) of the CST Act. In the return filed under the OST Act, the dealer claimed deduction of turnover of ₹ 3,96,32,784 on account of subsequent sale as contemplated under sub-section (2) of section 6 of the CST Act.This claim of the dealer having not been accepted in the assessment order passed under the CST Act, the same has been treated as intra-State sale in the reassessment order passed under section 12(8) of the OST Act by the assessing officer and the same has been accepted by the first and second appellate authorities after detailed factual analysis. In the circumstances, imposition of penalty of ₹ 10,00,000 under section 12(8) of the OST Act is not justified. In conclusion, we answer question No. (i) in affirmative in favour of Revenue, question No. (ii) in affirmative in favour of the Revenue and question No. (iii) in affirmative in favour of dealer. The tax revision is allowed to the aforesaid extent.

Summary

Issues Involved:
1. Justification of reopening the assessment under section 12(8) of the Orissa Sales Tax Act, 1947.
2. Classification of sales as inter-State or intra-State under section 6(2) of the Central Sales Tax Act, 1956.
3. Justification for imposing a penalty under section 12(8) of the Orissa Sales Tax Act.

Issue-wise Detailed Analysis:

1. Justification of Reopening the Assessment:
The petitioner argued that the reopening of the assessment under section 12(8) of the OST Act was unjustified as no reason was indicated in the notice, and it was based on a mere change of opinion. The Tribunal found that valid reasons were recorded by the assessing officer before issuing the notice, which were communicated to the dealer. The court held that the condition precedent to initiate reassessment proceedings was satisfied and that the reopening was not based on a change of opinion, as there was no prior formation of opinion on the dealer's claim for exemption under section 6(2) of the CST Act. Thus, the court answered this issue in the affirmative, in favor of the Revenue.

2. Classification of Sales:
The petitioner contended that the sales to OPGC and NTPC were inter-State sales qualifying for exemption under section 6(2) of the CST Act. The assessing officer and the Tribunal found that the goods were sold to OPGC and NTPC after they were taken delivery by the dealer in Orissa, making them intra-State sales. The Tribunal noted that the dealer failed to prove that the transfer of documents of title to the goods occurred while the goods were in transit. The court upheld the Tribunal's factual findings, stating that the sales were intra-State and taxable under the OST Act. This issue was also answered in the affirmative, in favor of the Revenue.

3. Imposing Penalty:
The petitioner argued that the penalty of Rs. 10,00,000 was unjustified as there was no suppression of turnover. The first appellate authority had deleted the penalty, finding no suppression. The Tribunal, while confirming the assessment, did not specifically address the penalty. The court noted that the imposition of penalty is quasi-criminal and should be exercised judicially. Since the dealer disclosed its gross turnover and the dispute was only regarding the exemption claim, the court found the imposition of the penalty unjustified. This issue was answered in the affirmative, in favor of the dealer.

Conclusion:
The court concluded by answering question (i) in the affirmative in favor of the Revenue, question (ii) in the affirmative in favor of the Revenue, and question (iii) in the affirmative in favor of the dealer. The tax revision was allowed to the extent mentioned, with no costs.