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2009 (9) TMI 883 - HC - VAT and Sales TaxLevy of penalty under section 9B(3)(a)(ii) of the Orissa Sales Tax Act, 1947 for the periods 2000-01, 2001-02 and 2002-03 - Held that - In the present case, the petitioner has acted clearly in consonance with his lawful obligation both for collection and deposit of sales tax and the allegation that the petitioner had collected excess OST and surcharge over and above his liability under the Sales Tax Act, is preposterous. The OET Act itself permits set-off of entry tax against the sales tax dues and such set-off can only be made possible after the petitioner collects the OST from its purchasers and not at any time prior thereto. Therefore, the Sales Tax Officer s notice for levy of penalty is wholly unfounded both on facts as well as law and is, therefore, without jurisdiction. We, accordingly hold that the petitioner was justified in claiming set-off of entry tax paid by him (at the time of purchase) from the tax payable under the OST Act and such claim of set-off cannot form a lawful basis for issue of a notice for levy of penalty under section 9B(3)(a)(ii) of the OST Act, 1947. Appeal allowed.
Issues Involved:
1. Jurisdiction of Sales Tax Officer to issue penalty notice under section 9B(3)(a)(ii) of the Orissa Sales Tax Act, 1947. 2. Legality of the penalty levied for alleged excess collection of OST and surcharge. 3. Entitlement to set-off of entry tax against sales tax under the Orissa Entry Tax Act and the Orissa Sales Tax Act. Issue-Wise Detailed Analysis: 1. Jurisdiction of Sales Tax Officer to Issue Penalty Notice: The petitioner, M/s. Seetal Automobiles, challenged the jurisdiction of the Sales Tax Officer, Bhubaneswar-II Circle, in issuing notices for levying penalties under section 9B(3)(a)(ii) of the Orissa Sales Tax Act, 1947, for the periods 2000-01, 2001-02, and 2002-03. The petitioner argued that the notices were "wholly without jurisdiction" as they were based on the alleged non-deposit of excess tax and surcharge, which the petitioner denied collecting. 2. Legality of the Penalty Levied for Alleged Excess Collection: The petitioner contended that the penalty notices were issued without considering the provisions of sections 3 and 4 of the Orissa Entry Tax Act (OET Act) and rule 18 of the OET Rules. The petitioner maintained that it had paid entry tax at the point of entry of vehicles into Orissa and was entitled to a reduction in sales tax liability under section 4 of the OET Act. The petitioner computed its sales tax liability and submitted returns accordingly, claiming set-off of the entry tax paid against the sales tax due. The Revenue's counter-affidavit argued that the basis for invoking section 9B of the OST Act was the excess collection of tax, not the actual payment of sales tax. However, the court found this argument baseless, as section 4 of the OET Act and rule 18 explicitly permit set-off. The statutory illustration under rule 18 clearly indicates that a dealer must collect sales tax on the total price of the vehicle (including entry tax) and then claim set-off for the entry tax paid. 3. Entitlement to Set-Off of Entry Tax Against Sales Tax: The court noted that sections 3 and 4 of the OET Act and rule 18 of the OET Rules provide for the set-off of entry tax against sales tax. The petitioner, as an importer of motor vehicles, was liable to pay entry tax under section 3(2) of the OET Act. Rule 18's statutory illustration stipulates that the dealer must collect sales tax on the total value of the vehicle (including entry tax) and then claim set-off for the entry tax paid. The court referenced the case of LG Electronics (India) Ltd. v. State of Orissa [2007] 103 CLT 358, which clarified that "tax payable" under section 5A of the OST Act means "tax payable after set-off of entry tax from the sales tax assessed" on a dealer. The court concluded that the petitioner had acted in accordance with its lawful obligations by collecting and depositing sales tax and claiming set-off for the entry tax paid. Conclusion: The court held that the Sales Tax Officer's notice for levy of penalty was "wholly unfounded both on facts as well as law" and without jurisdiction. The petitioner was justified in claiming set-off of entry tax paid from the tax payable under the OST Act. The court allowed the writ applications, quashed the penalty notices, and ruled that the petitioner had not collected excess OST and surcharge. There were no costs awarded in the judgment. Separate Judgments: B.P. DAS J. concurred with the judgment delivered by INDRAJIT MAHANTY J.
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