2022 (12) TMI 1394 - HC - VAT and Sales Tax

Levy of Entry Tax - scheduled goods imported from outside the territory of India - Section 3 of the Odisha Entry Tax Act 1999 - levy of penalty u/s10(2) of the Act - Whether levy under Section 3 of the Odisha Entry Tax Act 1999 is attracted on scheduled goods imported from outside the territory of India? - HELD THAT - The issue now stands settled in STATE OF KERALA AND OTHERS VERSUS FR. WILLIAM FERNANDEZ ETC. ETC. 2017 (10) TMI 491 - SUPREME COURT where it was held that We thus do not find any substance in the submission of the learned counsel for the petitioner that entry tax legislation is not covered by Entry 52 List II. - the Court declines to frame question as urged. Whether in the facts and circumstances of the case levy of penalty U/s.10(2) of the Act is warranted? - HELD THAT - With the legal position having been settled only in October 2017 most of the Dealers-Assessees were under bona fide impression that Entry Tax would not payable on goods imported into India. Therefore it could reasonably be contended that till such time there was no willful or deliberate attempt by the Dealer-Assessee to waive payment of Entry Tax. The Court notes that under Section 10 (2) of the OET Act there is an element of discretion in the Assessing Authority to levy penalty where the escapement or under assessment of tax is without any reasonable cause. Since the Court is satisfied that the non-payment of Entry Tax on imported goods by the Petitioner cannot be said to be without reasonable basis the Court is of the view that in the present case the levy of penalty was not justified. The question is accordingly answered in the negative i.e. in favour of the Petitioner and against the Department. The impugned Assessment order in so far as it imposes penalty on the Petitioner is hereby set aside - Revision petition allowed.

Summary

Issues Involved:
1. Interpretation of Section 3 of the Odisha Entry Tax Act, 1999 on scheduled goods imported from outside India
2. Levy of penalty under Section 10(2) of the Act

Analysis:

1. Interpretation of Section 3 of the Odisha Entry Tax Act:
The revision petition raised two questions related to the Order passed by the Orissa Sales Tax Tribunal. The first question queried the applicability of the levy under Section 3 of the Odisha Entry Tax Act on scheduled goods imported from outside India. The Court referred to a Supreme Court decision in State of Kerala v. Fr. William Fernandez, (2021) 11 SCC 705, which settled the issue. Consequently, the Court declined to frame the first question, affirming the settled legal position on the matter.

2. Levy of Penalty under Section 10(2) of the Act:
Regarding the second question on the levy of penalty under Section 10(2) of the Act, the Court considered the legal position as of October 2017. It noted that many Dealers-Assessees were under a genuine impression that Entry Tax was not payable on imported goods until the legal position was clarified. The Court observed that under Section 10(2) of the OET Act, the Assessing Authority has discretion to levy a penalty when there is an escapement or under-assessment of tax without any reasonable cause. In this case, the Court found that the non-payment of Entry Tax by the Petitioner had a reasonable basis, indicating no willful or deliberate attempt to evade payment. Therefore, the Court held that the levy of penalty was not justified.

In conclusion, the Court answered the second question in favor of the Petitioner, setting aside the penalty imposed in the Assessment order and subsequent orders. The revision petition was allowed, and the Court directed the issuance of an urgent certified copy of the order.