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Home Case Index All Cases VAT and Sales Tax VAT and Sales Tax + HC VAT and Sales Tax - 2021 (3) TMI HC This

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2021 (3) TMI 1024 - HC - VAT and Sales Tax


Issues:
Review of judgment regarding treatment of consumables as input under OVAT Act and imposition of penalty under Section 43(2) of the Act.

Analysis:
1. The review petitions involved a challenge by the National Aluminum Company Limited (NALCO) seeking a review of a judgment regarding the treatment of consumables like coal, alum, and caustic soda as input under the Orissa Value Added Tax Act (OVAT Act).

2. The main issues for consideration were whether the consumables used for electricity generation could be treated as input under Section 2(25) of the OVAT Act and whether the tax paid on such consumables could be claimed as input tax credit against the tax payable on the sale of finished products like aluminum.

3. The Court ruled in favor of NALCO, stating that the consumables used in the manufacturing process are considered inputs under the OVAT Act, allowing for the input tax credit against the tax payable on the sale of finished products.

4. Regarding the imposition of penalty under Section 43(2) of the OVAT Act, the Court clarified that the penalty is not automatic and that the assessing authority must be satisfied that the escapement or under assessment of tax is without reasonable cause before directing the dealer to pay the penalty.

5. The Court emphasized the distinction between Section 42(5) and Section 43(2) of the OVAT Act, highlighting that the AO has discretion under Section 43(2) to levy the penalty, unlike the mandatory penalty under Section 42(5) after an audit assessment.

6. The Court reviewed the judgment to clarify that the imposition of penalty under Section 42(5) was not warranted, as the relevant provision in the context was Section 43(2) of the OVAT Act, where the AO has discretion in levying the penalty based on the circumstances.

7. The review petitions were allowed to the extent of recalling the observation on the automatic imposition of penalty under Section 42(5) and clarifying the discretionary nature of the penalty under Section 43(2) of the OVAT Act based on the satisfaction of the assessing authority.

8. The judgment highlighted that the question of penalty would only arise if NALCO is held liable to pay tax, contingent upon the outcome of the Department's appeal in the Supreme Court.

9. The Court's decision provided clarity on the treatment of consumables as inputs and the discretionary nature of penalty imposition under the OVAT Act, ensuring a fair and just application of the tax laws.

 

 

 

 

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