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2023 (4) TMI 760 - HC - VAT and Sales TaxSuppression of sales or not - peas - confirmation of order based on conjectures and surmises - doubt and suspicion - Levy of penalty - satisfaction of the Assessing Officer that the escapement of tax was without reasonable cause - Section 43(2) of the Odisha Value Added Tax Act, 2004. HELD THAT - The discretionary exercise of power amounts to something that is not compulsory, but it is left to the discretion of the person or authority involved, such as a discretionary grant. It is opposite to mandatory . Therefore, discretionary is a term which involves an alternative power, i.e., a power to do or refrain from doing a certain thing. In other words, it would be power of free decision or choice within certain legal bounds - The significant words employed in Section 43(2) of the OVAT Act are he may direct the dealer to pay, by way of penalty . The language itself gives clear indication of application of discretion. Discretion, as it appears from generic sense, may be unrestricted, but in its application it demands certain rule of law to be followed and reposes conduct and application of mind, testing whether the delegates of it acted rationally, fairly without fear and favour taking all relevant fact and material considerations. Discretion conferred, if unqualified and untrammelled, it has to be exercised sparingly with abundant caution when facts and circumstances warrant. Such being conceptual understanding of the term discretion based on well-settled dicta of different Courts and its application to fact-situation of given case, considering the present case in the said perspective, it seems that the learned Odisha Sales Tribunal, while considering certain allegations out of eight categories as reflected in the Assessment Order based on the contents of Fraud Case Report as unsustainable but for two, failed to apply its judicial discretion while imposing penalty by invoking powers under Section 43(2) of the OVAT Act. Discretion as applied by the Tribunal should have been supported by independent reason for exercise of said power. In the case at hand, the learned Odisha Sales Tax Tribunal after computing the tax effect on establishing suppression of turnover to the tune of Rs. 6,00,332/-, as if there is absence of discretion in invoking power under Section 43(2) and construing the provision as mandatory in every circumstance, without discussing anything more, simply imposed penalty equal to twice the amount of tax so determined. Such exercise of power, in the opinion of this Court, is arbitrary, illogical and indicative of non-application of mind. Since penalty is a statutory liability and is substantive in nature, the provisions for imposition thereof are to be strictly construed. It is, therefore, pertinent to put forth the well-accepted principle with regard to strict interpretation. In a taxing statute one has to look at what is clearly said. There is no equity about a tax. There is no intendment. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly on the language used. If the meaning of the provision is reasonably clear, Courts have no jurisdiction to mitigate harshness. A Court of law, has nothing to do with the reasonableness or unreasonableness of a provision of a statute except so far as it may hold it in interpreting what the Legislature has said - The Court is to ascribe the natural and ordinary meaning to the words used by the Legislature and the Court ought not, under any circumstances, to substitute its own impression and ideas in place of the legislative intent as is available from a plain reading of the statutory provisions. Section 43(2) of the OVAT Act specifically requires satisfaction of the Assessing Authority to be recorded while proceeding to exercise said power to impose penalty. The authority has to determine whether a penalty should be imposed and if it decides to impose a penalty the extent of the penalty liable to be imposed has been fixed in the statutory provision under Section 43(2) of the OVAT Act - Sri Rudra Prasad Kar, learned counsel for the petitioner laid stress upon the fact that the learned Tribunal accepted the explanation proffered by the petitioner with respect to 29 written pages contained in small note book which related to transactions procured through brokers and held that the allegation in the Fraud Case Report is not established - Agreeing with the contention of the learned counsel for the petitioner, there is no warrant for imposition of penalty under Section 43(2) of the OVAT Act. Since this Court held that there is little scope in interfering with the factual adjudication made by the learned Odisha Sales Tax Tribunal, Cuttack, question Nos. I, II and III are answered against the petitioner-assessee and in favour of the Revenue-opposite party. So far as question No. IV is concerned, this Court, having noticed infirmity in exercise of power and improper use of discretion to impose of penalty under Section 43(2) of the OVAT Act by the learned Odisha Sales Tax Tribunal, answers said question in the affirmative, i.e., in favour of the assessee-dealer and against the opposite party- Revenue. The sales tax revision petition is disposed off.
Issues Involved:
1. Suppression of sales amounting to Rs. 4,20,812/- 2. Suppression of sales amounting to Rs. 1,79,520/- (10.56 MT of peas) 3. Justification of assessment without rejecting books of account 4. Legality of sustaining penalty under Section 43(2) of the OVAT Act 5. Application of amended Section 43(2) of the OVAT Act 6. Overall reasonableness and rationality of the Tribunal's order Summary: Issue I: Suppression of Sales Amounting to Rs. 4,20,812/- The Odisha Sales Tax Tribunal confirmed the finding of the Assessing Authority regarding suppression of sales based on 89 handwritten slips involving Rs. 4,20,812/-. The Tribunal found evidence of procurement of orders through brokers and receipt of payments, which established the suppression. The Court upheld this finding, noting that factual adjudications by the Tribunal seldom give scope for re-appreciation of evidence in revision proceedings. Issue II: Suppression of Sales Amounting to Rs. 1,79,520/- (10.56 MT of Peas) The Tribunal disbelieved the dealer's claim of self-arrangement for taking back 10.56 MT of peas without delivery challans. The Tribunal found no plausible explanation for not producing delivery challans, thereby establishing suppression. The Court upheld this finding, emphasizing that factual disputes settled by the Tribunal cannot be re-adjudicated in revision proceedings. Issue III: Justification of Assessment Without Rejecting Books of Account The Court found that the assessment was based on the value of goods found to be suppressed, supported by the dealer's declaration. The basis for quantification of suppressed transactions was clearly spelt out in the Assessment Order. The Court held that there was a valid basis for the assessment and rejected the contention that the assessment was unjustified without rejecting the books of account. Issue IV: Legality of Sustaining Penalty Under Section 43(2) of the OVAT Act The Court found that the Tribunal imposed the penalty mechanically without ascribing any reason, contrary to the discretionary nature of Section 43(2). The Tribunal failed to record satisfaction that the escapement of tax was without reasonable cause, a prerequisite for imposing penalty. The Court set aside the penalty of Rs. 48,026.56, emphasizing that penalty provisions should be strictly construed and discretionary power must be exercised judiciously with recorded reasons. Issue V: Application of Amended Section 43(2) of the OVAT Act The Court acknowledged the distinction between Sections 42(5) and 43(2) of the OVAT Act, noting that the latter confers discretionary power on the Assessing Authority to impose penalties only if the escapement of tax is without reasonable cause. The Tribunal's failure to apply this discretion judiciously was a significant error. Issue VI: Overall Reasonableness and Rationality of the Tribunal's Order The Court concluded that the Tribunal's order lacked proper reasoning for the imposition of penalty and failed to exercise discretion judiciously. The Tribunal's factual findings on suppression were upheld, but the penalty imposition was set aside due to non-compliance with statutory requirements for discretionary power. Conclusion: The Court upheld the Tribunal's findings on suppression of sales but set aside the penalty imposed under Section 43(2) of the OVAT Act due to improper exercise of discretion and lack of recorded reasons. The determination of tax liability to the tune of Rs. 24,013.28 was sustained. The sales tax revision petition succeeded partially, with no order as to costs.
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