2021 (8) TMI 887 - HC - VAT and Sales Tax

Assessment for liability of sales tax - assessment was set aside on the short ground that the law on works contract has undergone change and that unless there is a specific rule framed under Section 29 of the OST Act for assessment of works contract under the OST Act, there should be no assessment of liability of sales tax on works contract in terms of Section 5(2)(AA)(i) of the OST Act - HELD THAT - The Court is of the view that the impugned notice dated 20 th November, 2007 is unsustainable in law since it could have been issued only after complying with the specific directions issued in para 18 of the judgment dated 11th October, 2007. In other words, without framing the Rules as directed by the Court no fresh notice of hearing could have been issued. While setting aside the impugned notice dated 20th November, 2007 and permitting the Opposite Parties to issue a fresh notice of hearing in light of the Rules notified on 6 th February, 2010, the Court permits the Petitioner to raise all defences it has both in relation to such reassessment as well as validity of the Rules - Petition disposed off.

Summary

Issues:
Assessment under the Orissa Sales Tax Act, 1947 for the period 2004-2005; Validity of impugned notice for reassessment without framed rules; Compliance with court directions for reassessment; Legality of rules made subsequent to impugned notice.

Analysis:
The judgment concerns the Petitioner's assessment under the Orissa Sales Tax Act, 1947 (OST Act) for the period 2004-2005. In the first round of litigation, a common judgment was passed setting aside the assessment due to changes in the law on works contract. The court directed that unless specific rules are framed under Section 29 of the OST Act for assessment of works contract, no liability of sales tax should be assessed. The Petitioner was issued an impugned notice for reassessment without the required rules being framed. The court intervened, halting further steps against the Petitioner until rules were framed by the Opposite Parties. Subsequently, the Finance Department issued the Orissa Sales Tax (Amendment) Rules, 2010, effective retrospectively. The Petitioner argued that the notice was not sustainable as the rules were made subsequent to it. However, the Opposite Parties contended that with the rules in place, they should proceed with the assessment. The Court held that the impugned notice was unsustainable as it was issued without complying with the court's directions to frame rules first. The Court set aside the notice and allowed the Opposite Parties to issue a fresh notice in line with the newly notified Rules. The Petitioner was granted the right to challenge the rules and raise defenses during reassessment, including the issue of limitation. The Court clarified that it did not express any opinion on the merits of the case for either party. The impugned notification was set aside, and the writ petition was disposed of accordingly.