2022 (1) TMI 103 - HC - VAT and Sales Tax

Reopening of assessment - initiation of proceedings under Section 12 (8) of the Orissa Sales Tax Act, 1947 - sales tax concession on purchase of raw materials and sale of finished product under IPR-92 and in terms of Entry-42 of the exemption list as per the Finance Department Notification dated 23rd September, 1992 - HELD THAT - The reason given for the reopening of the assessment for the year 1998-99 also does not stand scrutiny. The Petitioner has been merely informed that it is the same reason as per 1997-98 when in fact it could not have been. The basis for the claim of exemption for 1998-99 was in terms of Entry 44-A of the F.D. Notification dated 26th July 1996, which in fact permitted 100% exemption from sales tax. The decision in Vadilal Chemicals Ltd. 2005 (8) TMI 121 - SUPREME COURT is instructive in this regard. In similar circumstances in that case, the Supreme Court disapproved the approach of the sales tax authorities seeking to override the exemption granted by the Department of Industries and Commerce. It was held that the Deputy Commissioner of Commercial Taxes (DCCT) certainly could not assume that the exemption was wrongly granted nor did he have the jurisdiction under Section 20 of the State Act to go behind the eligibility certificate and embark upon a fresh enquiry with regard to the appellant's eligibility for the grant of the benefits. As the eligibility certificates were issued by the Department of Industries and Commerce and could not be cancelled by the Sales Tax Authorities - Petition allowed.

Summary

Issues:
Challenge to order rejecting application for reasons for initiation of proceedings under Section 12 (8) of the Orissa Sales Tax Act, 1947 and quashing of reassessment proceedings for the year 1998-99.

Analysis:

Issue 1: Rejection of Application for Reasons for Initiation of Proceedings
The petitioner challenged the order rejecting the application for reasons for initiating proceedings under Section 12 (8) of the Orissa Sales Tax Act, 1947 for the year 1998-99. The petitioner sought to quash the reassessment proceedings for the same period. The petitioner had set up a Small Scale Industry Unit under the Industrial Policy Resolution 1992 and was eligible for sales tax concessions. The District Industries Centre certified the petitioner's eligibility for sales tax exemption based on fixed capital investments. The Sales Tax Officer (STO) initiated reassessment proceedings for the year 1998-99 without providing valid reasons. The petitioner requested reasons for reassessment, which the STO declined to furnish, stating they were the same as the previous year. The petitioner argued that without a valid assessment order, reassessment cannot be initiated. The STO's decision lacked fresh material and objective satisfaction, essential for reopening assessments under the Act.

Issue 2: Legal Basis for Reassessment
The petitioner contended that the reassessment for the year 1998-99 could not be based on the same grounds as the previous year as the exemption claim was under a different entry. The petitioner relied on legal precedents to support the argument that the DIC certificate granting exemption should be considered by the STO. The Additional Standing Counsel for the Revenue Department acknowledged the petitioner's eligibility for sales tax exemption based on the initial certificate. The absence of an assessment order for the initial period meant there could be no reassessment proceedings, as clarified by legal authorities.

Issue 3: Justification for Reopening Assessment
The court found that the reasons provided for reopening the assessment for the year 1998-99 were not valid. The basis for the claim of exemption for that year was different from the previous year and permitted 100% exemption from sales tax. Legal precedents emphasized the importance of considering the DIC certificate granting exemption and disapproved of attempts to override such exemptions by tax authorities. The court set aside the STO's order and the reassessment proceedings for the year 1998-99, ruling in favor of the petitioner.

In conclusion, the court allowed the writ petition, setting aside the impugned order and reassessment proceedings for the year 1998-99, emphasizing the importance of valid reasons and legal basis for initiating reassessment under the Orissa Sales Tax Act, 1947.