2022 (7) TMI 763 - HC - VAT and Sales Tax

Benefit of decision of SC in another case - Levy of penalty u/s 10 of the OET Act - dispute with regard to Levy of Tax on the goods in question is pending before the Apex Court? - HELD THAT - That can be no doubt that the levy of penalty does not have to be automatic. It is contingent on the STO being satisfied that the escapement of tax was without any reasonable cause . In the present case, the justification put forth by the Petitioner is that in terms of the decision of this Court in RELIANCE INDUSTRIES LIMITED VERSUS STATE OF ORISSA (AND OTHER CASES) 2008 (2) TMI 825 - ORISSA HIGH COURT it withheld the payment of entry tax. However, in the said decision handed down by this Court on 18th February 2008, the challenge to the validity of the OET Act was negatived. The Petitioner did not choose to join the Petitioners who had challenged the vires of the OET Act or even the requirement thereunder of having to pay entry tax on the goods purchased from outside the State - The decision of this Court was applicable to those who had approached it. Even, the interim order passed by the Supreme Court was confined to those parties who had approached the Court. The Petitioner could not have taken advantage of it. Therefore, the Petitioner had no reasonable cause to withhold payment of entry tax when it fell due. The Court is of the view that the penalty under Section 10 (2) of the OET Act was rightly levied on the Petitioner by the STO. In other words, the Court does not find any error having been committed by the STO in exercising the discretion in terms of Section 10 (2) of the OET Act to levy the penalty. The question framed is answered in the affirmative, i.e., in favour of the Department and against the Assessee. It is clarified that since the Tribunal has deleted the levy of interest as ordered by the DCST, it is not payable by the Assessee and any amount paid under that head will be adjusted again the penalty to be paid by the Assessee in terms of the impugned order of the Tribunal - revision petition dismissed.

Summary

Issues:
Assessment of penalty under Section 10 of the Orissa Entry Tax Act, 1999 based on the escapement of tax without reasonable cause.

Analysis:
The petitioner, a manufacturer of PVC suction and Garden pipes, was subjected to assessment proceedings under Section 10 of the OET Act due to allegations of non-payment of entry tax on goods purchased from outside the State. The petitioner argued that it withheld the tax payment based on a previous court judgment until an interim order by the Supreme Court prompted compliance. The assessing officer levied a penalty under Section 10 along with the tax amount. The Deputy Commissioner of Sales Tax (DCST) later deleted the penalty but imposed interest for withholding tax arbitrarily, which the petitioner paid in full.

The State appealed against the DCST's decision, leading to the Tribunal's order confirming the tax and penalty while deleting the interest. The High Court was tasked with determining whether the penalty under Section 10 was rightfully imposed. The petitioner contended that there was no reasonable cause for the penalty since it acted based on a court judgment. However, the court noted that the previous judgment did not provide a valid basis for withholding tax, as it did not challenge the entry tax requirement and was not applicable to all parties. Therefore, the court upheld the penalty imposed by the assessing officer, finding no error in exercising discretion under Section 10 of the OET Act.

The court ruled in favor of the Department, dismissing the revision petition and clarifying that the interest deleted by the Tribunal need not be paid by the petitioner. Any amount paid under interest would be adjusted against the penalty imposed by the Tribunal.