2023 (4) TMI 149 - HC - VAT and Sales Tax

Levy of Entry Tax - Hydrate Lime being a chemical can be treated as a schedule goods under the O.E.T. Act as mentioned in SI. No.6 Part-1 of Schedule appended to the O.E.T. Act, or not - validity of confirming the charging of entry tax on imported coke, when the dispute is pending for decision by the Larger Bench of the apex Court - imposition of penalty U/s. 7(5) of the O.E.T. Act - HELD THAT - Section 7(5) has to be construed to mean that the presumption contained therein is rebuttable and the penalty of one and half times of tax assessed stipulated therein is only the maximum amount, which could be levied and the Assessing Authority has the discretion to levy lesser amount depending upon the facts and circumstances. In the absence of satisfaction, the presumption is that non-disclosure in the return is with an intention to evade payment of entry tax and, as such, depending on the facts of each case the Assessing Authority has to decide what would be the reasonable amount of penalty to be imposed. Thus, cardinal principle of the statute is that under the Act penalty may be imposed for failure to pay entry tax and furnish the return in due time, but the liability to pay penalty does not arise merely upon proof of default in filing return or failure to pay entry tax and furnish the return in due time. The Odisha Entry Tax Act being a new legislation and the petitioner being under the bona fide belief that the disputed goods is an un-scheduled goods and there being some confusion with regard to levy of entry tax on goods imported, being a new legislation, which is in a fluid state, no penalty should have been imposed - The cardinal principle of taxing statute is that when two views are possible, the view favourable to the assessee should be preferred and in that view of the matter no penalty should have been imposed on the petitioner. In view of the meaning attached to the word penalty under different provisions of different taxing statute, in an unequivocal term it can be said that the penalty ordinarily becomes payable when it is found that an assessee has wilfully violated any of the provisions of the taxing statute. In view of the fact that in the instant case the petitioner has already paid the tax and so far as payment of tax is concerned there is no dispute. Since there is no violation or deviation in payment of tax, as a consequence thereof, the petitioner is not liable to pay the penalty - the impugned orders passed by the Assessing Authority, First Appellate Authority and the Sales Tax Tribunal, Cuttack, so far as imposition of penalty under Section 7(5) of the O.E.T. Act is concerned, are hereby quashed. The revision is allowed.

Summary

Issues Involved:
1. Whether "Hydrate Lime" can be treated as a scheduled good under the O.E.T. Act and is liable for entry tax.
2. Whether entry tax on imported coke is valid when the issue is pending before the Supreme Court.
3. Whether the imposition of penalty under Section 7(5) of the O.E.T. Act is justified.

Issue 1: Hydrate Lime as Scheduled Good
The Sales Tax Tribunal held that "Hydrate Lime" is a chemical and can be treated as a scheduled good under the O.E.T. Act, relying on the case of *State of Gujarat v. Shah Bhagwanji Manekchand* where the High Court of Gujarat held that lime is a chemical. The Tribunal concluded that the same can be taxed under the Orissa Entry Tax Act.

Issue 2: Entry Tax on Imported Coke
The petitioner argued that the demand for entry tax on the purchase value of imported coke is illegal and relied on the decision of the Kerala High Court in *Fr. William Fernandez v. State of Kerala*. However, the Tribunal confirmed the charging of entry tax on imported coke despite the pending decision by the Larger Bench of the Supreme Court.

Issue 3: Imposition of Penalty under Section 7(5) of the O.E.T. Act
The petitioner contested the imposition of penalty, arguing that they had paid the tax on time and relied on the case of *Tata Steel Ltd. v. State of Odisha*. The court emphasized that penalty under Section 7(5) should not be imposed if non-submission of the statement/return was not with the intention to evade tax. The court referred to various precedents, including *Hindustan Steel Ltd. v. State of Orissa*, which held that penalty should not be imposed unless the party acted deliberately in defiance of the law or was guilty of contumacious conduct.

Judgment:
The court concluded that the petitioner had already paid the tax, and there was no violation or deviation in payment. Therefore, the petitioner is not liable to pay the penalty. The impugned orders by the Assessing Authority, First Appellate Authority, and the Sales Tax Tribunal regarding the imposition of penalty under Section 7(5) of the O.E.T. Act were quashed. The revision was allowed, and no costs were ordered.