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TMI Blog2008 (5) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs under Rule 12(8) of the CST (O) Rules can be initiated on the basis of the subject-matter which was not before the assessing officer at the time of original assessment in respect of which any appeal is pending either before the first appellate authority or second appellate authority. In the present case since the assessing officer has issued notice under Rule 12(8) of the CST (O) Rules on the basis of some new/fresh material alleging escapement of turnover relating to inter-State sale from the original assessment he was fully justified to take action under the said rule and issue notice under Rule 10 of the CST (O) Rules and to complete the reassessment on the basis of such notice. The appellate authorities while disposing of the appeal arising out an assessment order cannot take into consideration any fresh or new material which was not before the assessing officer but subsequently comes to light after completion of the assessment for the purpose of enhancement of the assessment. the appellate authorities while disposing of the appeal arising out an assessment order cannot take into consideration any fresh or new material which was not before the assessing officer but subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods to outside the State to the tune of Rs. 8,50,53,19,480, it failed to produce any evidence to that effect along with supporting declaration in form F for which the claim of branch transfers was disallowed. Accordingly, tax was levied at the appropriate rate on the turnover claimed to have been transferred to outside the State on stock-transfer basis. The assessing officer, vide his order dated March 31, 2005 passed under Rule 12(5) of the CST (O) Rules, has determined the gross turnover at Rs. 8,54,58,73,039 and net turnover at Rs. 8,54,43,13,286. On the said net turnover, the assessing officer levied tax to the tune of Rs. 13,85,98,769.94. Since the petitioner has paid tax amounting to Rs. 18,03,333 before furnishing return, the petitioner was asked to pay the balance amount of Rs. 1,66,06,06,474. 5. Against the said order, the petitioner filed first appeal which was dismissed by the Assistant Commissioner of Sales Tax, Cuttack-I Range, Cuttack by order dated February 15, 2006. Being aggrieved by the said order, the petitioner filed second appeal before the Tribunal under Section 23(3) of the Orissa Sales Tax Act read with Section 9(2) of the CST Act on April 26, 2006. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verification of the documents which were obtained reflecting the transaction it is calculated that during the period 2001-02 the dealer-company has delivered goods to the other oil company such as 228535 KL of HSD and 310550 KL of SKO. Since the goods as stated above have been delivered ex-tanker at the port of destination at Haldia, Port Blair to HPCL, BPCL and IBP Co. and the consignees bear the loss in transit proportionately, it is obvious that the goods were shipped for the purpose of delivery to the above companies. The transactions are clearly inter-State sales falling under Section 3(a) of the CST Act. HSD and SKO consigned by the instant dealer from outside the State of Orissa as inter-State purchase have been unloaded and taken delivery at Paradeep port in the State of Orissa and subsequently the same goods have been dispatched to other companies located outside the State of Orissa at Haldia in the State of West Bengal, Port Blair in Andaman which proves break in journey and another inter-State journey is started from Paradeep Port which is a sale in course of inter-State trade and commerce coming under the purview of Section 3(a) of the CST Act. On examination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of SKO and HSD are used for local sale inside the State of Orissa on which sales tax is paid. Some portion of the SKO and HSD is sold to other oil companies in Orissa. 9. The learned Counsel appearing for the petitioner further submitted that the petitioner claimed exemption from payment of tax on the ground that inter-State transfer of goods was not by reason of sale, but by way of stock transfer. This claim of the petitioner was prima facie accepted by the Commissioner of Sales Tax while granting full stay in exercise of powers conferred under Section 23 of the OST Act, on the basis of required F forms being furnished before him, pending disposal of the second appeal. He further submitted that in view of acceptance of form F and the fact that the matter is now pending adjudication before the Tribunal on the question whether it is an inter-State sale liable for tax or a branch transfer, notice under Rule 12(8) of the CST (O) Rules as well as order of reassessment is without jurisdiction. 10. The learned Counsel further submitted that proceeding under Rule 10 read with Rule 12(8) of the CST (O) Rules cannot be initiated for the assessment year 2001-02 for which the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax . (c) Commissioner of Sales Tax, Madhya Pradesh v. H.M. Esufali, H.M. Abdulali . 13. He also cited the decision of the honourable apex court in the case of Sales Tax Officer v. Uttareswari Rice Mills for the purpose of construction of the provision. 14. Per contra, learned Counsel for the Revenue submitted that the scheme of the Act in respect of the first appellate order is that only the assessee has a right to make an appeal and not the department. He seriously challenged the contention of the petitioner that the first appellate authority has the power to enhance or reduce the assessment under appeal or that the Revenue has an opportunity to enhance the assessment for the reasons for which assessment has been reopened. According to him, if the contention of the petitioner is accepted it will amount to giving the department a right to appeal against the order of assessment in question which is not contemplated in the scheme of the Act. In support of his contention, the learned Counsel relied on the decision of the honourable Supreme Court in the case of Commissioner of Income-tax v. Amritlal Bhogilal and Co. . 15. In the above backdrop, questions which fall for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, the sales tax authority may at any time within five years from the expiry of the year to which the said period relates call for a return after complying with the provisions of Rule 10 and proceed to assess the amount of tax due from the dealer. The sales tax authority may also direct in cases where escapement or under-assessment is due to the dealer having concealed particulars of his turnover or having without sufficient cause furnished incorrect particulars thereof the dealer shall pay penalty in addition to the tax assessed. Such penalty shall not exceed to one-and-a-half times the amount of the tax so assessed. 18. The petitioner has been informed of the reason for reopening of assessment for the year 2001-02 under the CST Act by the assessing officer in his letter dated December 30, 2006. The said letter is set out hereinbelow: Office of the Commercial Tax Officer : Cuttack I East Circle, Cuttack No. 5259/CT dated December 30, 2006 To M/s. Indian Oil Corporation Limited Sikharpur, Cuttack bearing TIN-21181202651 Orissa State Office, 304, Bhoi Nagar, Unit-IX Bhubaneswar-751 022 Sub : Reasons for reopening of assessment for the year 2001-02 under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome form before initiation of proceeding under Section 12(8) of the OST Act. He must at least indicate the basis for such prima facie satisfaction that there has been escapement of assessment or under-assessment. In absence of such a recording of satisfaction, the initiation of proceeding under Section 12(8) is not sustainable in the eye of law. [See Suburban Industries Kalinga Private Limited v. Sales Tax Officer, Bhubaneswar [1993] 90 STC 280 (Orissa), State of Orissa v. Ugratara Bhojanalaya [1993] 91 STC 76 (Orissa), Indure Limited v. Commissioner of Sales Tax [2006] 148 STC 61 (Orissa) and D. Ch. Guruvalu Son Co. v. Sales Tax Officer, Koraput-II Circle, Dist: Rayagada reported in [2008] 14 VST 509 (Orissa) : [2008] I OLR 18 (Ori)]. 21. The letter of the assessing officer (annexure 5 series) as quoted above clearly reveals that the assessing officer has indicated reason for reopening of the assessment and the same has been communicated to the assessee. 22. The provisions of Rule 12(8) of the CST (O) Rules contemplate that action in this rule shall be initiated within five years from the relevant year in which escapement is alleged. In the present case, the original asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adly described as an order of assessment. It is a final order disposing of an appeal which in a sense is a continuation of assessment. This order has been rendered by the honourable Supreme Court considering the provisions of the Bombay Sales Tax Act, 1959 which constitutes the Tribunal as an appellate as well as revisional authority over the Commissioner. The honourable apex court held that the Tribunal is the supreme appellate authority as well as the revisional authority under that Act. It cannot be divested of its jurisdiction to decide the correctness of an order. It cannot be frustrated in the exercise of that jurisdiction merely because of subordinate authority, the Commissioner has also been vested with jurisdiction over that order. There is no dispute over the proposition of law laid down in that judgment. In that case, their Lordships held that when jurisdiction of superior authority is invoked against an order and when that authority is seized of the case it is not permissible for the subordinate authority to claim exercise of jurisdiction to revise that very order. In the present case, the assessing officer is not revising the original assessment order. What he is doing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here an appeal relating to a particular assessment year would be disposed of after five years from the end of the financial year in which the escapement or under-escapement is alleged. This is because the limitation of five years for initiating proceedings under Rule 12(8) of the CST (O) Rules runs from the end of the relevant year in which escapement or under-assessment is alleged. In that event, no proceeding under Rule 12(8) of the said Rules can be initiated even in a case where there is escapement of assessment or under-assessment. This is certainly not the intention of the Legislature. 28. The honourable apex court in the case of Sales Tax Officer v. Uttareswari Rice Mills while analysing the provisions of Section 12(8) of the OST Act held that approach in this matter has to be practical and not pedantic. Any view which would make the opening words of Section 12(8) unworkable has to be avoided. In the said judgment, the observations of the judicial committee which dealt with the language of Section 34 of the Indian Income-tax Act, 1922 have been quoted. Section 34 of the Income-tax Act, 1922 is similar to Section 12(8) of the OST Act. According to the judicial committee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enabling the assessing officer to bring any new/fresh adverse material to the notice of appellate authority which comes to his possession after completion of original assessment order. Under the statute, the appellate authorities are also not vested with any power/authority to accept and consider any such new/fresh adverse material while disposing of appeal for the purpose of enhancement. Thus, there is no scope for the assessing officer to bring any new/fresh material which subsequently comes to his possession relating to escaped turnover or the fact of under-assessment to the notice of the first and second appellate authorities for their consideration while disposing of the appeal. 31. It will also amount to judicial impropriety on the part of an appellate authority to consider any material which is not the subject-matter before the assessing officer. Both the first and the second appellate authorities are empowered to decide in appeal the issues adjudicated in the assessment order. They cannot decide any issue which was not considered by the assessing officer in the assessment order. Thus, the subject-matter on the basis of which reassessment proceeding is initiated being not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the present case, by exercising power under Section 12(8) of the CST (O) Rules, the assessing officer has confined assessment to the matters which had escaped assessment earlier as evident from the concluding part of the impugned order. In that view of the matter, this case is not applicable to the present case. 35. In the case of Hind Wire Industries Ltd. [1995] 212 ITR 639 (SC); AIR 1995 SC 1133 the question before the honourable Supreme Court was with regard to the period of limitation prescribed under Section 154(7) of the Income-tax Act, 1961. While considering the provisions of said section, the honourable apex court held that Section 154(7) of the Income-tax Act prescribes limitation of four years for exercising power of rectification of mistake and such period has to be computed from the date of the order sought to be amended. In that case the honourable apex court held that the word order in the aforesaid expression from the date of order sought to be amended , has not been qualified in any way and it does not necessarily mean the original order. It can be any order including the amended or rectified order. Hence, when the I.T.O. has not taken into consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssess the turnover once again which he had already assessed in the original assessment order as evident form the concluding part of the impugned assessment order. Hence, this case is also of no help to the petitioner. 37. Apart from that, none of the issues involved in this case was considered by the honourable apex court in the above three cases. 38. In the present case, the stand of the Revenue is that subsequent to the completion of the original assessment, it came to the notice of the assessing officer that there were some inter-State transactions effected by the petitioner-company during the period 2001-02. But on verification of the assessment record, prima facie the assessing officer found that the same has not been disclosed in the return and also at the time of assessment. Hence, he came to the conclusion that there was reason to believe that the dealer had been under-assessed due to default in disclosing the true and correct picture of business transactions during the year in question. Petitioner's case is that the alleged transactions were already disclosed by the petitioner-company as its branch transfer. These are purely disputed questions of facts. Such fact ..... 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