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TMI Blog2023 (4) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... ission of any fraud has not been established, nor the petitioner has been found to have illegally deducted any turnover as exempted sale to affect the tax liability, in that case imposition of penalty under Rule 12(4)(c) cannot have any justification. The discretionary exercise of power amounts to something that is not compulsory, but it is left to discretion of the person or authority involved, such as a discretionary grant. It is opposite to mandatory. Therefore, discretionary is a term which involves an alternative power, i.e., a power to do or refrain from doing a certain thing. In other words, it would be power of free decision or choice within certain legal bounds. If Rule 12(4)(c) provides for exercise of discretionary power for imposition of penalty, the assessing officer should have exercised such discretionary power reasonably. In absence of any rationality or reasonability, exercise of discretionary power can be construed as arbitrary and unreasonable exercise of power by the authority. Therefore, when the first appellate authority examined the fact vis- -vis contention raised by the parties and came to a definite finding that the petitioner has not suppressed any turnov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the language used. If the meaning of the provision is reasonably clear, Courts have no jurisdiction to mitigate harshness - The Court is to ascribe the natural and ordinary meaning to the words used by the Legislature and the Court ought not, under any circumstances, to substitute its own impression and ideas in place of the legislative intent as is available from a plain reading of the statutory provisions. The question of law as framed by this Court is answered in the negative, i.e., in favour of the petitioner-assessee and against the State of Odisha-Revenue - the sales tax revision petition allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... form as an SSI Unit), 4% on Rs.2,10,99,800/- (sale without 'C' form of cashew kernel) came to Rs.9,94,828/-, against which the dealer had already paid Rs.9,33,802/- through challans. Therefore, the tax dues came to Rs.61,026/-. As such, an amount of Rs.1,22,052/- was imposed as penalty under Rule 12(4)(c) of the CST (O) Rules, 1957. Therefore, the total tax and penalty together came to Rs.1,83,078/- to be paid by the petitioner-dealer. Consequentially, the demand notice was issued to the petitioner-dealer. 2.1 Against the aforesaid order of assessment demanding Rs.1,83,078/- which includes penalty of Rs.1,22,052/- under Rule 12(4)(c) of the CST (O) Rules, 1957, the petitioner-dealer preferred an appeal under Section 9(2) of the CST Act and Rule 22 of the CST (O) Rules read with Section 77(1) of the OVAT Act, 2004 which was registered as AAC (KOR) 20/12-13. The appellate authority, upon hearing, vide order dated 30.10.2013, came to a definite finding that, so far as imposition of maximum penalty under Rule 12(4)(c) of the CST (O) Rules, 1957 is concerned, the petitioner had not suppressed any turnover which would affect the revenue. The appellate authority also held that no suppres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty imposed under clause (c) of sub-rule (4) of Rule 12 of the CST (O) Rules particularly when the order of assessment has been made under Rule 12(4) (a) of the CST (O) Rules on the basis of the scrutiny of returns without completion of assessment under sub-rule (1), (2) or (3) of Rule 12 of the CST (O) Rules? (D) Whether on the facts and in the circumstances of the case, the Tribunal has committed gross illegality in upholding the levy of penalty undisputedly when the first appellate authority has satisfied that there was no escapement of tax and the adjustment of VAT against CST payable was with reasonable cause? (E) Whether on the facts and circumstances of the case, the imposition of penalty under Rule 12 (4) (c) of the CST (O) Rules is maintainable or sustainable in the eye of law in absence of any substantial provisions under the CST Act, 1956?" 4. As a matter of fact, this Court, vide order dated 28.11.2017, has admitted the revision petition on the following question of law:- "(B) Whether in the facts and circumstances of the case, the learned Tribunal was justified in upholding the penalty equal to twice the amount of tax particularly when there was no suppress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not deserve indulgence in the present proceeding. 7. "Escaped Assessment" can be understood in common parlance as that the turnover cannot be said to have escaped assessment except in the case where an assessment has been made which does not include the turnover. At all events, such turnover has not escaped assessment if they are pending at the time proceedings for the assessment of the assessee's figures disclosed in the return which have not yet terminated in a final assessment thereof. More so, the words "for any reason" placed before the expression "escaped assessment" clearly indicate that the Legislature intended to include all those cases which either resulted from mere inadvertence or from conscious misapprehension of the proper situation. There is no justification for confining the meaning of the word "escape" to those cases only which have not come to the notice of the assessing officer at all and excluding those cases where he has applied his mind, but on account of an error of judgment has set any part of the turnover free from assessment. More specifically, the expression "escaped assessment" is not the same thing as "escaped from assessment". But in the technical sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated and if he is satisfied that the escapement is without any reasonable cause, he may direct the dealer to pay, by way of penalty, a sum equal to twice the amount of tax additionally assessed. ***" 10. Bare perusal of aforesaid provisions of Rule 12(4) which enables the Assessing Authority to initiate action for assessment is dependent on certain pre- conditions, namely: i. Initiation of the assessment under Rule 12(4) should be preceded by assessment under sub-rule (1), (2) or (3); ii. The basis for action is information in the possession of the Assessing Authority; iii. On the basis of such information opinion must be formed by the Assessing Authority; iv. Such opinion must relate to the following eventualities: a. the whole or any part of the turnover of the dealer in respect of any period or periods has escaped assessment; or b. the whole or any part of the turnover of the dealer in respect of any period or periods has been under-assessed; or c. the whole or any part of the turnover of the dealer in respect of any period or periods has been assessed at a rate lower than the rate at which it is assessable; or d. the dealer has been allowed wrongly any de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without C Form for Rs.2,03,84,800.00, CST of Rs.9,33,802.00 and shown adjustment of Rs.56,041.00 against VAT ITC. But on verification it is found that the dealer has no input tax credit for that tax period to adjust. As the dealer has paid excess amount of tax under the OVAT Act, he cannot adjust the same against the CST dues. ***" 13. Against imposition of penalty, the assessee has submitted by way of grounds of appeal before the First Appellate Authority as follows, which forms part of the Appellate Order: "In the instant case, the dealer has by mistake paid under the OVAT challan instead of CST challan. The tax payment is made, so the dealer cannot be penalized on wrong interpretation and it should be broadly considered." Since the aforesaid fact and figure of turnover found incorporated in the account books, this Court is of the considered opinion that the Assessing Authority has not applied his mind to the material fact available on record. This view is supported by the dicta of Hon'ble Supreme Court laid down in Sree Krishna Electricals Vrs. State of Tamil Nadu and Another, (2009) 23 VST 249 (SC). 14. The discretionary exercise of power amounts to something that is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionary power reasonably. In absence of any rationality or reasonability, exercise of discretionary power can be construed as arbitrary and unreasonable exercise of power by the authority. Therefore, when the first appellate authority examined the fact vis-à-vis contention raised by the parties and came to a definite finding that the petitioner has not suppressed any turnover which will affect the revenue and the discretionary power has been vested with the assessing officer while imposing penalty under Rule 12(4)(c) and in fact there has been no suppression of any turnover or fraud nor the petitioner has been found to have illegally deducted any turnover as exempted sale which will affect the tax liability, it limited the penalty to Rs.30,000/- instead of Rs.1,22,052/-. But the tribunal, while passing the order impugned, has come to a different conclusion construing as if the assessing authority is mandatorily required to impose penalty of a sum equal to twice the amount of tax additionally assessed under Rule 12(4)(c), restored the assessment order. The learned Tribunal has failed to consider the effect of words "if he is satisfied that the escapement is without any reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Textile Processors and others (2008) Volume-18 VST 180 (SC), not considered the subsequent decision of the Supreme Court in Union of India Vrs. Rajasthan Spinning and Weaving Mills 2009 (Vol.238) ELT Page-3, both of which were in the context of Section 11 AC of the Central Excise Act, 1944. The wording of the said provision was not on par with the wording of Section 43(2) of the OVAT Act. The further grievance is that there was no occasion for the Court to have made any observations as regards the imposition of penalty under Section 42 (5) of the OVAT Act as the said provision was in the context of audit assessment and differently worded from Section 43(2) of the OVAT Act. *** 11. The Court notes that under Section 42(5) of the OVAT Act the penalty levied is "equal to twice the amount of tax assessed" under Section 42(3) or 42(4) pursuant to an audit assessment. There is no discretion with the Assessment Officer (AO) to reduce this amount of penalty. On the other hand, Section 43(2) of the OVAT Act is under the heading "Turnover escaping assessment", and is differently worded. It reads thus: '43 (2) If the assessing authority is satisfied that the escapement or under assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny reasonable cause'. ***" 20. Applying the above ratio to the present context, the essential component of Section 43(2) of the OVAT Act for attracting the penalty, i.e., satisfaction of the assessing officer that the escapement of tax was without reasonable cause, if the same principle will apply to the provisions contained under Rule 12(4)(c) of the CST (O) Rules, 1957, nothing has been placed on record to indicate that there is satisfaction of the assessing officer that the escapement of tax was without reasonable cause. In absence of the same, imposition of penalty cannot be sustained in the eye of law. 21. In the judgment dated 07.12.2022 rendered in STREV No. 17 of 2016 (M/s United Electricals & Engineering Pvt. Ltd. v. State of Odisha) to which one of us (Mr. Justice M.S. Raman) was a party, this Court has come to the similar finding and answered the question in favour of the assessee and against the department. 22. Another pertinent aspect which deserves discussion in the present context is non-recording of satisfaction by the Assessing Authority to the effect that "the escapement is without any reasonable cause". The following observation of this Court is found in Unite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able cause" shown by the petitioner-assessee in connection with the discharge of tax liability, but there is no intention to evade payment of tax. Unless the assessing authority records satisfaction as provided under clause (c) of Rule 12(4) to the effect that the escapement was "without any reasonable cause", he should not have imposed penalty. 24. Penalty is not prescribed for mechanical imposition because law permits such a levy. It is well settled legal position that while interpreting the provisions of the statute, every part of the provisions of the statute has to be given effect to and one part cannot be interpreted in a manner inconsistent with another part of the statute that would defeat the object and purpose of the Act and rules framed thereunder. As laid down in Mohammad Ali Khan and Others Vrs. Commissioner of Wealth Tax, AIR 1997 SC 1165 wherein the following lines has been quoted from J.K. Cotton Spinning & Weaving Mills Co. Ltd. Vrs. State of Uttar Pradesh, AIR 1961 SC 1170: "The Courts always presume that the Legislature inserted every part thereof for a purpose and the legislative intention is that every part of statute should have effect." It is also well-es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing is to be implied. One can only look fairly on the language used. If the meaning of the provision is reasonably clear, Courts have no jurisdiction to mitigate harshness. A Court of law, has nothing to do with the reasonableness or unreasonableness of a provision of a statute except so far as it may hold it in interpreting what the Legislature has said. If the language of a statute be plain, admitting of only one meaning, the Legislature must be taken to have meant and intended what it has plainly expressed, and whatever it has in clear terms enacted must be enforced though it should lead to absurd or mischievous results. The Court is not to be concerned with the question whether the policy that the provision embodies is wise or unwise, or whether it leads to consequences just or unjust, beneficial or mischievous. As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the Legislature cannot then be appealed to whittle down the statutory language which is otherwise unambiguous. If the intendment is not in the words used it is nowhere else. The need for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d principles have been followed subsequently State of Uttar Pradesh Vrs. Singhara Singh, AIR 1964 SC 358, Dhananjay Reddy Vrs. State of Karnataka, AIR 2001 SC 1512, Chandra Kishore Jha Vrs. Mahabir Prasad, AIR 1999 SC 3558, Gujrat Urja Vikas Nigam Ltd. Vrs. Essar Power Ltd., AIR 2008 SC 1921, Ram Deen Maurya Vrs. State of U.P., (2009) 6 SCC 735. 11. It is apt to refer here the legal maxim 'Expressio unius est exclusion alterius i.e. if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and any other manner are barred. Similar question had come up for consideration before this Court in Subash Chandra Nayak Vrs. Union of India, 2016 (1) OLR 922 and this Court in paragraph-8 observed as follows: '*** the statute prescribed a thing to be done in a particular manner, the same has to adhered to in the same manner or not at all. The origin of the Rule is traceable to the decision in Taylor Vrs. Tailor, (1875) LR I Ch D 426, which was subsequently followed by Lord Roche in Nazir Ahmad v. King Emperor, AIR 1936 PC 253(2). But the said principle has been well recognized and holds the field till today in Babu Verghese Vrs. Bar Council o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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