Orissa High Court
M/S. Ecmas Resins Pvt. Ltd vs State Of Odisha And Others on 5 August, 2022
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) Nos.7458 of 2015 and 7296 of 2013
In W.P.(C) No.7458 of 2015
M/s. ECMAS Resins Pvt. Ltd. .... Petitioner
-versus-
State of Odisha and others .... Opposite Parties
In W.P.(C) No.7296 of 2013
M/s. Shyam Metalics & Energy Ltd. .... Petitioner
-versus-
The Commissioner of Commercial .... Opposite Parties
Taxes, Odisha and others
Advocates appeared in these cases:
For Petitioner : Mr. Jagabandhu Sahoo,
Senior Advocate
along with Ms. Kajal Sahoo,
Advocate
(In W.P.(C) No.7458 of 2015)
Mr. S.P. Mishra,
Senior Advocate
along with Mr. B.P. Mohanty,
Advocate
(In W.P.(C) No.7296 of 2013)
For Opposite Parties : Mr. Sunil Mishra,
Additional Standing Counsel
CORAM:
THE CHIEF JUSTICE
JUSTICE K.R. MOHAPATRA
JUSTICE B.P. ROUTRAY
W.P.(C) Nos.7458 of 2015 and 7296 of 2013 Page 1 of 30
JUDGMENT
05.08.2022
Dr. S. Muralidhar, CJ.
1. In both these writ petitions, a common question of law arises
for consideration under the Orissa Entry Tax Act, 1999 (OET
Act). The question is whether a formal communication of the
acceptance of the return filed by way of self-assessment under
Section 9 (2) of the OET Act is a pre-requisite to the reopening of
an assessment under Section 10 (1) of the OET Act?
Background
2. At the outset, it must be noticed that in the context of the Orissa
Value Added Tax Act, 2004 (OVAT Act), a similar question was
considered by this Court in its decision in M/s. Keshab
Automobiles v. State of Odisha (decision dated 1st December
2021 in STREV No.64 of 2016) which holds, in the context of
Section 43 read with Section 39 (2) of the OVAT Act, prior to
their amendment with effect from 1st October 2015, that unless
there is a communication of the acceptance of the return filed in
the first instance by way of self assessment, there cannot be a
reopening of the assessment. The aforementioned decision of this
Court in M/s. Keshab Automobiles (supra) has been affirmed by
the Supreme Court of India in its order dated 13th July 2022 in
SLP (Civil) No.9912 of 2022 (Deputy Commissioner of Sales
Tax v. M/s. Rathi Steel and Power Ltd. etc. and batch) by the
following order:
"We have gone through the impugned order (s)
passed by the High Court. The High Court has
passed the impugned order (s) on the interpretation
of relevant provisions, more particularly Section 43
(1) of the Odisha Value Added Tax Act, 2004,
which was prevailing prior to the amendment. We
are in complete agreement with the view taken by
the High Court. No interference of this Court is
called for in exercise of powers under Article 136
of the Constitution of India. Hence, the Special
Leave Petitions stand dismissed.
Pending application (s) shall stand disposed of."
3. In fact, W.P.(C) No.7458 of 2015 was at one stage adjourned
awaiting the decision of the Supreme Court in the aforementioned
SLP.
Referral order
4. As regards the reference to this Full Bench, it was made by the
order dated 31st March 2022 of the Division Bench of this Court
in W.P.(C) No.7458 of 2015 (M/s. ECMAS Resins Pvt. Ltd. v.
State of Orissa) by the following order:
"1. One of the issues involved in the present case is
whether the impugned order of reassessment for the
period 1st April, 2008 to 31st March, 2014 is valid in
view of the non-communication of the acceptance of
the original return filed by the assessee by way of
self-assessment under Section 9 (2) of the Orissa
Entry Tax Act, 1999 (OET Act)?
2. Mr. Sahoo, learned Senior counsel for the
Petitioner placed reliance on the decision of this
Court in M/s. Keshab Automobiles v. State of
Odisha (decision dated 1st December, 2021 in
STREV No. 64 of 2016) which holds in the context
of Section 43 read with Section 39 of the Odisha
Value Added Tax Act, 2004 (OVAT Act) that unless
such acceptance of the return filed by way of self-
assessment is actually communicated to the assessee,
there cannot be a re-opening of the assessment.
3. Mr. Sunil Mishra, learned Senior Standing
counsel for the Department on the other hand refers
to the decision dated 7th December, 2016 of the Co-
ordinate Division Bench of this Court in W.P. (C)
No.22343 of 2015 (M/s. Nilachal Ispat Nigam Ltd.
v. State of Odisha) which arose under the OET Act
and in para 12 of which it has been concluded that
for the purposes of Section 10 of the OET Act there
need not be a formal communication by the
Department to the Assessee of the acceptance of the
original return filed by way of self-assessment under
Section 9 (1) of the OET Act.
4. It will be noticed here that the decision in Keshab
Automobiles (supra) arose under the OVAT Act.
The effect of the amendment to Sections 39 and 43
of the OVAT Act with effect from 1st October, 2015
by way of the OVAT (Amendment) Act, 2015 was
being considered there. It will be noted here that the
said issue does not arise as far as the OET Act is
concerned since there was no corresponding
amendment to the OET Act in 2015. Also, the
wording of Section 10 of the OET Act which
pertains to reopening of assessment is not in pari
materia with its counterpart Section 43 of the OVAT
Act. Nevertheless Section 9 (2) of the OET Act
which pertains to self-assessment and is a
counterpart of Section 39 of the OVAT Act does
contemplate 'acceptance' of the return filed by way
of self-assessment. Therefore, the question whether
without the communication of the acceptance of
such self-assessment, there can be a re-opening of
the assessment would still arise for consideration.
5. Having considered the legal position on the
question of 'acceptance' of a return filed by way of
self-assessment as discussed in Keshab Automobiles
(supra), although it was in the context of the OVAT
Act, this Court is of the view that the correctness of
the opinion expressed by the co-ordinate Bench of
two learned judges of this Court in para 12 of the
decision in Nilachal Ispat Nigam Ltd. v. State of
Odisha (supra) interpreting Section 9 (2) read with
Section 10 of the OET Act requires to be re-
considered.
6. Accordingly, the present petition is directed to be
placed before the larger Bench of three Judges on
28th June, 2022 to consider the following question:
"Is the view taken by the Division Bench of this
Court in its decision dated 7th December 2016 in
W.P. (C) No.22343 of 2015 (M/s. Nilachal Ispat
Nigam Ltd. v. State of Odisha)in the context of
Section 9 (2) read with Section 10 of the OET Act
require reconsideration? In other words, whether a
formal communication of the acceptance of the
return filed by way of self-assessment under Section
9 (2) of the OET Act is a pre-requisite to the
reopening of an assessment under Section 10 (1) of
the OET Act?"
7. The interim order shall continue till the next
date."
5. An identical question arises for consideration in the companion
W.P.(C) No.7296 of 2013 (M/s Shyam Metalics & Energy Ltd. v.
The Commissioner of Commercial Taxes, Odisha) in which the
following order was passed on 19th July, 2022:
"1. One of the issues raised in the present petition is
whether the Assessing Officer could have exercised
jurisdiction under Section 10(3) of the OET Act,
1999 when there is no assessment order as such. It is
pointed out that in the first instance there was a self
assessment by the dealer in terms of Section 9(1)
read with 9(2) of the OET Act, 1999 and there was
no order as such was passed by the Assessing
Officer in respect thereof.
2. It is pointed out that this very issue namely
whether there can be reassessment order without
there being an assessment order is pending before
the Larger Bench of this Court.
3. List this matter along with W.P.(C) No.7458 of
2015 with the said batch of petitions before the
Larger Bench.
4. The interim order passed earlier shall continue till
the next date."
Background facts in W.P.(C) No.7296 of 2013
6. The facts in W.P.(C) No.7296 of 2013 are that the Petitioner-
M/s Shyam Metalics & Energy Ltd. (SMEL) is registered as a
dealer under the OVAT Act and is engaged in manufacturing and
sale of sponge iron, steel billets, TMT bars etc. For the purpose of
its manufacturing unit, SMEL has a captive power plant (CPP)
where it manufactures electricity. Coal is one of the raw materials
used in the process of manufacturing of the sponge iron, TMT bar
and billets etc. Relying on a judgment of this Court in Bhushan
Power and Steel Limited v. State of Orissa (2012) 56 VST 50
(Orissa) wherein it was held that coal used in the production of
the electricity in the CPP cannot be treated as raw material for the
manufacturing of sponge iron. Thus, it was held that the dealer
was not entitled to avail concessional levy of entry tax on
purchase of coal used to generate electricity in the CPP.
7. On the basis of the above decision in Bhushan Power and
Steel Limited (supra), the Assistant Commissioner of Sales Tax
(ACST), Sambalpur II Circle issued a notice to the Petitioner
under Section 10 (3) of the OET Act seeking to reopen the
assessment for the period 1st April, 2005 to 31st December, 2012.
On 23rd February 2013, the Assessing Officer (AO) i.e. the ACST
reopened the assessment for the period from 1st April, 2005 to 31st
December, 2012 and denied the exemption on payment of entry
tax @1% on the coal used for production of electricity.
Accordingly, a demand of Rs.1,67,62,329/- was raised.
8. Aggrieved by the above re-assessment order, SMEL filed
W.P.(C) No.7296 of 2013 in this Court seeking the quashing of
not only the re-assessment order, but also the consequential
demand notice. While directing notice to issue in the present
petition on 4th January 2016, this Court passed an interim order
that no coercive action would be taken against the Petitioner. That
stay order has continued since.
Background facts in W.P.(C) No.7458 of 2015
9. As far as W.P.(C) No.7458 of 2015 filed by ECMAS Resins
Pvt. Ltd. (ERPL) is concerned, the order under challenge is dated
19th February 2015, passed by the Deputy Commissioner of Sales
Tax (DCST), Puri Circle, Puri re-opening the assessment for the
period 1st April 2008 to 31st March, 2014.
10. The occasion for the issuance of the notice for reopening of
the assessment is that ERPL is engaged in sale of products like
polyester, resins, glass articles and other polypher and epoxide
resins in primary forms. ERPL is stated to have its own
manufacturing unit at Hyderabad and its depot at Puri. It is stated
that ERPL's depot at Puri obtains stock of products from its
manufacturing unit at Hyderabad for sale in Odisha.
11. On the basis of a tax evasion report of the DCST, Vigilance
Division, notice in Form E-32 was issued stating that goods
purchased/received by the ERPL were chemicals of different
variety falling under Entry 73 of Part-I of the Entry Tax Rate
Schedule which reads "chemicals used for any purpose" and
therefore, was exigible to entry tax @1% on all the products
except glass fiber. The assessment order dated 19th February 2015
was passed raising a demand of Rs.60,19,134/-.
12. Although on merits, it is the contention of ERPL that
unsaturated polyester resin in liquid form is not schedule goods
under the OET Act and cannot be covered under 'chemicals', the
assessment order is also challenged on the ground that there is no
initial assessment order to begin with under Section 9 (2) of the
OET Act.
13. W.P.(C) No.7458 of 2015 was filed challenging the said
assessment order, in which, on 13th October 2015, this Court
directed that the impugned assessment order shall remain stayed.
That interim order has continued since.
14. This Court has heard the submissions of Mr. S.P. Mishra,
learned Senior Advocate appearing for the SMEL and Mr.
Jagabandhu Sahoo, learned Senior Advocate appearing for the
ERPL. The Department was represented by Mr. Sunil Mishra,
learned Additional Standing Counsel in both the matters.
Relevant provisions of the OET Act and Rules
15. To address the question referred to the Larger Bench for its
opinion, reference is first required to be made to the relevant
provisions of the OET Act and the Orissa Entry Tax Rules, 1999
(OET Rules) and thereafter, undertake a comparative assessment
of the provisions of the OET Act and OVAT Act.
16. Under Section 2(q) of the OET Act, words and expressions
used in the OET Act and not defined therein and yet defined in the
OVAT Act would have same meaning assigned to them under the
OVAT Act.
17. Section 9 of the OET Act talks of "self assessment" and reads
as under:
"9. Self assessment-
(1) Subject to provisions of sub-section (2), the
amount of tax due from a registered dealer or a
dealer liable to be registered under this Act shall be
assessed in the manner hereinafter provided, for each
tax period or periods during which the dealer is so
liable.
(2) If a registered dealer furnishes the return in
respect of any tax period within the prescribed time
and the return so furnished is found to be in order, it
shall be accepted as self-assessed subject to
adjustment of any arithmetical error apparent on the
face of the said return."
18. The critical words as far as Section 9 (2) is concerned is the
requirement that the return furnished "shall be accepted as self-
assessed" subject to adjustment of any arithmetical error apparent
on the face of the return. What constitutes 'acceptance' is the
critical question. To understand this, one needs to refer to Rule 15
of the OET Rules which reads as under:
"15. Self-assessment:-
(1) Where a dealer files return for a tax period within
the period specified in sub-rule (1) of Rule 10 and
the return is found to be correctly and completely
filled in, and there is no arithmetical mistake
apparent on the face of such return, the said return
shall be accepted as self-assessed.
(2) Where there is any arithmetical mistake apparent
on the face of such return, and such mistake can be
reconciled without any reference to the dealer to
whom the return relates, such return may
accordingly be rectified and the rectification so
made may be intimated to the dealer in Form E28
for information.
(3) If the rectification as intimated to the dealer
under sub-rule (2) is not accepted by the dealer, he
may, within seven days from the date of receipt of
such intimation, file an application stating therein
the correct position along with reasons for
occurrence of such mistake to the assessing
authority, and if such authority is satisfied, the return
referred to in sub-rule (2) shall be accepted as self-
assessed.
(4) Where the arithmetical mistake apparent on the
face of the return furnished for a tax period remains
un-reconciled, such mistake shall be intimated to the
dealer to whom the return relates in Form E28 for
necessary rectifications within fourteen days from
the date of receipt of the intimation and if the
assessing authority is satisfied that the mistake is
bona fide and not deliberate, such authority shall
accept the return as self-assessed.
(5) Where the dealer fails to rectify the mistake as
intimated under sub-rule (4) within the time
specified therein or the mistakes are found to be
deliberate with an intention to evade tax or an
attempt to evade tax, the return, wherein the
mistakes are found, shall be referred to audit under
Section 9B of the Act."
19. Further, as far as reassessment is concerned, the relevant
provision is Section 10 of the OET Act read with Rule 15 B of the
OET Rules both of which read as under:
Section 10 of the OET Act:
"10. Reassessment in certain cases.-
(1)Where for any reason all or any of the scheduled
goods brought by a dealer has escaped assessment of
tax, or where value of all or any of the scheduled
goods has been under-assessed, or any deduction has
been allowed wrongly, the assessing authority, on
the basis of information in his possession, may,
within a period of seven years from the end of the
year to which the tax period relates, serve a notice
on the dealer in such form and in such manner as
may be prescribed and after making such enquiry as
he considers necessary and after giving the dealer a
reasonable opportunity of being heard, proceed to
assess the dealer accordingly.
(2) If the assessing authority is satisfied that the
escapement or under assessment of tax on account of
any reason (s) mentioned in sub-section (1) above is
without any reasonable cause, he may direct the
dealer to pay in addition to the tax assessed under
sub-section (1), by way of penalty, a sum equal to
twice the amount of tax additionally assessed under
this section.
(3) Where any order passed by the assessing
authority in respect of a dealer for any period is
found to be erroneous or prejudicial to the interest of
revenue consequent to, or in the light of, any
judgment or order of any Court or Tribunal, which
has become final and binding, then, notwithstanding
anything contained in this Act, the assessing
authority may proceed to reassess the tax payable by
the dealer in accordance with such judgment or
order, at any time within a period of three years from
the date of the judgment or order."
Rule 15B of the OET Rules:
15B. Audit assessment.-
(1) If the tax audit conducted under Section 9B of
the Act results in findings, which the assessing
authority considers to be affecting the tax liability of
a dealer for a tax period or tax periods, such
authority shall serve a notice in Form E30 along
with a copy of the Audit Visit Report, upon such
dealer, directing him to appear in person or through
his authorized representative on such date, time and
place, as specified in the said notice for compliance
of the requirements of sub-rules (2) and (3).
(2) The assessing authority may, in the notice
referred to in sub-rule (1), require the dealer-
(i) to produce the books of accounts maintained
under the provisions of the Act and these Rules;
(ii) to furnish records and documents required to be
maintained under the Act and these Rules claiming
deductions or concessions, as may be applicable;
(iii) to furnish any other information relating to
assessment of tax, levy of interest, imposition of
penalty; and
(iv) to explain the books of account, other accounts,
records, documents or information referred to in
sub-clauses (i), (ii) and (iii),
on the date and at the time specified in the notice.
(3) In addition to the accounts and documents
referred to in sub-rule (2), a dealer if so desires, may
produce such other evidence and documents in
support of his claim preferred in his returns, or rebut
the charges made in the Audit Visit Report, or any
objection which he wishes to raise.
(4) The assessing authority, while hearing the dealer
on the date specified in the notice referred to in sub-
rule (1) or on any date to which the hearing is
adjourned for making an assessment of tax payable
by him, shall-
(a) examine the accounts, documents, records or any
other evidence furnished under sub-rule (2);
(b) call for such information or evidence from the
dealer or any person as deemed necessary;
(c) consider the objection, if any, preferred by such
dealer and examine the evidence in support thereof;
and
(d) make such enquiry, as deemed necessary, for the
purpose of such assessment:
Provided that not more than three adjournments
shall be granted to a dealer for hearing his case.
(5) The assessing authority shall, after hearing the
dealer in the manner specified in sub-rules (2), (3)
and (4), assess the tax due from that dealer
accordingly, in respect of a tax period or tax periods,
for which the assessment proceeding has been
initiated, and impose penalty under sub-section (5)
of Section 9C of the Act.
(6) In the event of default by a dealer to comply with
the requirement of the notice referred to in sub-rule
(1), the assessing authority may make to the best of
judgment, an ex parte assessment of the tax payable
by such dealer in respect of such tax period or tax
periods and pass an order of assessment, in writing,
recording the reasons therein and shall impose
penalty under sub-section (5) of Section 9C"
Provisions of the OVAT Act and Rules
20. At this stage, it is necessary to refer to the corresponding
provisions of the OVAT Act. Section 39 (2) of the OVAT Act is
in pari materia with Section 9 (2) of the OET Act. Likewise, Rule
48 of the Orissa Value Added Tax Rules 2005 (OVAT Rules)
talks of self assessment and is in pari materia with Rule 15 of the
OET Rules. Section 39 (2) of the OVAT Act and Rule 48 of the
OVAT Rules read as under:
Section 39 (2) of the OVAT Act:
"39. Self assessment.--
xxx xxx xxx
(2) If a registered dealer furnishes the return in
respect of any tax period within the prescribed time
and the return so furnished is found to be in order, it
shall be accepted as self assessed subject to
adjustment of any arithmetical error apparent on the
face of the said return."
Rule 48 of the OVAT Rules:
"48. Self-assessment:-
(1) Where a dealer files return for a tax period within
the period specified in Rule 34 and the return is
found to be correctly and completely filled in, and
there is no arithmetical mistake apparent on the face
of such return, the said return shall be accepted as
self-assessed.
(2) Where there is any arithmetical mistake apparent
on the face of such return and such mistake can be
reconciled without any reference to the dealer to
whom the return relates, such return may
accordingly be rectified and the rectification so
made may be intimated to that dealer in Form VAT-
305 for information.
(3) If the rectification as intimated to the dealer
under sub-rule (2) is not accepted by the dealer, he
may, within seven days from the date of receipt of
such intimation, file an application stating therein
the correct position along with reasons for
occurrence of such mistake, to the assessing
authority, and if such authority is satisfied, the return
referred to in sub-rule (2) shall be accepted as self-
assessed.
(4) Where the arithmetical mistake apparent on the
face of the return furnished for a tax period remains
un-reconciled, such mistakes shall be intimated to
the dealer to whom the return relates in Form VAT-
305 for necessary rectifications within fourteen days
from the date of receipt of the intimation and if the
assessing authority is satisfied that the mistake is
bona fide and not deliberate, such authority shall
accept the return as self-assessed.
(5) Where the dealer fails to rectify the mistake as
intimated under sub-rule (4) within the time
specified in that sub-rule or the mistakes are found
to be deliberate with an intention to evade tax or
attempt to evade tax, the return, wherein the
mistakes are found, shall be referred to audit under
Section 41."
21. As far as re-assessment is concerned, the corresponding
provisions of the OVAT Act are Section 43 (as it stood prior to 1st
October 2015) and Rule 50 of the OVAT Rules which read as
under:
Section 43 of the OVAT Act (as it stood prior to 1st October
2015):
"43. Turnover escaping assessment.-
(1) Where, after a dealer is assessed under Section
39, 40, 42 or 44 for any tax period, the assessing
authority, on the basis of any information in his
possession, is of the opinion that the whole or any
part of the turnover of the dealer in respect of such
tax period or tax periods has--
(a) escaped assessment, or
(b) been under-assessed, or
(c) been assessed at a rate lower than the rate at
which it is assessable;
or that the dealer has been allowed--
(i) wrongly any deduction from his turnover, or
(ii) input tax credit, to which he is not eligible,
the assessing authority may serve a notice on the
dealer in such form and manner as may be
prescribed and after giving the dealer a reasonable
opportunity of being heard and after making such
enquiry as he deems necessary, proceed to assess to
the best of his judgment the amount of tax due from
the dealer.
(2) If the assessing authority is satisfied that the
escapement or under assessment of tax on account of
any reason(s) mentioned in sub-section (1) above 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 under
this section.
(3) No order of assessment shall be made under sub-
section (1) after the expiry of seven years from the
end of the tax period or tax periods in respect of
which the tax is assessable."
Rule 50 of the OVAT Rules:
"50. Assessment of escaped turnover. -
(1) Where a dealer has already been assessed under
section 39, 40, 42 or 44 and it is required to reopen
the assessment under subsection (1) of section 43 for
occurrence of any or more of the events specified in
that subsection, the assessing authority shall serve a
notice in Form VAT -307 upon the dealer.
(2) The hearing of the dealer shall be concluded in
accordance with the provisions of sub-rules (2), (3),
(4) and (5) of rule 49.
(3) The assessing authority shall, after hearing the
dealer in the manner specified in sub-rule (2), assess
to the best of judgment, the amount of tax payable
by the dealer in respect of a tax period or tax
periods, for which assessment proceeding has been
initiated, and impose penalty under sub-section (2)
of section 43.
(4) In the event of default by a dealer to comply with
the requirements of the notice referred to in sub-rule
(1), the assessing authority may make, to the best of
judgment, an ex parte assessment of the tax payable
by such dealer in respect of such tax period or tax
periods and pass an order of assessment in writing,
after recording the reasons therein."
22. It must also be noticed here that scrutiny of every return by a
dealer by the assessing officer (AO) is mandatory in terms of
Section 7 (10) and 7 (11) of the OET Act. The corresponding
provision in the OVAT Act is Section 38.
The decision in M/s. Keshab Automobiles
23. In the context of Section 39 (2) of the OVAT Act read with
Section 43 thereof, this Court examined the issue in M/s. Keshab
Automobiles (supra). The question that arose in that case was
however also about the effect of the amendment brought to
Section 39 (2) after 1st October 2015, whereas that issue does not
arise in the context of the OET Act. It would suffice to note that
the corresponding provisions of the OVAT Act namely Section 39
(2) of the OVAT Act as it stood prior to 1st October 2015 is in
pari materia with Section 9 (2) of the OET Act.
24. As was held in M/s. Keshab Automobiles (supra), there had to
be a formal communication of an acceptance of return or even an
acknowledgment by the Department in terms of Section 39 (2) of
the OVAT Act as it stood prior to 1st October, 2015. The position
underwent a change after 1st October 2015. This was noticed in
M/s. Keshab Automobiles (supra) where after comparing Section
39 (2) as it stood prior to 1st October 2015 (which corresponds to
Section 9 (2) of the OET Act) and the provision as it stood after
its amendment in 1st October 2015, this Court observed as under:
"11. ... The concept of 'deemed' self assessment
was introduced only with effect from 1st October,
2015. Prior thereto, if such return filed by the dealer
under Section 39 of the OVAT Act and was "found
to be in order" and within the prescribed time, then it
was to be accepted as self assessed subject to
adjustment of arithmetical errors."
25. Likewise, in M/s. Keshab Automobiles (supra) a comparison
was undertaken of Section 43 (1) of the OVAT Act (as it stood
prior to 1st October 2015 and which corresponds to Section 10 of
the OET Act) and Section 43 (1) of the OVAT Act as it stood
after 1st October, 2015. Analyzing both the amended and un-
amended Section 43 (1) of the OVAT Act, this Court in M/s.
Keshab Automobiles (supra) observed as under:
"13. It is significant that prior to its amendment with
effect from 1st October, 2015 the trigger for invoking
Section 43 (1) of the OVAT Act required a dealer to
be assessed under Sections 39, 40, 42 and 44 for any
tax period. The words "where, after a dealer is
assessed" at the beginning of Section 43 (1) prior to
1st October, 2015 pre-supposes that there has to be
an initial assessment which should have been
formally accepted for the periods in question i.e.
before 1st October, 2015 before the Department
could form an opinion regarding escaped assessment
or under assessment or the accused taking the benefit
of a lower rate or being wrongly allowed deduction
from his turnover or input tax credit to which he is
not eligible.
14. However, under Section 43(1) of the OVAT Act,
after its amendment with effect from 1st October,
2015 the Assessing Authority can form an opinion
about the whole or part of the turnover of the dealer
escaping assessment or being under assessed "on the
basis of any information in his possession". In other
words, it is not necessary after 1st October, 2015 for
the Assessee's initial return having to be 'accepted'
before Section 43(1) could be invoked.
15. Therefore, the position prior to 1st October, 2015
is clear. Unless there was an assessment of the dealer
under Sections 39, 40, 42 and 44 for any tax period,
the question of reopening the assessment under
Section 43 (1) of the OVAT Act did not arise."
26. As far as the OET Act is concerned, the relevant provisions
i.e., Section 9 (2) and Section 10 correspond exactly to Section 39
(2) and Section 43 respectively of the OVAT Act as those
provisions stood prior to the amendment in 1st October, 2015. The
same legal position as above would, therefore, hold good for the
provisions of the OET Act as well.
The decision in Nilachal Ispat Nigam Limited overruled
27. However, as noted in the referral order, a different view
appears to have been taken by a Division Bench of this Court in
M/s. Nilachal Ispat Nigam Limited v. State of Odisha (decision
dated 7th December 2016 in W.P.(C) No.22343 of 2015). It must
be noted that the judgment is dated 7th December 2016, and since
it was under the OET Act and Rules thereunder, there was no
occasion for the Court to refer to the corresponding provisions of
the OVAT Act and the position obtaining thereunder.
28. In para 12 of the judgment in Nilachal Ispat Nigam Limited
(supra) it was observed as under:
"12. So far as the ground taken by the petitioner that
the company was assessed as per the provisions of
section 9(1) of the Act and as such, it is not known
to them as to whether assessment has been finalized
or not or in other words, whether the authorities
have accepted the self assessment made by the
petitioner-company under Section 9(1) has been
accepted or not is concerned, we are of the
considered view that Section 9 contains a provision
for self assessment, which requires the dealer to be
assessed in the manner provided for each tax period
or periods during which the dealer is so liable and if
the registered dealer furnishes the return in respect
of any tax period within the prescribed time and the
return so furnished is found to be in order, it shall be
accepted as self assessed subject to adjustment of
any arithmetical error apparent on the face of the
said return. Section 10 of the Act provides for
reassessment in certain cases when the authority is
of the reason to believe that the dealer has escaped
assessment of tax and as such communication
regarding acceptance of the assessment made under
the provisions of Section 9 of the Act is not required
to be communicated to the petitioner and the
communication can only go in a situation when on
scrutiny it will be found that the same is not in order
or there is arithmetical error. Under the Taxation
Rule the assessee is required to furnish self
assessment and the authority is required to assess the
same and there is no provision provided under the
Act to communicate in case of acceptance of the
assessment. Although under the provision of Orissa
Value Added Tax Act under Section 38 read with
Section 7(10) each and every return in relation to
any tax period furnished by a registered dealer shall
be subject to scrutiny by the assessing authority to
verify the correctness of the calculation, application
of correct rate of tax and interest etc and in case of
any mistake, detected in course of scrutiny, the
assessing authority shall serve a notice in the
prescribed form as we find even from the provision
of section 7 or sub-section (11) and as such, if the
authorities have not issued any notice under Section
7(11), then the assessment made by the registered
dealer under the provisions of Section 9 will be said
to be accepted."
29. Reference at this juncture may be made to Section 7 (10) and
(11) of the OET Act which read as under:
7. Return and return defaults:-
xxx xxx xxx
(10) Each and every return in relation to any tax
period furnished by a dealer under this section, shall
be subject to scrutiny by the assessing authority to
verify the correctness of calculation, application of
correct rate of tax and interest, claim of deductions,
if any, under this Act and full payment of tax and
interest payable by the dealer for such period.
(11) If any mistake is detected as a result of scrutiny
made under sub-section (10), the assessing authority
shall serve a notice in the prescribed form on the
dealer to make payment of the extra amount of tax
along with the interest as per the provisions of this
Act, by the date specified in the said notice.
30. This has to be compared with the corresponding provision in
the OVAT Act viz., Section 38 of the OVAT Act which reads as
under:
"38. Scrutiny of return.--
(1) Each and every return in relation to any tax
period furnished by a registered dealer under Section
33, shall be subject to scrutiny by the assessing
authority to verify the correctness of calculation,
application of correct rate of tax and interest, claim
of input tax credit made therein and full payment of
tax and interest, payable by the dealer for such
period.
(2) If any mistake is detected as a result of scrutiny
made under sub-section (1), the assessing authority
shall serve a notice in the prescribed form on the
dealer to make payment of the extra amount of tax
along with the interest as per the provisions of this
Act, by the date specified in the said notice."
31. Both sets of provisions of the OVAT Act and the OET Act
respectively, therefore, make it mandatory for scrutiny of every
return by a dealer. The corresponding Rule under the OET Rules
is Rule 15 as amended with effect from 19th October 2005 which
has already been extracted hereinabove.
32. Therefore, even Rule 15 of the OET Rules as amended
requires the return to be 'accepted'. If this is read with Rule 10 (3)
to (6) of the OET Rules, it is plain that self-assessment is not
automatic. It requires compliance with Section 7 (10) and 7 (11)
of the OET Act. The same result would be reached from a
collective reading of Section 39 of the OVAT Act with Rule 48 of
the OVAT Rules as they stood prior to 1st October, 2015. The
long and short of this discussion is that under the OET Act there is
no concept of a 'deemed' acceptance of a return filed by way of
self assessment if nothing is heard from the Department after it is
filed. There has to be an overt act of communication of such
acceptance by the Department to the dealer.
33. Even in the context of the OVAT Act to which reference was
made by the Bench in M/s. Nilachal Ispat Nigam Limited
(supra), the position after 1st October 2015 where the concept of
'deemed' acceptance was introduced for the first time, made it
plain that prior to such amendment there was no such concept of
'deemed' acceptance. This was noticed by this Court in M/s.
Keshab Automobiles (supra) where it was concluded in para 21 to
23 as under:
"21. A comparison of the language used in the
amended Section 43 (1) of the OVAT Act with its
version prior to 1st October, 2015 makes it clear that
a new system has been put in place as far as
reopening of returns filed as "self-assessment" is
concerned. Now such reopening is permitted even if
there was no formal acceptance of the return
originally filed. The concept of a "deemed"
acceptance of the return has been introduced for the
first time since 1st October, 2015. This is not a mere
procedural change. Further, the amending statute
itself makes it clear that the amendments are with
effect from 1st October, 2015 and not with
retrospective effect from an earlier date. Therefore,
the Court is precluded from presuming that the
amendment to Sections 39 (2) and 43 (1) of the
OVAT Act and correspondingly to Rule 50 of the
OVAT Rules are either merely clarificatory or
retrospective.
22. From the above discussion, the picture that
emerges is that if the self-assessment under Section
39 of the OVAT Act for tax periods prior to 1st
October, 2015 are not 'accepted' either by a formal
communication or an acknowledgment by the
Department, then such assessment cannot be sought
to be re-opened under Section 43 (1) of the OVAT
Act and further subject to the fulfillment of other
requirements of that provision as it stood prior to 1st
October, 2015.
23. For all of the aforementioned reasons, the
reopening of the assessment sought to be made in
the present case under Section 43 (1) of the OVAT
Act is held to be bad in law. The question framed is
accordingly answered in the negative i.e. in favour
of the Assessee and against the Department. It is
accordingly, held that in the absence of the
completion of the assessment under Sections 39, 40,
42 and 44, reassessment under Section 43 (1) of the
OVAT Act is unsustainable in law."
34. This Court had in M/s. Keshab Automobiles (supra)
distinguished M/s. Nilachal Ispat Nigam Limited (supra) when it
observed in para 17 [It must be mentioned here that original para
17 of the judgment of this Court in M/s. Keshab Automobiles
(supra) was corrected by a subsequent order dated 8th April 2022]
which reads as under:
"17. A perusal of the decision of this Court in
Nilachal Ispat Nigam Ltd. (supra) reveals that it
was in the context of the Orissa Entry Tax Act (OET
Act). Secondly, this Court had no occasion in the
said decision to discuss the effect of more or less
similar amendments effected to the provisions of the
OVAT Act which were brought into effect from 1st
October, 2015. This is despite the fact that the
decision is dated 7th December, 2016. The
amendments did bring about a significant change to
the OVAT Act and therefore had a direct bearing on
the issues discussed in the said decision.
Consequently, this Court finds that the decision in
Nilachal Ispat Nigam Ltd. is per incuriam inasmuch
as it fails to discuss the amended provisions of the
OVAT Act which have a direct bearing on the issues
adjudicated by this Court."
35. The decision of this Court in M/s. Keshab Automobiles
(supra) has, as already noted, been affirmed by the Supreme
Court of India in its order in Deputy Commissioner of Sales Tax
v. M/s. Rathi Steel and Power Ltd. etc. and batch (supra). This
Court, therefore, is unable to agree with the conclusion reached by
the Division Bench of this Court in M/s. Nilachal Ispat Nigam
Limited (supra) since it is not consistent with the legal position
that emerges on the reading of Section 9 (2) of the OET Act with
its corresponding provision of the OVAT Act viz., Section 39 (2)
of the OVAT Act as it stood prior to 1st October 2015 and which
has been interpreted in the above manner by this Court in M/s.
Keshab Automobiles (supra).
36. Further, the decision in M/s. Keshab Automobiles (supra) also
noticed earlier decisions of the Supreme Court in Ghanshyam
Das v. Regional Assistant Commissioner of Sales Tax, Nagpur
AIR 1964 SC 766 where it was held as under:
"10. ...if a return was duly made, the assessment
could be made at any time unless the statute
prescribed a time limit. This can only be for the
reason that the proceedings duly initiated in time
will be pending and can, therefore, be completed
without time limit. A proceeding is said to be
pending as soon as it is commenced and until it is
concluded. On the said analogy, the assessment
proceedings under the Sales-tax Act must be held to
be pending from the time the said proceedings were
initiated until they were terminated by a final order
of assessment. Before the final order of assessment,
it could not be said that the entire turnover or a part
thereof of a dealer had escaped assessment, for the
assessment was not completed and if, completed, it
might be that the entire turnover would be caught in
the net."
37. This was also be seen in the context of an order passed by this
Court on 29th February 2008 in W.P.(C) No.2777 of 2008 (M/s.
Jayshree Chemicals Ltd. v. State) where it was observed as
under:
"Apart from that, the concept of escaped assessment
under Section 43 of the Orissa Value Added Tax Act
comes into play only when the assessment has been
made and completed.
In the instant case, without assessment being
complete, the notice of escaped assessment is
misconceived and as such the said notice under
Annexure-1 is quashed."
38. In the context of the Orissa Sales Tax Act, a Full Bench of
this Court in M/s. Jaynarayan Kedarnath v. Sales Tax Officer,
Cuttack-I West Circle (1988) 68 STC 25 followed the judgment
of the Supreme Court in Ghanshyam Das (supra) and concluded
that no escapement of income from assessment can be predicted
before an assessment is complete.
39. This Court is of the considered view, therefore, that the
decision of the Division Bench of this Court in M/s. Nilachal
Ispat Nigam Limited (supra) which holds that if the authorities
have not issued any notice under Section 7 (11) of the OET Act,
then the self assessment of the dealer under Section 9 (2) of the
OET Act should be taken to have been 'accepted' does not set
down the correct legal position and to that extent, the said
decision is hereby overruled.
Court not to supply the gaps in the statute
40. Mr. Mishra, learned Standing counsel for the Department then
submitted that the above interpretation which exposes a gap in the
provisions of the OET might result in several similar cases of re-
opening of assessments being challenged by the Assessees or
might prevent the Department from issuing notices for re-opening
assessments.
41. It is not the task of this Court, while interpreting a taxing
statute, to fill the lacunae. In Ransom (Inspector of Taxes) v
Higgs [1974] 3 All ER 949, it was explained by Lord Simon that:
"It may seem hard that a cunningly advised tax-
payer should be able to avoid what appears to be his
equitable share of the general fiscal burden and cast
it on the shoulders of his fellow citizens. But for the
courts to try to stretch the law to meet hard cases
(whether the hardship appears to bear on the
individual tax-payer or on the general body of tax-
payers as represented by the Inland Revenue) is not
merely to make bad law but to run the risk of
subverting the rule of law itself."
42. Referring to the above decision, Justice G.P. Singh in his
Interpretation of Statutes (13th Edn., 2012) p. 829 states:
"The same rule applies even if the object of the
enactment is to frustrate legitimate tax avoidance
devices for moral precepts are not applicable to the
interpretation of revenue statutes. It may thus be
taken as maxim of tax law, which although not to be
overstressed ought not to be forgotten that, "the
subject is not to be taxed unless the words of the
taxing statute unambiguously impose the tax on
him." The proper course in construing revenue Acts
is to give a fair and reasonable construction to their
language without leaning to one side or the other but
keeping in mind that no tax can be imposed without
words clearly showing an intention to lay the burden
and that equitable construction of the words is not
permissible. Considerations of hardship, injustice or
anomalies do not play any useful role in construing
taxing statutes unless there be some real ambiguity.
It has also been said that if taxing provision is "so
wanting in clarity that no meaning is reasonably
clear, the courts will be unable to regard it as of any
effect. (IRC v. Ross and Coulter (1948) 1 All ER
616)"
Conclusion
43. The sum total of the above discussion is that as far as a return
filed by way of self assessment under Section 9 (1) read with
Section 9 (2) of the OET Act is concerned, unless it is 'accepted'
by the Department by a formal communication to the dealer, it
cannot be said to be an assessment that has been accepted and
without such acceptance, it cannot trigger a notice for re-
assessment under Section 10 (1) of the OET Act read with 15 B of
the OET Rules. This answers the question posed to the Court.
44. As far as the individual writ petition is concerned, it is ordered
as under:
(i) In W.P.(C) No.7458 of 2015 filed by ERPL, the impugned re-
assessment order dated 19th February 2015 and the consequential
demand, if any, raised are hereby quashed.
(ii) In W.P.(C) No.7296 of 2013 filed by SMEL, the impugned re-
assessment order dated 23rd February 2013 and the consequential
demand notice (Annexure-3) are hereby quashed.
45. The writ petitions are disposed of in the above terms.
(S. Muralidhar)
Chief Justice
(K.R. Mohapatra)
Judge
(B.P. Routray)
Judge
S.K.Guin/ PA
