M/S. Pal Construction vs The Assessing Authority
2022 Latest Caselaw 2051 Ori

      IN THE HIGH COURT OF ORISSA AT CUTTACK
       W.P.(C) Nos. 16957 of 2009, 5085 and 5087 of 2014,
                8484 of 2015 and 19127 of 2016

In W.P.(C) No.16957 of 2009
 M/s. Pal Construction                        ....         Petitioner
                                 Mr. B. Panda, Senior Advocate
                            -versus-
The Assessing Authority, Bhubaneswar .... Opposite Parties
I Circle and others
                  Mr. Sunil Mishra, Additional Standing Counsel
In W.P.(C) Nos. 5085 and 5087 of 2014
 M/s. Kanakadhara Mining & Minerals ....                Petitioner
 Pvt. Ltd.
                                   Mr. Sidhartha Ray, Advocate
                            -versus-
 Commissioner of Commercial Taxes,        .... Opposite Parties
 Odisha, Cuttack and another
                  Mr. Sunil Mishra, Additional Standing Counsel

In W.P.(C) No. 8484 of 2015
 M/s. Krishak Sathi                           ....         Petitioner
                                         Mr. S.K. Acharya, Advocate
                              -versus-
State of Odisha and others               .... Opposite Parties
                 Mr. Sunil Mishra, Additional Standing Counsel

In W.P.(C) No. 19127 of 2016
 M/s. DLF Limited                             ....         Petitioner
                                             Mr. R.P. Kar, Advocate
                              -versus-
State of Orissa and others                .... Opposite Parties
                  Mr. Sunil Mishra, Additional Standing Counsel

           CORAM:
           THE CHIEF JUSTICE
           JUSTICE K.R. MOHAPATRA
           JUSTICE B.P. ROUTRAY

                                                          Page 1 of 8
                                        ORDER

Order No. 31.03.2022

08. 1. The present petitions are listed before this Larger Bench on account of an order passed by a Division Bench of two learned Judges of this Court on 20th October 2014 in W.P.(C) No.16957 of 2009 which reads as under:

"This Writ Petition has been filed challenging the validity and legality of assessment order dated 31.03.2009 passed by the Assessing Authority, Bhubaneswar I Circle, Bhubaneswar, under Section 42 of Orissa Value Added Tax Act, 2004 (for short, 'OVAT Act') for the period 01.04.2005 to 30.04.2008.

2. Although several grounds have been taken in the writ petition to challenge the assessment order, Mr. B. Panda, learned Senior Advocate for the petitioner confined his argument to one of those grounds. According to Mr. Panda, the audit in the business premises of the petitioner was conducted on 29.04.2008 and the said report was signed by the Sales Tax Officer, Audit Unit, Bhubaneswar on 06.09.2008 as reveals from the Audit Visit Report (Annexure-1). The said report was received by the Assessing Authority from the Sales Tax Officer, Audit Unit on 16.10.2008. Since the Authorized Officer has not submitted the Audit Visit Report to the Assessing Authority within seven days from the date of completion of audit as contemplated under Section 41 (4) of the OVAT Act, the said Audit visit Report dated 06.09.2008 is non est/ invalid in the eyes of law and therefore, the assessment made on the basis of such Audit Visit Report is not sustainable in law.

In support of his contention, reliance is placed by Mr. Panda on the judgment of this Court in the case of Jindal Stainless Ltd. v. State of Orissa and others (2012) 54 VST 1 (Orissa), more particularly paragraphs 37, 38 and 39 thereof, which are quoted hereunder:

"37. Question No. (iii) is whether the Authorized Officer has not submitted audit visit report to the Assessing Authority within seven days from the date of audit as contemplated under Section 41(4) of the OVAT Act and thereby the impugned audit visit report dated 31.03.2008 and audit assessment dated 20.08.2008 would be non est / unsustainable in the eye of law. Normally, it is a mixed question of fact and law. But the documents annexed to the writ petition reveal that there is infraction of the provision and time provided under Section 41(4) has not been adhered to. Section 41(4) provides that after completion of tax audit of any dealer under sub-section (3), the officer authorized to conduct such audit shall, within seven days from the date of completion of the audit, submit the audit report to the assessing authority in the prescribed form along with the statements recorded and documents obtained evidencing suppression of purchases or sales, or both, erroneous claims of deductions including input tax credit and evasion of tax, if any, relevant for the purpose of investigation, assessment or such other purposes.

38. In the instant case, notice issued in form VAT 306 and the accompanying audit visit report reveal that the audit of the business of the petitioner was undertaken by the officers of the audit unit on 01.10.2007 and audit visit report was to be submitted within seven days from 01.10.2007 as contemplated in Section 41(4). But the audit visit report was submitted on 31.03.2008, i.e., after six months of the completion of the audit. This is in clear violation of the statutory provision contained in Section 41(4) since there is a time limit prescribed for submission of audit visit report and the same has not been complied with. Therefore, the said audit visit report has no validity.

39. It is unfortunate that while under OVAT Act Section 41(4) provides for submission of audit visit report within seven days from the date of audit and audit assessment is to be completed within six months

from the date of receipt of AVR by assessing authority, the action of the Authorised Officer in submitting the AVR to Assessing Authority after six months from the date of audit visit not only violates the statutory provisions contained in Section 41(4) but also is against the scheme and spirit of audit visit and audit assessment provided under the OVAT Act."

3. Per contra, Mr. R.P. Kar, learned Standing Counsel appearing for the Revenue submits that Sub-Section (4) prescribes no adverse consequence in the event of non- compliance of seven days period stipulated therein and, therefore, the same ought to be inferred as directory and not mandatory. He further contends that the period of "seven days" as prescribed in Sub-Section (4) refers to the period within which the "Audit visit Report" is required to be submitted to the Assessing Officer and such period is in no way connected to the dealer in any manner. Such audit report once received by the Assessing Officer, a copy thereof is required to be sent to the assessee under Section 42 (1) and, therefore, consequently no right of a dealer accrues nor stands extinguished, even if the aforesaid period stipulated is crossed or lapsed.

4. The points of issue involved in the present case are extremely important, especially the issue raised on behalf of the Revenue vis-à-vis the impact of judgment relied upon by learned counsel for the petitioner and interpretation of Sub-Section (4) of Section 41 of the OVAT Act.

5. On the above backdrop, the following question is referred to the Larger Bench.

Whether non-submission of Audit Visit Report to the Assessisng Officer within seven days from the date of completion of audit as contemplated under Section 41 (4) of the OVAT Act renders the Audit Visit Report invalid and assessment made on the basis of such Audit Visit Report is illegal?

Place the matter before the Hon'ble Chief Justice."

2. The question involved in the present petitions concern interpretation of Section 41 (4) of the Odisha Value Added Tax Act, 2004 as it stood prior to its amendment by virtue of the Odisha Value Added Tax (Amendment) Act 2015 with effect from 1st October, 2015. Section 41 (4) of the OVAT Act reads as under:

"41(4) After completion of tax audit of any dealer under sub-section (3), the officer authorized to conduct such audit shall, within seven days from the date of completion of audit, submit the audit report, to be called "AUDIT VISIT REPORT", to the assessing authority in the prescribed form along with the statements recorded and documents obtained evidencing suppression of purchases or sales, or both, erroneous claims of deductions including input tax credit and evasion of tax, if any, relevant for the purpose of investigation, assessment or such other purposes.

3. A question is whether the requirement of the Authorized Officer having to submit the audit report to the Assessing Authority within seven days from the date of completion of the audit is mandatory or directory?

4. Learned counsel for the Petitioner had cited before the Division Bench of this Court, the decision of another Division Bench of this Court comprising two learned Judges in Jindal Stainless Ltd. (now JSL Ltd.) v. State of Orissa (2012) 54 VST 1 (Orissa).

5. After noticing the said judgment, the Division Bench of two learned Judges in the referral order proceeded to state that the points of issue involved in the case "are extremely important, especially the issue raised on behalf of Revenue vis-à-vis the impact of the judgment relied upon by the learned counsel for the Petitioner." That judgment is the one in Jindal Stainless Ltd. (supra) regarding the interpretation of Section 41 (4) of the OVAT Act as it stood prior to the 2015 amendment.

6. In the considered view of the Court, a Division Bench of two learned Judges of this Court is bound to follow a judgment of a coordinate Bench of same strength and if it chooses to differ from the said judgment, it is only then that the matter can be referred to a Larger Bench by stating the points of difference with the judgment of the coordinate Bench. This rule of stare decisis is well settled and has been explained by the Supreme Court of India in Union of India v. Raghubir Singh (1989) 2 SCC 754 in the following passage:

"What then should be the position in regard to the effect of the law pronounced by a Division Bench in relation to a case raising the same point subsequently before a Division Bench of a smaller number of Judges? There is no constitutional or statutory prescription in the matter, and the point is governed entirely by the practice in India of the Courts sanctified by repeated affirmation over a century of time. It cannot be doubted that in order to promote consistency and certainty in the law laid down by a superior Court, the ideal condition would be that the entire Court should sit in all cases to decide questions of law, and for that reason the Supreme Court of the United States does so. But having regard to the volume of work

demanding the attention of the Court, it has been found necessary in India as a general rule of practice and convenience that the Court should sit in Divisions, each Division being constituted of Judges whose number may be determined by the exigencies of judicial need, by the nature of the case including any statutory mandate relative thereto, and by such other considerations which the Chief Justice, in whom such authority devolves by convention, may find most appropriate. It is in order to guard against the possibility of inconsistent decisions on points of law by different Division Benches that the rule has been evolved, in order to promote consistency and certainty in the development of the law and its contemporary status, that the statement of the law by a Division Bench is considered binding on a Division Bench of the same or lesser number of Judges. This principle has been followed in India by several generations of Judges.

......

We are of opinion that a pronouncement of law by a Division Bench of this Court is binding on a Division Bench of the same or a smaller number of Judges, and in order that such decision be binding, it is not necessary that it should be a decision rendered by the Full Court or a Constitution Bench of the Court."

7. With the order dated 20th October 2014, not stating the reasons for differing from the judgment in Jindal Stainless Ltd. (supra) which is by a co-ordinate Bench and is therefore binding, the question of a larger Bench considering the issue does not arise. A referral order properly framed should ideally set out the point of difference from an earlier binding judgment with which the Bench is differing. That however has not been done in the referral order dated 20th October, 2014.

8. In that view of the matter, the Court declines to answer the reference made to this Larger Bench and places all these matters before the Roster Bench on 13th April 2022 to be dealt with on merits in accordance with law. The interim order passed earlier in the respective writ petitions shall continue till then.

9. Urgent certified copy of this order be issued as per rules.

(Dr. S. Muralidhar) Chief Justice

(K.R. Mohapatra) Judge

(B.P. Routray) Judge S.K. Guin