The Orissa High Court (Cuttack Bench) has ruled that a return filed by way of self-assessment under Section 9(1) read with Section 9(2) of the Odisha Entry Tax Act, 1999 (OET Act) cannot trigger a notice for reassessment under Section 10(1) read with Rule 15B of the OET Rules unless it is accepted by the Department by a formal communication to the dealer. The Court explained that in a tax statute, the word ‘substitute’ is to be interpreted strictly as per the legislative intention and amending provisions extending the period of limitation will have prospective effect unless expressly provided or manifest from a bare reading of the provision.
The Court clarified that an Appellate Order setting aside an assessment does not fall within the scope of Section 10(3) of the OET Act, as it cannot be comprehended within the meaning of an ‘Order of any Court or Tribunal’.
Rule 34 of the OET Rules, which applies the provisions of the Orrisa VAT Act mutatis mutandis for matters not specified, cannot be invoked to import Section 49(2) of the OVAT Act for the purpose of reassessment, because specific substantive provisions for reassessment are already provided under Section 10 of the OET Act, and delegated rule-making power cannot bring into existence substantive rights or obligations not contemplated by the Act, added the Court.
Accordingly, the Court pointed out that the public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order in the shape of an affidavit; validity must be judged by the reasons mentioned in the order itself.
The Division Bench comprising the Chief Justice Harish Tandon and Justice Murahari Sri Raman observed that the Assessing Authority is competent to initiate a proceeding for reassessment where for any reason all or any of the scheduled goods brought by a dealer has escaped assessment of tax, within a period of seven years (five years, pre-amendment) from the end of the year to which the tax period relates. 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 trigger a notice for reassessment under Section 10(1) of the OET Act.
The Bench observed that the end of the year relatable to the tax periods from April 01, 2005 to Feb 28, 2006 is March 31, 2006, meaning the notice ought to have been served on the petitioner on or before March 31, 2011. The Odisha Entry Tax (Amendment) Act, 2012, which substituted the words ‘within a period of seven years’ with effect from July 01, 2012, has prospective effect and cannot be given retrospective effect unless expressly provided. The communication of acceptance of self-assessment returns after an inordinate delay since 2005-06, was an inappropriate exercise of authority made only to cover up latent deficiency and camouflage that the initiation for reassessment under Section 10 was made after acceptance of returns.
The Notice in Form E-32 dated April 24, 2023 purported to exercise jurisdiction under Section 10(3) based on the Appellate Order, but an Order of the Appellate Authority cannot be comprehended within the meaning of ‘Order of any Court or Tribunal’ under Section 10(3). The subsequent Notice in Form E-32 abandoned the proceeding under sub-section (3) of Section 10 and was issued under sub-section (1) of Section 10, which was ex facie issued beyond the period of limitation prescribed, added the Bench.
The Bench explained that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of an affidavit or otherwise. The Revenue’s reliance on Rule 34 of the OET Rules read with Section 49(2) of the OVAT Act is inapplicable inasmuch as specific substantive provisions for reassessment have been spelt out under Section 10 of the OET Act, and a delegated power to legislate by making rules for carrying out the purposes of the Act cannot be exercised to bring into existence substantive rights or obligations not contemplated by the provisions of the Act itself.
Briefly, the petitioner, a limited company engaged in the manufacturing of different types of chemical fertilizers, filed its self-assessment returns for the tax periods from April 01, 2005 to Feb 28, 2006 as required under Section 9 of the Odisha Entry Tax Act, 1999 (OET Act). However, no communication was made with respect to the acceptance of such self-assessment returns. Pursuant to an Intelligence Report, a proceeding for Audit Assessment under Section 9C was initiated by construing the Intelligence Report as an Audit Visit Report, and the Assistant Commissioner of Sales Tax passed an Audit Assessment Order under Section 9C of the OET Act raising a demand of Rs. 84.92 lakhs.
In 2019, the Additional Commissioner of Sales Tax (Appeal) set aside the Audit Assessment Order, holding that utilization of materials other than an Audit Report is not permissible while making Audit Assessment under Section 9C, and directed the initiation of proper proceedings strictly in accordance with the provisions of the OET Act. Thereafter, the Deputy Commissioner of Sales Tax issued a letter directing the petitioner to produce books of account for the purpose of reassessment. Subsequently, in 2023, the Joint Commissioner of Sales Tax issued a letter communicating that the self-assessed returns were accepted.
The Joint Commissioner of Sales Tax then issued a Notice in Form E-32 contemplating a proceeding under Section 10 of the OET Act, citing an earlier order found to be erroneous in light of an Appellate Order and a High Court judgment. A revision against this notice was rejected by the Commissioner of Commercial Tax. Following this, a fresh Notice in Form E-32 was issued for assessment of escaped turnover, omitting the reason contained in the earlier Notice. The Assessing Authority proceeded to finalize the assessment under sub-section (1) and sub-section (2) of Section 10 vide Order dated July 12, 2024, overturning the objection that the assessment was barred by limitation.
Appearances:
Senior Advocate Bibekananda Mohanti, along with Advocates M/s Mark Wright, Adhiraj Mohanty, Ashish Kumar Samal Sahil Sovan Swain and Sayed Shahzeb Ali, for the Petitioner/ Taxpayer
Advocate Sunil Mishra, for the Opposite Party/ Revenue
