JUDGMENT B. P. Das J. - The petitioner - company, i.e., Aska Co-operative Sugar Industries Ltd., has in the present writ petition challenged an order of assessment dated February 12, 2007 passed by the Sales Tax Officer, Bhanjanagar Circle, Bhanjanagar under annexure 1 for the assessment period April 1, 2005 to March 31, 2006. The brief facts leading to this writ petition are as follows : The petitioner, which is engaged in the business of manufacturing sugar, is a registered dealer bearing TIN 21201901913 under the jurisdiction of the Sales Tax Officer, Bhanjanagar, opposite party No. 1. During the assessment period 2005-06, the petitioner filed its return under the Orissa Value Added Tax Act, 2004 (OVAT Act) and paid the admitted tax. Thereafter the Sales Tax Officer issued a notice in VAT form 307 for assessment of tax on the allegation of "escaped turnover" under sub-rule (1) of rule 50 of the OVAT Rules, 2005. The petitioner appeared before the Sales Tax Officer on February 12, 2007 and challenged his jurisdiction to issue notice in VAT form 307 and filed a petition praying to decide the question of jurisdiction as preliminary issue. According to the petitioner, opposite - party No. 1 without passing any order on the petition filed by it, completed the assessment on the same day the petition was filed. In the order of assessment, it was held that the "sugarcane", which was used as "industrial input" for sugar manufacturing was exigible to tax at four per cent, since sugar was exempted from taxation by entry 70 in Part II of the OVAT Act placing reliance on the Explanation thereto since sugar was subject to levy of excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Accordingly, the petitioner was taxed at four per cent on the value of purchase of sugarcane and consequential demand was raised on that score. This writ petition was filed on March 6, 2007. Notice in this case was issued on March 13, 2007 directing the Revenue to file counter-affidavit, if any, by the end of April, 2007 and on that date, as an interim measure, the demand raised pursuant to annexure 1 was directed to be stayed subject to the petitioner depositing Rs. 10 lakhs. Notice in this case was issued on March 13, 2007 directing the Revenue to file counter-affidavit, if any, by the end of April, 2007 and on that date, as an interim measure, the demand raised pursuant to annexure 1 was directed to be stayed subject to the petitioner depositing Rs. 10 lakhs. Thereafter the matter was listed on May 2, 2007, May 17, 2007, June 18, 2007, August 13, 2007 and October 4, 2007 and on all those dates time was granted on the request of the Revenue to file counter. On October 29, 2007 also learned counsel for the Revenue was directed to file counter-affidavit by the third week of January, 2008 and thereafter the matter was listed on April 25, 2008, June 13, 2009 and on July 14, 2009, but no counter-affidavit was filed. Mr. Dalai, learned Additional Standing Counsel for the Revenue, submits that since only questions of law are involved in this writ petition, no counter is necessary for disposal of the writ petition. On the aforesaid factual matrix, we have to examine whether the petitioner has any case. Reference is made to section 12 of the OVAT Act which provides for levy of "tax on purchase". Clause (ii)(b) of the section provides for levy of tax on purchase of the goods consumed or used in the manufacture of goods declared to be exempted from tax under this Act. In the list of goods exempted from value added tax, as mentioned in Schedule A, sugar is not included. In this regard, we may also refer to section 17 which provides for sale of goods exempted from tax. A reference to entry 108 in Part II of Schedule B indicates sugar as a taxable item. The Explanation thereto suggests that sugar along with other goods shall not be subject to levy of tax under this Act until such goods are subject to levy of excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Therefore, the contention of learned counsel for the Revenue that "sugar" is an exempted item but is exigible to tax under the provisions of section 12(ii)(b) of the OVAT Act cannot be accepted. The fact remains that, the assessing authority has held that "sugarcane" is exigible to purchase tax since "sugar" is an exempted item. Therefore, the contention of learned counsel for the Revenue that "sugar" is an exempted item but is exigible to tax under the provisions of section 12(ii)(b) of the OVAT Act cannot be accepted. The fact remains that, the assessing authority has held that "sugarcane" is exigible to purchase tax since "sugar" is an exempted item. Admittedly, VAT is not collected from the finished product like "sugar" as the petitioner is paying the excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Entry 108 in Part II of Schedule B makes sugar exigible to Orissa value added tax, but due to the reason of payment of excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 on sugarcane, VAT is not to be collected form the finished product, i.e., sugar. A bar perusal of the assessment order shows that the assessing authority has not correctly understood the import of entry 108 and the Explanation to Part II of Schedule B, which negates collection of VAT. We may refer to the decision of the apex court in the case of Associated Cement Companies Ltd. v. State of Bihar reported in [2004] 137 STC 389; [2004] 7 SCC 642, paragraph 17 of which is quoted as hereunder : "17. Crucial question, therefore, is whether the appellant had any 'liability' under the Act. The answer to this lies in section 3 of the Act which is extracted above and is the charging section. In sub-section (1), subject of the provisions of the Part (i.e., Part I), sales tax or purchase tax, as the case may be, shall be paid by every dealer as provided in the section itself. Section 7 speaks of exemption. Sub-section (3) of section 7 stipulates that the State Government may, by notification and subject to such conditions or restrictions as it may impose, exempt from sales tax or purchase tax certain sales or purchases as the case may be. The question of exemption arises only when there is a liability. Exigibility to tax is not the same as liability to pay tax. The former depends on charge created by the statute and the latter on computation in accordance with the provisions of the statute and rules framed thereunder if any. The question of exemption arises only when there is a liability. Exigibility to tax is not the same as liability to pay tax. The former depends on charge created by the statute and the latter on computation in accordance with the provisions of the statute and rules framed thereunder if any. It is to be noted that liability to pay tax chargeable under section 3 of the Act is different from quantification of tax payable on assessment. Liability to pay tax and actual payment of tax are conceptually different. But for the exemption the dealer would be required to pay tax in terms of section 3. In other words, exemption presupposes a liability. Unless there is liability question of exemption does not arise. Liability arises in terms of section 3 and tax becomes payable at the rate as provided in section 12. Section 11 deals with the point of levy and rate and concessional rate." Hence the reasons ascribed by the assessing authority while completing the assessment being based on a misinterpretation of the provisions of the OVAT Act, we quash the order of assessment dated February 12, 2007 (annexure 1) passed by the Sales Tax Officer, Bhanjanagar Circle, Bhanjanagar. The amount, which has been deposited by the petitioner by virtue of the order of this court dated March 13, 2007, be refunded to it by the Revenue, on proper application, within three months from the date of communication of this judgment, failing which, the petitioner shall be entitled to interest at 10 per cent per annum to be computed from the date of deposit. Accordingly, the writ petition is allowed to the extent indicated above. I. Mahanty J. - I agree.