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2021 DIGILAW 190 (ORI)

Shiva Cement Ltd. v. State Of Orissa

2021-04-19

B.P.ROUTRAY

body2021
ORDER 1. This matter is taken up by video conferencing mode. 2. Both these revision petitions arise from a common order dated 6th March 2006 of the Orissa Sales Tax Tribunal, Cuttack (Tribunal) in S.A. Nos.1221 to 1224 of 1998-99 (filed by the State of Orissa) and S.A. Nos.1118 to 1120 of 1998-99 (filed by the Petitioner-assessee). 3. The common questions of law framed by this Court on 27th November 2019, in both the revision petitions read as under: (1) Whether in the particular facts and circumstances of the case the imposition of penalty u/s 9-B (3) of the OST Act can be said to be legally justified? (2) The petitioner being liable to collect and pay tax with effect from 1.12.1993 on the original installed capacity of 13500MT of Cement as a registered dealer whether the finding of the Orissa Sales Tax Tribunal to the effect that the collection of tax by the petitioner is not authorized under law is legally correct? (3) Whether consideration of relevant and irrelevant materials together by the Tribunal while coming to its conclusion does not vitiate the order passed by it in the particular circumstances of the case? And whether such a decision of the Tribunal is legally sustainable in view of the law laid down by the Hon'ble Supreme Court in case of Commissioner of Income Tax, Bihar and Orissa v. S.P. Jain reported in 87 ITR 370? 4. The background facts are that the Petitioner is a small scale industrial (SSI) unit engaged in the manufacturing and sale of cement. It was registered with the District Industries Centre, Sundargarh. It was registered as an SSI Unit with effect from 28th January 1987 with an installed capacity of 13500MTs of cement. 5. The Petitioner was also registered as a dealer under the Orissa Sales Tax Act, 1947 (OST Act) as well as the Central Sales Tax Act, 1956 (CST Act). After setting up its industrial unit at Industrial Area Kalunga, commercial production commenced with effect from 1st December, 1986. 5. The Petitioner was also registered as a dealer under the Orissa Sales Tax Act, 1947 (OST Act) as well as the Central Sales Tax Act, 1956 (CST Act). After setting up its industrial unit at Industrial Area Kalunga, commercial production commenced with effect from 1st December, 1986. It is stated by the Petitioner that as a continuing unit under the Industrial Policy Resolution (IPR), 1989, the Petitioner was eligible for sales tax exemption both on purchase of raw materials X4555for a period of five years as well as on sale of finished product i.e. cement, for a period of seven years from the date of commercial production i.e. 1st December, 1986. The seven year period accordingly came to an end on 1st December, 1993. 6. Availing of the scheme declared under IPR 1989, the Petitioner made an additional investment in plant and machineries for an additional capacity of 22500MT s of cement over and above the installed capacity of 13500MTs. Commercial production at its expanded unit commenced on 16th July, 1992. Under the IPR 1989, the sales tax exemption in so far as the expanded unit was concerned commenced with effect from 16th July 1992 itself. 7. For the year 1994-95, assessment was completed under Section 12 (4) of the OST Act when the Sales Tax Officer (STO) passed the assessment order on 31st May, 1996. The Petitioner was held liable to pay tax on sale of cement with effect from 1st December 1993 insofar as the existing unit having installed capacity of 13500MTs is concerned. For the AY 1995-96, by the assessment order dated 7th March 1997, the STO held likewise. 8. The Intelligence Unit, Rourkela as well as the Intelligence Unit of Sambalpur sent two fraud case reports alleging that the Petitioner had unauthorizedly collected sales tax in the sum of Rs.2,76,685.53 and Rs.13,19,114.97 on sale of cement to Government offices out of the total sale of Rs.23,05,712.72 and Rs.1,09,92,624.76 during the years 1992-93, 1993-94, 1994-95 and 1995-96 respectively. On that basis, the STO, Rourkela II Circle, Panposh issued a show cause notice (SCN) on 9th January 1997 asking the Petitioner to show cause why penalty not exceeding thrice of the amount of tax so realized should not be imposed on it in terms of Section 9-B(3) of the OST Act. 9. On that basis, the STO, Rourkela II Circle, Panposh issued a show cause notice (SCN) on 9th January 1997 asking the Petitioner to show cause why penalty not exceeding thrice of the amount of tax so realized should not be imposed on it in terms of Section 9-B(3) of the OST Act. 9. The Petitioner in its reply to the SCN denied having made any unauthorized collection of sales tax from the Government Departments on sale of cement. It was pointed out that the Petitioner had collected tax @ 12% on the sale of cement in terms of the statutory provisions and there was no infringement of the law. 10. For the period 1994-95, the STO imposed a penalty on the basis that while effecting sales of cement to the tune of Rs.47,49,093.64, the Petitioner had collected tax to the tune of Rs.5,08,831.46. For the period 1995-96, he held that while effecting sale of cement to Government Departments in the sum of Rs.45,70,555.30, the Petitioner had unauthorizedly collected sales tax to the tune of Rs.4,89,702.35. The STO held that the Petitioner was not authorized to collect the tax on the sale of its finished product while enjoying the exemption under Entry-30-FFF of the tax free schedule under the OST Act. In similar manner, the penalty was imposed for the years 1992-93, 1993-94 and 1995-96. 11. Aggrieved by these orders, the Petitioner preferred appeals before the Assistant Commissioner of Sales Tax (ACST), Sundargarh Range, Rourkela. By a common order dated 18th August 1998 for the years 1992-93 to 1995-96, the ACST waived the penalty for the year 1995-96 completely as there was no proof of the Petitioner having illegally collected the sales tax. For the years 1992-93 to 1994-95, the penalty was reduced from Rs.37,36,724/- to Rs.2,77,785/-. 12. Aggrieved by the above order of the ACST, the Petitioner as well as the State filed the aforementioned appeals before the Tribunal. 13. The Tribunal by the common impugned order dated 6th March 2006, allowed the Petitioner's appeal for the assessment years 1992- 93 and 1993-94 while allowing the appeals filed by the State for the assessment years 1994-95 and 1995-96. 14. This Court has heard the submissions of Mr. Damodar Pati, learned counsel for the Petitioner and Mr. Sunil Mishra, learned Additional Standing Counsel for the Opposite Party-Sales Tax Department. 15. 14. This Court has heard the submissions of Mr. Damodar Pati, learned counsel for the Petitioner and Mr. Sunil Mishra, learned Additional Standing Counsel for the Opposite Party-Sales Tax Department. 15. The Court at the outset notes that the approach for the period up to 1st December, 1993 when the sales tax exemption was available in respect of the cement from the installed capacity of 13500MTs, had to be different from the approach in respect of the sales tax payable by the Petitioner on cement for the period subsequent thereto. Likewise for the additional capacity of 22500MTs, the approach in respect of the issue of the exemption with effect from 16th July 1992, had to be separately dealt with. 16. It is interesting that the ACST while partly allowing the Petitioner's appeals came to the conclusion that even for 1992-93 and 1993-94, the penalty imposed by the STO was 'very high and excessive' and that there was no direct proof of collection of sales tax by the Petitioner. The appellate authority further noted that the Petitioner-assessee had deposited the entire tax collected by it for the years 1994-95 and 1995-96. 17. The attention of the Court has been drawn to the relevant observations in the assessment order passed by the STO noting that the Petitioner had produced the books of account for the period 1992-93 to 1995-96. The fact of the matter was that the Department was not able to present any credible evidence to show that the Petitioner had illegally collected tax on the sale of cement for any of the years in question. The STO overlooked the fact that in respect of the installed capacity of 13500MTs, the Petitioner was exempted from sales tax on the finished products i.e. cement up to 1st December, 1993. There is nothing to show that during this period it collected sales tax illegally. This was the position even for the year 1993-94. This was noticed by the Tribunal in the impugned order where it categorically observed as under: 'The LAO has not recorded a clear finding that the dealer collected sales tax on the sale of cement during these periods. It is observed by him that in the sale bills sales tax @ 12% on the basic sale price has been realized by the dealer in the name of 'Special duty' and 'Basic Excise duty'. It is observed by him that in the sale bills sales tax @ 12% on the basic sale price has been realized by the dealer in the name of 'Special duty' and 'Basic Excise duty'. It implies that in the sale bills the dealer has specifically not mentioned to have realized sales tax. Learned ACST also observes that the dealer realized sales tax in an indirect way. Unless the dealer clearly mentions in the bills that it has raised sales tax on the basic sale price of the goods there cannot be a presumption, on the afore- stated acts and circumstances, that the dealer has collected sales tax in the guise of 'Basic Excise duty' or 'Special duty'. Unless and until there is a definite finding that the dealer realized tax on the sales of cement, penalty cannot be imposed on the dealer. Consequently, the order imposing penalty on the dealer in respect of the transactions taking place during the year 1992-93 and 1993-94 is not sustainable.' 18. The above finding has become final with the Department not challenging it by filing any revision petition in this Court. 19. Consequently, it is only in so far as the Tribunal has sustained the penalty against the Petitioner for the years 1994-95 and 1995-96 that these revision petitions require to be considered. 20. With regard to the period 1994-95 and 1995-96, the ACST, in the appellate order waived the penalty imposed on the Petitioner on the ground that it had deposited the amount of sales tax realized. The fact of the matter is that as far as the installed capacity was concerned, with the exemption on payment of sales tax on the finished product having come to end on 1st December 1993, the Petitioner was bound to collect the sales tax on the finished product which in fact it did. It was this tax that the Petitioner deposited with the Department. This cannot be understood as any admission by the Petitioner of having illegally collected the tax and having thereafter 'returned' to the Department. On the contrary, the explanation offered by the Petitioner that it was bound to collect the sales tax for this period is both logical and correct. If that is the position, then there is no justification in imposing any penalty on the Petitioner for these two years on the ground that it had illegally collected sales tax. 21. On the contrary, the explanation offered by the Petitioner that it was bound to collect the sales tax for this period is both logical and correct. If that is the position, then there is no justification in imposing any penalty on the Petitioner for these two years on the ground that it had illegally collected sales tax. 21. Consequently, the Court finds that the conclusion of the Tribunal with regard to the issue to be unsustainable in law. 22. The questions framed for consideration for both the years 1994- 95 and 1995-96 are answered as under: (i) Question (1) is answered in the negative by holding that the imposition of penalty on the Petitioner under Section 9-B(3) of the OST Act for 1994-95 and 1995-96 cannot be said to be legally justified. (ii) Question (2) is answered in the negative by holding that the finding of the Tribunal that the Petitioner had illegally collected the sales tax in respect of the installed capacity cement with effect from 1st December, 1993 is incorrect and not sustainable in law. (iii) Question (3) is answered in the affirmative by holding that the Tribunal's order is vitiated as it considered together both the relevant and irrelevant materials in arriving at its conclusions. 23. The impugned order of the Tribunal to the extent that it has sustained the penalty against the Petitioner for the years 1994-95 and 1995-96 is hereby set aside. 24. The revision petitions are disposed of in the above terms. 25. As the restrictions due to resurgence of COVID-19 situation are continuing, learned counsel for the parties may utilize a printout of the order available in the High Court's website, at par with certified copy, subject to attestation by the concerned advocate, in the manner prescribed vide Court's Notice No.4587, dated 25th March, 2020 as modified by Court's Notice No.4798, dated 15th April, 2021.