- 27 -
In the Honble High Court of Orissa : Cuttack.W.P. (C) No.
__________ of 2 0 1 5.Code No. 170403
In the matter of:An application under Articles 226 and 227 of
the Constitution of India, 1950;A N DIn the matter of:An
application under the Central Sales Tax Act, 1956 and rules framed
thereunder;A N DIn the matter of:An application challenging the
assessment order dated 20.02.2015 passed by the Joint Commissioner
of Sales Tax, Sundargarh Range, Rourkela under Rule 12(3) of the
Central Sales Tax (Odisha) Rules, 1957 for the period from
01.04.2011 to 31.03.2013;A N DIn the matter of:An application
assailing the sanctity and legality of audit visit report purported
to have been prepared and submitted by the Deputy Commissioner of
Sales Tax, Rourkela-II Circle, Panposh under Rule 10 of the Central
Sales Tax (Odisha) Rules, 1957 pursuant to which the impugned
assessment order dated 20.02.2015 was passed by the Joint
Commissioner of Sales Tax, Sundargarh Range, Rourkela under Section
12(3) of the said Rules for the period from 01.04.2011 to
31.03.2013;A N DIn the matter of:An application with a prayer to
hold imposition of mechanical penalty invoking exercise of power
under Section 12(3) of the Central Sales Tax (Odisha) Rules, 1957
without issue of notice and/or calling for show-cause;A N DIn the
matter of:M/s. Siemens Ltd.A company registered under the Companies
Act, 1956 having its registered office at 130, Pandurang Budhkar
Marg, Worli, Mumbai in the state of Maharastra and a Branch Office
at Qr. No. C/320, Koelnagar,Rourkela 769 014, District: Sundargarh
in the State of Odisha bearing TIN No.21922000069 represented by
Power of Attorney Sri Prithanu Bhattacharjee, Manager Indirect Tax
........ Petitioner Versus1. State of Odisharepresented through its
Secretary, FinanceOdisha SecretariatBhubaneswarDistrict : Khurda,
Odisha.2. Commissioner of Sales Tax, Odisha having his office at:
Banijyakar BhawanP.O.: BuxibazarCity & District: Cuttack 753
001, Odisha.3. Joint Commissioner of Sales TaxSundargarh Range,
RourkelaAt/po-Uditnagar, Rourkela, Dist-Sundargarh, Odisha.4.
Deputy Commissioner of Sales Tax Rourkela-II
Circle,At/po-Uditnagar, Rourkela, Dist-Sundargarh,
Odisha....Opposite parties.ToThe Honble Shri Pradip Kumar Mohanty,
LL.B., the Acting Chief Justice of Orissa High Court and His
companion Justices of the said Honble Court.Humble petition of the
petitioner above named;
Most respectfully sheweth:1. The petitioner in this writ
petition challenges (a) the assessment order dated 20.02.2015
passed under Rule 12 of the Central Sales Tax (Odisha) Rules, 1957
[in short CST (O) Rules] by the Joint Commissioner of Sales Tax,
Sundargarh Range, Rourkela-opposite party No.3 as the same is
violative of principles of natural justice, arbitrary, illegal and
tainted with perverse finding of fact. The petitioner asserts that
the assessment order is liable to be quashed as it is barred by
limitation, and also against the provisions of the C.S.T. (O)
Rules.It is salient feature of the principles of natural justice
that a person should not be judge of his own cause. The assessment
being undertaken and completed by passing order by an authority who
was involved in the audit process, the entire proceeding is
vitiated in view of ratio laid down in Tata Sponge Iron Ltd. Vrs.
Commissioner of Sales Tax, (2012) 49 VST 33 (Ori) and ABB Ltd. Vrs.
State of Odisha, (2015) 77 VST 124 (Ori).(Original copy of the
assessment order is filed herewith and marked as Annexure-1.)(b)
The order of the assessment is also against the provisions of the
Central Sales Tax Act, 1956 and rules made thereunder as it has
rejected the petitioners claims of exemption of second
sales.Subsequent sales made under section 6(2) of the C.S.T. Act on
vague reasonings thereby violating the provisions of the article
286 of the Constitution of India.(c) The order of assessment is
also illegal because the assessing authority has sought to reject
the petitioners sale under section 6(2) of the C.S.T. Act, 1956
without giving a proper notice of show cause to the petitioner
before rejecting the same, and by first adding the turnover of said
subsequent sale to the turnover under the OVAT Act. The assessing
authority has also traversed beyond the contents of the audit Visit
Report (AVR).The order of the assessment is therefore arbitrary,
illegal and bad in law and against the provisions contained in the
Central Sales Tax act, 1956, and against the provisions contained
in Articles 19(1)(g) and 286 of the Constitution of India and
liable to be quashed. 2. The petitioner prays for an order for
quashing the order of assessment in Annexure-1.3. The petitioner is
a Company registered under the Companies Act, 1956 having it's
Registered Office at Pandurang Budhkar Marg, Worli, Mumbai in the
State of Maharastra and has a branch office at C/320,Koel Nagar,
Rourkela in the district of Sundargarh in the State of Odisha. That
most of the shareholders of the petitioner company are citizens of
India and carry on the business of manufacture and supply of
Electrical Equipments etc. throughout the country. The cause of
action arises within the territorial jurisdiction of this Hon'ble
Court.4. The facts leading to the present Writ Application inter
alia are:(a) The petitioner is a Company registered under the
Companies Act, 1956 having it's Registered Office at Worli, Mumbai
in the State of Maharashtra and a local office at Rourkela in the
district of Sundargarh in the State of Odisha.(b) The petitioner
carries on the business of manufacture, sale and supply of
Electrical Equipments and Electrical Goods and also carries on the
business of Works Contracts for erecting the said Equipments and
Goods at Customer's Sites throughout the State of Odisha. For the
aforesaid transactions the petitioner is registered as a "Dealer"
under the Odisha Value Added Tax Act,2004 and under the Central
Sales Tax (Registration & Turnover) Rules, 1957 with the Deputy
Commissioner of Sales Tax (Hereinafter for short mentioned as DCST)
O.P.No.4 bearing TIN 21922000069.The petitioner has been filing its
returns regularly and paying the admitted taxes thereon. That for
the present impugned period being 1.4.2011 to 31.3.2013, the
petitioner has executed contracts with Tata Steel Ltd, Bhushan
Steel Ltd, Indian oil Corporation Ltd, Praxaair India Pvt Ltd,
Mcnally Bharat Engg Co. Ltd., Thermax Ltd., OCL Iron & Steel
Ltd., Steel Authority of India Ltd., Bhushan Energy Ltd., Bhushan
Power & Steel Ltd., Essar Projects (India) Ltd., Hindalco
industries Ltd., Rungta Mines Ltd., Utkal Alumina International
Ltd., Jindal Stainless Ltd., Vedanta Aluminium Ltd., BOC India
Ltd., Bhilai Engineering Corporation Ltd., BRG Iron and Steel,
Concast Steel & Power Ltd., Reliable Hitech Infrastructure Pvt
Ltd., Sterlite Energy Ltd., Ultratech Cement Ltd., Larsen &
Toubro Ltd., Hindustan Coca-Cola Beverages, Thermax Ltd., Tata
Projects Ltd., (hereinafter for short mentioned as CUSTOMERS for
design, engineering, manufacture, procurement and supply of
electrical equipments and for erecting the said equipments at
customer's sites in Odisha. ( A photocopy of the contract between
the petitioner and the Vedanta Aluminium Ltd. is enclosed herewith
and marked as Annexure- 2).(c) That under the aforesaid contracts,
the petitioner was to design the equipments, manufacture and supply
Electrical Equipments either by itself or through Sub-Vendors
approved by the CUSTOMERS. Under the said contract the Equipments
are to be designed and engineering done and after the same are
done, they are to be approved by the CUSTOMERS and after the
designs are approved, they would be manufactured either in the
petitioner's works situated in various places throughout the
country or through approved Sub-Vendors of the aforesaid CUSTOMERS.
That after the said goods are manufactured the same are tested by
the CUSTOMERS at the Petitioner's Works/Sub-Vendor's Works and
after the CUSTOMERS are satisfied that the said goods are
manufactured in pursuance to the specifications mentioned in the
contracts, they give despatch clearance and the equipments are
thereafter despatched to the CUSTOMERS in the State of Odisha. The
Consignor mentioned in the Lorry Receipt is the Sub-Vendor or the
petitioner situated in the Non-Odisha States and the Consignee is
the CUSTOMERS situated inside the State of Odisha. (d) The invoices
are raised by the Sub-Vendors on SIEMENS i.e. the petitioner and
thereafter the petitioner raises an invoice on the aforesaid
CUSTOMERS. The first sale is between the Sub-Vendor and SIEMENS in
the Non-Odisha States covered under the provisions of Section 3(a)
of the Central Sales Tax Act and relevant Sales Tax has been paid
by the Sub-Vendor at a concessional rate in the State from where
the goods have commenced their Inter-State journey. That since
these are contracted goods i.e. specific, ascertained and
tailor-made good as per specifications mentioned in the
pre-existing contract between the parties and moved from the
NON-ODISHA State into the State of Odisha, they are clearly
Inter-State Sales under the provisions of Section 3(a) of the
Central Sales Tax Act, 1957 and the State from where the goods
commenced their Inter-State journey will be the appropriate State
to levy and collect the Central Sales Tax and therefore the Central
Sales Tax at a concessional rate is rightly paid in the State from
where the goods commenced their Inter-State journey. That while the
goods are in movement from the Non-Odisha State into the State of
Odisha, the petitioner i.e. the first purchaser sells the goods by
transfer of documents of title to the goods i.e. the lorry receipt
and delivery challan, and raises an invoice on the ultimate
purchaser i.e. the CUSTOMERS and the said sale is a "subsequent
sale" and therefore the second sale is exempted from being taxed
further under the provisions of Section 6(2) of the Central Sales
Tax Act, 1956. The invoices raised by the petitioner on the
ultimate purchaser i.e. the CUSTOMERS is as per the rates or values
of specific goods as detailed out in the pre-existing contracts
between the parties because of the fact that specific/contracted
goods have a specific/contracted price for it. The petitioner will
not be able to charge a higher price other than what is mentioned
in the contract. The goods enter into the State of Odisha in the
Way Bill of the ultimate purchaser i.e. the CUSTOMERS and the
aforesaid ultimate purchaser/CUSTOMERS pays the Entry Tax inside
the State of Odisha on the said goods for causing entry of goods
into the State of Odisha and the said Entry Tax has been rightly
levied and collected by the State of Odisha from the CUSTOMERS.(e)
It can never be said that the equipments manufactured by the
approved Sub-Vendor/Sub-Supplier of SIEMENS and the items supplied
by SIEMENS to the CUSTOMERS are two different items because if that
be so and if the goods are not a part of the contracted goods, then
the CUSTOMERS will not accept the same and will neither make
payment of the price and neither issue a C Form to SIEMENS and
therefore in other words the said equipments supplied are specific
goods manufactured in pursuance to the pre-existing contracts
between the CUSTOMERS and SIEMENS and have been supplied by the
Sub-Vendors to SIEMENS and thereafter by SIEMENS to the CUSTOMERS
and the CUSTOMERS have made a payment of the invoice and issued 'C
Form for the invoice value on SIEMENS. SIEMENS accordingly has
issued a C Form to the Sub-Vendor and the Sub-Vendor to complete
the transaction and for paying concessional rate of Central Sales
Tax has issued a 'E-l' Form to SIEMENS. (Photocopy of two copies of
all documents relating to the sales are enclosed herewith marked as
Annexure -3 Series).(f) The petitioner submits that the contract
between the Petitioner and the CUSTOMERS in the present case
mentions only the broad headings of the equipments to be supplied.
It does not mention each and every small item of equipments that is
to be supplied. Therefore the invoice raised by the Sub-Vendor of
the customer is a sub-heading item and in the invoices raised by
the petitioner on the CUSTOMERS, the description of the item given
is the broad heading item which finds place in the contract. Had it
been some other goods which were supplied by the Sub-Vendor of the
CUSTOMERS and the goods supplied by the petitioner on the CUSTOMERS
were different, then the CUSTOMERS would not have accepted or
received such goods and would not have paid the price of the goods
to the petitioner, nor given a 'C declaration form giving the
invoice value of the petitioner's invoice on the CUSTOMERS. There
is also sufficient proof that the CUSTOMERS have actually received
and paid for a specific tailor-made goods as per the specifications
mentioned in the contract because of the fact that the CUSTOMERS
have brought the said goods on its own Way Bill and also paid Entry
Tax on the said goods to the State of Odisha and which Entry Tax,
the State of Odisha has duly received and accepted.(g) The
petitioner hereby submits that as far as subsequent sales u/s. 6(2)
of the Central Sales Tax Act is concerned, the only element to be
seen is, as to whether there was a pre-existing contract, whether
specific or tailor-made goods have moved from one State to another
in pursuance to the pre-existing contract and whether there is a
subsequent sale from the ultimate seller to the ultimate buyer by
transfer of documents of title to the goods during the said
movement. Once the aforesaid three conditions are fulfilled, the
transaction will be a sale under section 3(a) of the Central Sales
Tax Act and thereafter a subsequent sale under Section 6(2) of the
Central Sales Tax Act and exempt from taxation under Section 6(2)
of the Central Sales Tax Act. It is immaterial as to whether it is
a belated transaction i.e. the time gap between the first invoice
i.e. the invoice between the Sub-Vendor and SIEMENS and the second
invoice i.e. the invoice between the petitioner and the CUSTOMERS,
has a long time gap or there is an overlapping of those invoices in
different assessment years and such vague reasonings cannot be
taken into account for rejecting a sale u/s. 6(2) of the Central
Sales Tax Act. 5. That the tax audit under Rule 10 of the CST (O)
Rules was undertaken by the DCST Opp. Party No.4 in pursuance to a
direction given by the assessing authority being the JCST Opp.
Party No.3. While the audit was going on the DCST who was
conducting audit had requested the petitioner to submit the certain
documents which the petitioner produced and filed. Other than the
aforesaid documents, the DCST never asked for the contract between
the petitioner and the CUSTOMERS. The DCST has therefore stated
about non-submission of declaration forms. (A photo copy of the
HAZIRA is enclosed herewith and marked as Annexure-4 Series)6.
Audit visit report communicated to the petitioner along with the
notice in Form IV for assessment as a result of audit is witness to
the fact that the AVR was not submitted in terms of Rule 10(3) of
the C.S.T. (O) Rules. It has been laid down by this Honble Court in
Jindal Stainless Ltd. Vrs. State of Odisha, (2012) 54 VST 1 (Ori)
that if AVR is not submitted within the period stipulated under
Section 41(4), the assessment under Section 42 is not sustainable
in the eye of law. AVR being taken as the foundation for audit
assessment under Rule 12(3) of the CST (O) Rules, the petitioner
reasonably believes that the AVR had not been submitted within the
period stipulated under Rule 10(3). ( A photocopy of the AVR in
Form III AA as communicated to the petitioner along with notice in
Form IV for assessment under Rule 12(3) of the CST (O) Rules is
enclosed herewith as Annexure-5)7. A glance at the notice in Form
IV in Annexure-5 reveals that the said notice was issued on
28.04.2014 fixing date of appearance and production of records on
30.05.2014. It is asserted by the petitioner that the said notice
having been tendered on the Advocate, on 30.04.2014 the notice
itself is invalid being served on improper person. By the date the
notice was served on the advocate, the company did not appoint him
to plead on its behalf. Therefore, in view of ratio laid down in
Manekia Vrs. Commissioner of Sales Tax, (1977) 39 STC 426 (Bom) and
Srikanth Trading Co. Vrs. State of Andhra Pradesh, (1998) 109 STC
590 (AP) that service of notice on person not authorised is
invalid.8. That as the authority failed to adhere to statutory
requirement contained in Rule 12(3)(c) of the CST (O) Rules, the
assessment proceeding is vitiated. It has been stipulated under the
said rule that the assessing authority was duty bound to specify
thirty days for production of relevant books of account and
documents. The words not less than employed in Rule 12(3)(c) of the
CST (O) Rules make it clear that the assessing authority at any
rate is not authorized to reduce the period of thirty days. Since
the authority had served the notice the Advocate on 30.04.2014 (who
was not authorized to act on behalf of the company-petitioner as on
30.04.2014) directing the assessee-petitioner to appear and produce
the books of account and documents on 30.05.2014, he has clearly
transgressed his jurisdiction in proceeding with the assessment.
The notice could have been served on the petitioners branch office
at Rourkela for reasons best known to the JCST the same was served
on the advocate. In terms of decision rendered by this Honble Court
in the case of Patitapaban Bastralaya Vrs. Sales Tax Officer, 2015
(I) OLR 183 and Delhi Footwear Vrs. Sales Tax Officer, (2015) 77
VST 146 (Ori), the assessment order is liable to be quashed.
9. That the JCST assumed jurisdiction in utter violation of
principles of natural justice. Reading of opening paragraph of the
AVR in Form VAT-303 [which forms part of writ application relating
to challenge made against assessment order passed under the OVAT
Act] would reveal the following: and Letter No.8568/CT, dated
26.03.2013 and subsequently communicated by the JCCT, Sundargarh
Range, Rourkela communicated vide Letter No.1479(2)/CT, dated
31.05.2013. Rule 10 of the CST (O) Rules read with Section 41(2) of
the OVAT Act speaks that after identification of dealers for tax
audit, the Commissioner is required to direct tax audit in respect
of such dealers to be conducted. The Commissioner, in exercise of
power conferred on him under Section 5 of the OVAT Act, vide
Notification bearing No. 6780-V(VI)-53/2005-CT., dated 06.04.2009
delegated his power under Section 41(2) to the Joint Commissioner
of Sales Tax. (Photocopy of the AVR under the OVAT Act is enclosed
herewith marked as Annexure-6)10. The opening paragraph of the AVR
as quoted above read with the aforesaid notification shows that the
Joint Commissioner of Sales Tax has exercised his power under
Section 41(2) of the OVAT Act and directed the audit team to
conduct the tax audit of the petitioner-company. Since the Joint
Commissioner of Sales Tax had been involved in the process of
audit, in view of decisions of this Honble Court in Tata Sponge
Iron Ltd. Vrs. Commissioner of Sales Tax, (2012) 49 VST 33 (Ori)
and ABB Ltd. Vrs. State of Odisha, (2015) 77 VST 124 (Ori), the
said officer-opposite party No.3 was not competent to take up and
conclude the assessment order under Section 42.11. That the
petitioner asserts that even though there was no categorical
observation or allegation made in the AVR as regards transactions
effected by the petitioner in terms of Section 6(2) of the Central
Sales Tax Act, 1956 [CST Act for brevity], the Joint Commissioner
of Sales Tax with an oblique bent of mind to disallow the entire
transaction covered under Section 3(b) read with Section 6(2) of
the CST Act and raise huge astronomical demand traversed beyond the
terms of AVR.At this juncture it may be necessary to have a glance
at paragraph 15 of the AVR in Form VAT-303 which reads as follows:
In addition to this the dealer failed to furnish the required Form
E-I certificates at a time in support of the sale effected under
Section 6(2) of the CST act which may be treated as VAT sales12. In
the AVR in Form IIIAA no allegation has been made against the claim
of exemption under Section 6(2) except making an observation that
the dealer partly could not furnish E-1 Forms.13. It is humbly
submitted that the suggestion of the audit team is without
comprehension either of the law or of the fact. Conceding for the
sake of argument, if a transaction of sale effected from outside
the State of Odisha is not disputed and pursuant to agreement with
the CUSTOMERS with the present petitioner is not in dispute, the
transaction disclosed as falling within the scope of Section 6(2)
of the CST Act on its rejection can only be comprehended within the
ken of Section 3(a) of the CST Act.14. The dealer-petitioner also
in its explanation clearly stated which was recorded by the
assessing authority in the following words [see assessment order
under the OVAT Act]: In regard to above allegation, it is explained
that non-submission of E-I certificate relates to tax exempted sale
under Section 6(2) of the CST Act wherein the goods have been
dispatched directly from outside the State to the ultimate buyers
of Odisha State on the strength of the way bill in Form VAT-402
issued by the purchaser. Hence, the transaction being in course of
inter-State trade or commerce, taxing of the same under the State
Act in the hands of the company is illegal and arbitrary.15. The
dealer-company as regards transactions covering Section 6(2) of the
CST Act explained and placed all relevant materials to show that
the vendors of the petitioner commenced movement of the goods
required to be supplied to the CUSTOMERS [which movement triggered
by virtue of agreement between the CUSTOMERS and the
petitioner-company] which is first inter-State sale falling within
Section 3(a) of the CST Act and thereafter during such movement
second inter-State sale was effected by the petitioner to the
contractee by way of endorsement and the way bills were issued by
the contractees for transportation of the goods moved from outside
the State of Odisha to its place of business. These documents, even
though without any ambiguity, led to show that the transactions in
question very well fall within scope of Section 6(2), the Joint
Commissioner of Sales Tax, opposite party No.3 acted in complete
defiance of law and being swayed away by the suggestion of his
subordinate officers made in AVR, held that the transactions would
be exigible to sales tax under the OVAT Act.The conclusion arrived
at by the opposite party No.3 is fallacious and irrational
particularly when it is not disputed that the waybills were given
by the CUSTOMERS for taking delivery at their end.16. That the
petitioner after entering into agreement(s) with CUSTOMERS placed
purchase orders on different vendors outside the State of Odisha
and instructed them to dispatch the goods directly to the above
CUSTOMERS who would furnish way bills. At paragraph 5, page 19 of
the assessment order under the OVAT Act it has been observed as
follows:All lorry receipts meant for loading of goods and
commencement of 1st inter-State movement were issued for direct
delivery of goods at the work site of the ultimate purchaser inside
the State of Odisha in the account of the instant dealer and there
was no endorsement made by the buyer i.e. instant dealer on the
L.R. transferring title to goods in favour of ultimate
purchaser.17. The assessing authority was under the misconception
that transfer of document of title can only be by endorsement in
lorry receipt. This conclusion would be contrary to the provisions
of the Sale of Goods Act. When the finding is that the delivery
inside the State of Odisha would be taken at the site of the
ultimate purchaser, there is no scope for entertaining any doubt
that the entire transaction is inter-State sale. The very same
goods while being in transit were diverted to be taken into the
mass of the goods of the CUSTOMERS. The fallacy in finding of fact
is apparent when the following reasoning of the assessing authority
is read page 16 para (vii) of the assessment order under the OVAT
Act) TO QUOTEVerification of documents reveals that the
dealer-company has purchased goods from outside the State on its
own account, transported the same into the State of Odisha as its
own goods without any change of ownership or change in the
documents of title to goods and has sold the same to different
customer inside the State of Odisha acting as an agent or dealer
and principal to the buyer inside the State. Hence, being an agent
like factor or pakka adatiya or dealer between the outside seller
and ultimate purchaser, it is liable to pay VAT on the said sale of
goods.UNQUOTE.18. Though the assessing authority found that the
dealer-petitioner was agent, and he did not dispute the movement of
goods from outside the State of Odisha and accepted that CUSTOMERS
have furnished waybills for movement of goods directly to their
premises for taking delivery, the opposite party No.3 failed to
appreciate the fact that the inter-State journey of the goods could
only be terminated in the premises of the CUSTOMERS. The assessing
authority fell in error of law by levying tax under the OVAT Act on
these transactions. 19. That since no allegation was contained in
the AVR with regard to suggestion to disallow transactions covered
under Section 6(2) of the CST Act, the assessing authority
unilaterally without calling for any show-cause from the petitioner
should not have jumped to the conclusion and rejected the claim of
the petitioner. The assessing authority could not have proceeded to
record finding and examine such fact which was not contained in the
AVR in view of principle stated in Bhushan Power & Steel Ltd.
Vrs. State of Odisha, (2012) 47 VST 466 (Ori).20. The notice for
assessment contained only AVR allegations which were explained by
the dealer-petitioner to the assessing authority. The assessing
authority could not take up and decide the issue which was not put
to the notice of the petitioner. Nowhere in the assessment order
the reason for rejection of claim of sale under Section 6(2) of the
CST Act has been stated by the assessing authority. There has been
blatant infringement of natural justice while raising huge
arbitrary and whimsical demand.21. That it is humbly submitted that
the assessing authority proceeded on presumptions and conjectures
without bringing on record analysis of each and every transaction.
The assessing authority has accepted the position that the name of
place located outside the State from which goods are consigned and
the final delivery address of the last purchaser inside the State
of Odisha are mentioned on the lorry receipt (see page 19 of
assessment order under the OVAT Act). This is clear indicative of
the fact that the transactions are inter-State in nature. Even if
the transactions are held to be out of the purview of Section 3(b),
the same would at best fall within the scope of Section 3(a) of the
CST Act, but nevertheless would be encompassed within the OVAT
Act.22. That the determination of tax liability under the OVAT Act
vis--vis the transactions disclosed under Section 3(b) read with
Section 6(2) of the CST Act shows that the assessing authority
committed grave error of procedure leading to infer that he was
committed to tax the transactions under the local sales tax law. At
page 6 of assessment order passed under the CST Act it is stated as
follows:The 2nd and 3rd allegation made in the AVR having been
dealt in separately and discussed in detail in the assessment order
passed today under the OVAT Act and OET Act, there is no need to
discuss the same again in this order23. It may be pointed out from
the assessment order under the CST Act that allegation Nos.2 and 3
are that out of claimed transactions under the purview of Section
6(2), the petitioner could not furnish certain certificates in E-I
and transactions relating to McNally Bharat disclosed under Section
6(2). The allegations do not contain that total rejection of claim
of exemption under Section 3(b) read with Section 6(2) of the CST
Act.24. The observation of the assessing authority in the
assessment order under the CST Act indicates that he took the view
to add the turnover representing transactions disclosed under
Section 3(b) read with Section 6(2) of the CST Act in the
assessment under the OVAT Act. In other words, the assessing
authority had passed order of assessment under the OVAT Act first
by assessing the tax liability in respect of transactions shown
under Section 3(b) read with Section 6(2) of the CST Act.
Therefore, it is urged that prior to rejection of transactions
falling within the scope of Section 3(b) read with Section 6(2) of
the CST Act, the assessing authority could not have taken the said
turnover into the assessment under the OVAT Act. 25. This fact is
amply clear from the orders dated 17.01.2015 and 20.02.2015
maintained in the order-sheet. The following orders are passed on
the aforesaid two dates:17.01.2015:The learned advocate of the
dealer company appeared today, filed hazira, produced declaration
forms in F and EI parts, and stated that they have not received the
balance declaration in Form C and EI from the purchaser and sellers
respectively till date. It is also requested to conclude the
assessment proceeding on the basis of documents produced and
statutory declaration already furnished. Accoreingly, the cases
were heard. It is admitted that they have no more explanation to
offer other than those explained in the written submission. It is
also admitted that no books of accounts to record expenditure
incurred on account of labour and service charges manufactured for
which they have deducted the amount towards labour and service
charges following the percentage fixed as per appendix to Rule 6(e)
of OVAT Rules. Put up for detail study and passing of assessment
order under the OVAT Act, CST Act and OET
Act.Sd/-17.01.201520.02.2015:Called for the records, gone through
the AVR submitted by the DCST, Audit, RKL-Ii Circle under OVAT Act,
OET Act and CST Act. Examined the written submission submitted by
the learned advocate of the dealer company explaining the
discrepancies pointed out in the AVRs. The documents submitted at
the time of audit and at the stage of hearing were examined
thoroughly. The declaration forms in EI and EII worth
Rs.81,51,86,787/- and C form covering transaction worty
Rs.126,07,54,920.00 and F Forms for Rs.3,77,37,614.00 furnished in
original till 17.01.2015 were examined. The dealer company failed
to furnish EI and EII declaration forms covering transaction worth
Rs.235,16,38,408/, C form covering transaction worth
Rs.288,94,73,539/- and F Form covering transaction worth
Rs.12,14,18,185.00, in original for the period under audit, despite
availing adequate opportunities. The documents produced in support
of claim of exemption under Section 6(2) of CST Act were verified
and it was found that the documents of title to goods in each
transaction had not been transferred during the movement of goods
from one State to another. Close scrutiny further revealed that the
dealer company after taking delivery of the goods from the carriers
inside the State of Odisha had forwarded the LRs, inter-State
invoices, delivery notes to the ultimate purchasers inside the
State of Odisha. The details in this regard have been discussed in
the assessement orders passed separately under the OVAT Act, OET
Act and CST Act. The dealer company has also failed to furnish
declaration Form F in support of claim of dispatch of goods worth
Rs.12,14,18,185/- to its branches located outside the State. The
dealer company admitted to have not maintained books of accounts to
record expenditure incurred towards labour and service charges in
regard to execution of civil works. Considering all the aspects
assessment order under the OVAT Act, OET Act and CST Act passed
today raising demand amounting to Rs.180,71,64,744/-,
Rs.21,12,43,767/- and Rs.5,26,05,784/- respectively. Issue
assessment orders and demand notices under the above
Acts.Sd/-20.02.2015[Emphasis laid on the bold letters]26. That
while the former order dated 17.01.2015 would indicate that the
assessing officer reserved the matter for further study, the latter
order dated 20.02,2015 shows that jumping to the conclusion by
rejecting the transactions claimed exempted under Section 3(b) read
with Section 6(2) of the CST Act. It is apparent from both the
orders quoted above would show that after examining the documents
produced by the dealer-petitioner, the assessing officer formed an
opinion to reject the claim of the petitioner under Section 3(b)
read with Section 6(2). The assessing authority has rejected the
claim of exemption under Section 3(b) read with Section 6(2)
without affording any opportunity after 17.01.2015.27. Thus, the
petitioner had had no opportunity to read the mind of the assessing
authority to rebut and/or explain before him. The view taken by the
assessing authority to reject the transactions under the CST Act
and add the same to the OVAT Act was behind the back of the
petitioner. At this juncture, the petitioner seeks to rely on the
principle stated by this Honble Court in the context of rejection
of transactions under Section 3(b) read with Section 6(2) of the
CST Act and addition of the said transactions under the OVAT Act in
Siemens Ltd. Vrs. State of Odisha, W.P.(C) No.10467 of 2004,
disposed of on 23.11.2004.28. That out of the aforesaid contracts,
the Joint Commissioner of Sales Tax( hereinafter for short
mentioned as JCST), O.P.No.3 in his order of assessment passed
under the Central Sales Tax Act, has taken into account the
contracts between the petitioner and the CUSTOMERS. He has not
dealt with any other particular contract between the petitioner and
the CUSTOMERS. The JCST in his order of has given reasonings for
rejecting the claims of the turnover of sales under Section 6(2) of
the Central Sales Tax Act made by the petitioner to its CUSTOMERS
and has not given any reasonings as far as the sales under Section
6(2) of the Central Sales Tax Act made by the petitioner to the
other aforesaid CUSTOMERS, drawing an inference that the
contractual clauses of the contract between SIEMENS and all its
CUSTOMERS are all identical. However the admitted fact is that the
Assessing Authority has accepted the first sale under section 3(a)
of the Central Sales Tax Act and has also accepted that the goods
have moved in pursuance to pre-existing contracts from one State to
another i.e. from a NON-ODISHA State into the STATE OF ODISHA.
29. That the assessing authority should have also gone into each
and every contract between the petitioner and its CUSTOMERS and
should have arrived at specific findings in respect of each and
every contract instead of generalizing the issue by combing all the
contracts. The JCST had never directed for production of all the
contracts between the petitioner and its CUSTOMERS, but had
requested the petitioner to submit copies of three to four
contracts which the petitioner filed. (Photocopy of Haziras are
enclosed herewith marked as Annexure-7). The same is against the
view laid down by the Honble Court in the case of Bhushan Steel and
Strips Ltd. Vs State of Orissa & Others. (Orders dated
06.03.2007 and 30.06.2009 in W.P. (C) No.2442 of 2007).
30. That it is humbly submitted that Section 6(2) of the CST Act
provides that sales subsequent to an inter-State sale is exempted
from being levied with tax. The said sales should be supported by
transfer of documents of title to the goods during the movement.
Section 2(4) of the Sale of Goods Act permits transfer of goods by
endorsement or delivery of documents of title. The documents of
title of goods can be transferred by mere delivery or by
endorsement on document. Section 6(2) provides that in order to
claim the exemption there under certificate in the prescribed form
was required to be obtained from the registered dealer. It is not
disputed or denied by the assessing authority that in most of the
transactions claimed to be covered under Section 3(b) read with
Section 6(2), there existed required certificates. In the present
case, all the conditions for valid transit sale is fulfilled by the
petitioner-company. The petitioner-company has also produced the
required declaration certificates in respect of most of the
transactions before the assessing authority during the course of
audit as well as assessment. The denial of benefit without
analyzing the fact and repercussion that the registered dealer
situated outside the State had furnished details of transactions to
their respective assessing authorities claiming the same to be
falling under Section 3(b) read with Section 6(2) of the CST Act.
In the similar way, the CUSTOMERS (situated within the State of
Odisha) have disclosed the transactions in their respective
returns. The State of Odisha cannot be benefited doubly by the same
transactions.31. That the impugned assessment order passed by the
opposite party No.3 levying tax and huge penalty under the OVAT Act
after rejecting the claim of in-transit sale under the CST Act
suffers from want of jurisdiction in applying the test of passing
of property. The assumption of jurisdiction by the assessing
authority under the OVAT Act by deleting the transactions from the
CST Act is wholly irrelevant and contrary to mandate of Article 286
of the Constitution of India read with Section 4 of the CST Act.32.
That the order of assessment is replica of other assessment
order(s) passed in respect of other dealers-assessees. The facts of
other dealers were not akin to that of the present transactions of
the petitioner. Therefore, such copied assessment should be quashed
as non-est in the eye of law.33. That the penal provision contained
in Rule 12(3) of the CST (O) Rules being confiscatory in nature,
even though there was bona fide claim of exemption under the CST
Act, imposition of penalty without leaving any discretion for the
assessing authority to apply his mind to particular fact situation
offends Article 14 and infringes mandate of Article 19(1)(g) of the
Constitution of India.34. That when the opposite parties have not
disputed the figures disclosed in the returns and the said returns
were accepted as self-assessed, it is apparent that the department
had been accepting the mode of transactions and claim of exemption
under Section 3(b) read with Section 6(2) of the CST Act.
Therefore, taking up assessment for a period of two years and
imposing penalty for the entire two years would militate against
the basic tenets of law, i.e., reasonableness, rational application
of mind and judicial approach. This Honble Court may warrant
interference with the offensive assessment order to uphold the
majesty of justice, equity and good conscience. 35. That when the
transactions were reflected in the returns furnished under the
provisions of the CST Act, there was no scope for imposition of
penalty under Section 42(5) of the OVAT Act. When there is dispute
as to the claim of benefit and nature of transactions and there is
no allegation of transactions being out of account, no penalty
should have been imposed mechanically. In this respect Sree Krishna
Electricals Vrs. State of Tamil Nadu, (2009) 23 VST 249 (SC) and
Commissioner of Central Excise & Customs Vrs. Aditya Alloys
Limited, 2014 (I) ILR - CUT- 401.36. That the order of assessment
appears to have suffered from vice of limitation as the same is not
passed within the period stipulated under Rule 12(3)(h) of the CST
(O) Rules. Notice in Form IV having been issued on 28.04.2014, the
assessment order was required to be passed within six months. The
assessment order does not whisper as to whether the assessing
authority has invoked terms of proviso to clause (h) of sub-rule
(3) of Rule 12.37. That it is further humbly submitted that the
action of authority-opposite party No.3 is arbitrary, irrational
and cannot be held to be tenable in the eye of law.38. That though
alternative remedy is provided under Section 9 of the CST Act read
with Section 77 of the OVAT Act to challenge the assessment order,
since there has been violation of principles of natural justice and
the assessment order is barred by limitation, and that the
assessing authority has acted without jurisdiction, the petitioner
has approached this Honble Court by way of writ petition.39. That
the petition is made bona fide.
P R A Y E R
It is therefore prayed that this Honble Court may graciously be
pleased to issue notice; after hearing both sides allow this
petition, And issue writ of certiorari quashing the assessment
order in Annexure-1;And issue writ of mandamus quashing the order
of assessment and demand notice in Annexure-1;And for this act of
kindness, the petitioner, as in duty bound, shall everpray.C U T T
A C K By the petitioner throughDate: 23.03.2015 A D V O C A T E