SHEETAL SURI V. COMMNR.OF SALES TAX

WP(C)/2367/2012

AI Insights

The case revolves around the interception of a vehicle owned by the petitioner, Sri Sheetal Suri, which was transporting goods from Uttar Pradesh to Odisha. The vehicle was intercepted by the sales tax authorities in Odisha, and despite the presence of valid documents, penalties and taxes were imposed under the OVAT Act and OET Act for alleged violations. The petitioner contested these impositions, arguing that all documents were in order and that the penalties were imposed without proper legal basis. The court examined the legality of the penalties imposed and found them to be unjustified, leading to the quashing of the orders against the petitioner.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 726150 (HC-CUTTACK)
• Appeal Type: Others
• Pronouncement Date: 14-03-2012
• Assessment Year: misc
• Other Referred Cases: Indore Kolhapur Road Lines-v.- Assistant Commissioner of Sales Tax, Singhal Converter (P) Ltd. V. Addl. Commissioner of Sales Tax, Orissa, Sambalpur, Vinayak Agro Industry v. Commissioner of Commercial Taxes, Orissa, Cuttack, Sales Tax Officer and others v. Dutta Traders, G. Narayana Swami v. G. Panneerselvam & Ors., Union of India and another V. Hansoli Devi and others, Govind Impex Private Limited and Others V. Appropriate Authority, Income Tax Department
• Laws Referred To: Orissa Value Added Tax Act, 2004, Orissa Entry Tax Act, 1999
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M S RAMAN
• Assessee Lawyers: T K SATPATHY JENA
• Keywords: Check Post; Entry Tax; Goods in Transit; Penalty; Sales Tax; Vigilance; Waybill
• Section: 25; 226; 227; 74(5); 74(2)(a); 74(2)(b); 74(2)(c); 74(2)(d)

Judgement Text

"HIGH COURT OF ORISSA: CUTTACK W.P.(C) No. 2367 of 2012 In the matter of an application under Articles 226 & 227 of the Constitution of India. -------- Sri Sheetal Suri, S/o- Sri Gopal Suri, At Khetrajpur, P.O./PS/Dist: Sambalpur. … Petitioner -Versus- Commissioner of Sales tax, Orissa, Banijyakar Bhawan, Buxibazar, Cuttack and others … Opp. Parties For Petitioner : M/s. T.K. Satpathy, R.K. Jena & S.B.Jena. For Opp. Parties : Mr. M.S. Raman, Addl. Standing Counsel ( Sales Tax ) ---------- P R E S E N T: THE HONOURABLE THE CHIEF JUSTICE SHRI.V.GOPALA GOWDA AND THE HONOURABLE SHRI JUSTICE B.N.MAHAPATRA Date of Judgment: 14.03.2012 B.N.MAHAPATRA,J. This writ petition has been filed with a prayer for quashing the order dated 16.01.2012 (Annexure-1) passed by opposite party no.2-Additional Commissioner of Sales Tax, North Zone, Banijyakar Bhawan, Buxibazar, Cuttack and the orders dated 31.12.2011 passed by the Sales Tax Officer, Vigilance, Sambalpur under Annexures-9 and 10 on the ground that the said orders are illegal, arbitrary and contrary to the provisions of Orissa Value Added Tax Act, 2004 (for short , “VAT Act”) and Orissa Entry Tax Act, 1999 (for short, “OET Act”). 2. Petitioner’s case in a nutshell is that he is the owner of a vehicle bearing No.CG-04-DB-5707, which was used by him for transport business. On 16.12.2011 the petitioner’s vehicle carrying 230 metres of pipe proceeded from Macawber Beky Pvt. Ltd. Greater Nodia (U.P.) to M/ s. Jindal Steel and Power Ltd., Angul, Odisha. The said consignment was covered with all valid required documents such as invoice No. 2172 dated 16.12.2011 for Rs.16,81,965/-, E. Waybill bearing No.21W- 110694206 etc. While the vehicle was running towards its destination at Angul, opposite party no.3 on 26.12.2011 intercepted and detained the said vehicle near Chandimal. On demand, the person in charge of the vehicle immediately handed over all original documents carried with him in support of the consignment, but opposite party no.3 without assigning any reason forcefully took the vehicle to Talasara Police Station without any notice or show cause to the person in-charge of the vehicle. Statement of the driver of the vehicle was recorded, but the driver signed the statement on coercion and duress without knowing the contents thereof. On 26.12.2011, opposite party no.3 served two notices; one under the OVAT Act and another under the OET Act. In response to the 2 said notices, the petitioner appeared and filed a petition before opposite party no.3 on 29.12.2011 praying therein to drop the proceeding and release the vehicle as the consignment is covered with all valid/required documents and there was no contravention of any provisions of Section 74(2)(b)(c)(d) of the OVAT Act. The petitioner also denied the allegation of violation of the provisions of Sections 23 and 24 of the OET Act. It was submitted that due to Maoist menace and to save time and distance the driver of the vehicle entered into the State of Odisha to reach the destination as early as possible and in the said route no check post or barrier was established by the Government of Odisha. Subsequently, opposite party no.3 transferred the proceeding to his subordinate officer i.e. opposite party no.4 to deal with the case. When no action was taken in the proceedings, the petitioner submitted another petition before opposite party no.4 on 31.12.2011 and while the same was pending, the petitioner received two orders from opposite party no.4 on 2.1.2012 wherein opposite party no.4 rejected the petitioner’s show cause reply and levied tax of Rs.67,279/- and penalty of Rs.3,36,395/- under the OVAT Act. Under the Orissa Entry Tax Act, opposite party No.4 levied entry tax of Rs.16,820/- and Penalty of Rs.33,640/-. Being aggrieved by the order passed by opposite party no.4, the petitioner filed revision under the OVAT Act and OET Act on 13.1.2012. The revisional authority passed one common order under the OVAT Act and OET Act and maintained only the imposition of penalty under the OVAT Act and OET 3 Act made by opposite party No.4. 3. Mr. T.K. Satapathy, learned counsel appearing for the petitioner submitted that the order passed by opposite party no.2 is unjustified and untenable in the eye of law. Before opposite party no.4 passed the order of assessment, no due and proper opportunity was extended to the petitioner in the proceeding. Opposite party no.2 has erroneously created a new issue and levied penalty under the OVAT Act and OET Act. Consignment carried in the vehicle was accompanied by valid documents as required under Section 74(2)(a) of the OVAT Act and the same were immediately produced before opp. party no.3 on spot. The petitioner has not contravened any provision of sub-section (2) of Section 74 of the OVAT Act or submitted any false or forged documents to opp. party no.3 and the goods were covered by the E-way bill and as such the levy of tax and penalty under Section 74(5) of the OVAT Act is without any authority of law. 4. The petitioner has only committed a mistake for not entering into the check gate disclosed in the way-bill. Placing reliance on the judgment of the Madhya Pradesh High Court (Indore Bench) in the case of Indore Kolhapur Road Lines-v.- Assistant Commissioner of Sales Tax and another reported in 95 STC-141 it was argued that once it is found that goods carried in a truck are accompanied by all the documents as required under the law, initiation of proceedings for imposing penalty would not arise merely because the truck had taken a different route. Therefore, imposition of tax and penalty upon the petitioner under 4 Section 74 (5) of the OVAT Act is per se illegal and without jurisdiction. Similarly, imposition of tax and penalty upon the petitioner under Section 25 of the OET Act is also illegal and without jurisdiction. 5. It was further argued that in the present case, both the consignee and consignor are registered dealers and the opp. parties did not find any fault in the documents produced before them by the owner of the truck. There is no provision under the OVAT Act and Rules that the Truck should pass through the Check Post or barrier when other routes are also available to the petitioner. Opp. party no.4 had not impleaded either the consignee or the consignor in the penalty proceedings. Penalty has been imposed without assigning any valid reason. Imposition of penalty is quasi-criminal in nature and penalty will not be ordinarily imposed unless the party either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or act in conscious disregard to the statutory obligation. In the present case, there has been non-consideration of facts and materials placed by the petitioner and the orders have been passed purely on the basis of suspicion and surmises. Due to illegal and motivated actions of opposite party Nos.4 and 2, the constitutional rights as conferred under Articles 14 and 19(1)(g) of the Constitution of India have been infringed. 6. Mr. Raman, learned Addl. Standing Counsel appearing for the Revenue vehemently argued that the petitioner has misutilised the way bill. The owner of the vehicle having accompanied with the 5 consigned goods in question in his statement dated 26.12.2011 stated that he has brought the goods vehicle into Orissa through a by-pass road avoiding border check gate at Telijore. The documents covering the consignment were not produced by him at Border Check Gate before entering into Orissa. The petitioner also avoided the other check gate established on the route through which he entered into the State of Orissa. Placing reliance on the judgment of this Court in the case of Singhal Converter (P) Ltd. V. Addl. Commissioner of Sales Tax, Orissa, Sambalpur and others, reported in (2008) 18 VST 165 (Orissa), Mr. Raman argued that where the goods were carried clandestinely to evade tax, the Officer-in-charge of the check post is justified to levy penalty or both tax and penalty. Further placing reliance on the judgment of this Court in Vinayak Agro Industry v. Commissioner of Commercial Taxes, Orissa, Cuttack and others, (2012) 47 VST 191 (Orissa), it was submitted that in the present case the imposition of penalty under Section 74(5) of the OVAT Act is justified. Placing reliance on the decision of the Hon’ble Supreme Court in the case of Sales Tax Officer and others v. Dutta Traders, (2007) 9 VST 425 (SC), Mr. Raman submitted that under Section 16 D of the OST Act, 1947 the Sales Tax Officer (Vigilance) has power not only to search and seize the documents, but also entitled to assess and recover the tax. 6 7. On the rival contentions of the parties, the following questions fall for consideration by this Court: (i) Whether in the facts and circumstances of the case, opp. party no.4-Sales Tax Officer (Vigilance), Sambalpur is justified in taking action under sub- Section (5) of Section 74 of the OVAT Act and Section 25 of the OET Act and passing the orders dated 31.12.2011 under Annexures-9 and 10 ? (ii) Whether the order dated 16.1.2012 under Annexure-1 passed by opp. party no.2-the Revisional Authority sustaining the imposition of penalty under Section 74(5) of the OVAT Act and U/s.25 of the OET Act is valid in law ? 8. To deal with Question No.(i) as above, it is necessary to know what is contemplated under sub-section (5) of Section 74 of the OVAT Act. Same is extracted below: “74. Establishment of check-posts and inspection of goods while in transit. — xx xx xx (5) The officer-in-charge of the check-post or barrier or the officer authorized under sub-section (3), after giving the driver or person-in-charge of the goods a reasonable opportunity of being heard and holding such enquiry as he may deem fit, may impose, for possession or movement of goods (in transit), whether seized or not, in violation of the provisions of clause (a) of sub-section (2) or for submission of false or forged documents or way bill either covering the entire goods or a part of the goods carried, a penalty equal to five times of the tax leviable on such goods, or twenty per centum of the value of the goods, whichever is higher, in such manner as may be prescribed”. (underlined for emphasis) 7 9. Section 74(5) of the OVAT Act prescribes that the officer-in- charge of the check-post or barrier or the officer authorized under sub- section (3) (here-in-after referred to as “prescribed authority”), after giving the driver or person-in-charge of the goods, a reasonable opportunity of being heard and holding such enquiry as he may deem fit, may impose penalty, as prescribed under the said sub-section, for possession or movement of goods (in transit), whether seized or not upon fulfillment of any of the following conditions:- (i) violation of the provisions of clause (a) of sub- section (2) of Section 74, or (ii) submission of false or forged documents or way bills either covering the entire goods or part of the goods carried. 10. Thus, imposition of penalty under sub-section (5) of Section 74 of the OVAT Act cannot sustain unless it is clearly shown that any of the conditions prescribed in that sub-section is satisfied. In other words, in order to exercise jurisdiction under Section 74(5) of the OVAT Act, the prescribed authority must be satisfied that either of the two conditions mentioned therein is fulfilled and such power cannot be exercised on some suspicion or doubt. 11. In the instant case, Sales Tax Officer, Vigilance after inspection of the goods in question and documents produced before him has issued show-cause notice under Section 74(5) of the OVAT Act and under Section 25 of the OET Act. Vide show-cause notice dated 8 26.12.2011 issued under Section 74(5) of the OVAT Act, the petitioner was informed that on verification of the documents produced by the person-in-charge/driver of the goods vehicle, it was found that the petitioner has contravened the provisions of Section 74(2) (b) (c) (d) of the OVAT Act 2004. The petitioner was further asked to show-cause within seven days from the date of receipt of the order as to why tax and penalty u/s.74(5) read with sub-section (7) amounting to Rs.4,03,674/- shall not be imposed on the petitioner. Similarly, vide show-cause notice issued under Section 25 of OET Act, the petitioner was informed that the vehicle carrying scheduled goods violated the provisions of Sections 23 and 24 of the OET Act, 1999 and as to why penalty of Rs.50,460/- cannot be imposed on him under the OET Act. 12. The petitioner has filed his reply to show-cause notice with a prayer to drop the penalty proceedings initiated u/s.74(5) of the OVAT Act. However, opposite party no.4, Sales Tax Officer (Vigilance), Sambalpur vide his order dated 31.12.2011 under Annexure-9 imposed tax and penalty of Rs.4,03,674/- under Section 74(5) of the OVAT Act on the ground of violation of the provisions of Sec.74(2) (b) (c)(d)(e) of the OVAT Act. Opposite party No.4 also imposed tax and penalty of Rs.50,460/- under Section 25 of the OET Act vide his order dated 31.12.2011 under Annexure-10 on the alleged violation of provision of Sec.23 of the OET Act. 9 The revisional authority vide his order passed under Annexure-10 maintained imposition of penalty inter alia on the ground that in the way bill it was declared that the goods will be entering into check gate at Biramitrapur, but on interception of the vehicle it was found that the vehicle had avoided the check gate violating the terms of declaration made in the way bill. While holding so, the Revisional Authority further held that since the person-in-charge of the vehicle was neither the consignor nor the consignee, the opposity party no.4-Sales Tax Officer (Vigilance) is not justified in imposing the tax. However, he upheld the levy of penalty. 13. As stated above, penalty under sub-section (5) of Sec. 74 can only be imposed on fulfilment of either of the conditions in Section 74(5) of the OVAT Act. One of such conditions is violation of provision of clause-(a) of sub-section (2) of Section 74 which provides that the driver or person-in-charge of every vehicle or carrier of goods in transit shall carry with him the records of the goods including “Challan” and “Bilties”, bills of sale or dispatch memo and prescribed declaration form or way bill duly filled in and signed by the consignor of goods carried. Undisputedly, in the present case, on interception of the vehicle in question, the person-in-charge of the vehicle produced all the documents including the way bill. Opposite party no.4, Sales Tax Officer (Vigilance), Sambalpur as well as opposite party no.2-Additional Commissioner of Sales Tax, North Zone, Cuttack in their orders passed under Annexures-9 & 10 and 10 Annexure-1 respectively, admitted that the petitioner has not violated the provisions of Clause (a) of sub-section (2) of Section 74 of the OVAT Act. It is also not the case of opposite party no.4 or opp. party no.2 that the petitioner has furnished false or forged documents or way bill either covering the entire bill or part of the goods carried in the vehicle. Opposite party nos. 2 and 4 have justified their action for imposing penalty under Sec. 74(5) on the ground that the petitioner violated the provisions of sub-section (2) (b) (c) (d) (e) of Section 74. But Section 74 (5) of the OVAT Act does not contemplate that the prescribed authority shall assume jurisdiction for imposition of penalty under the said section for contravention of provisions of Sec. 74(2) (b)(c)(d)(e) of the OVAT Act. 14. While the Legislature in its wisdom has provided that only in case of violation of provisions of clause (a) of sub-section (2) of Section 74 or for submission of false or forged documents or way bill either covering the entire goods or part of the goods carried, the prescribed authority may impose penalty as provided in sub-section (5) of Section 74, it cannot be said that the prescribed authority assumes jurisdiction for contravention of any other provision(s) of Section 74(2) or that the vehicle in question had avoided the check gate violating the terms of the declaration in way bill. The intention of Legislature is further clear when a comparison is made between sub-sections (2) and (5) of Section 74. While under sub- section (2) of Section 74, several obligations are cast on the driver or person-in-charge of the vehicle or carrier of goods in transit, under sub- 11 section (5) of Section 74 only for violation of either of the two conditions, i.e., violation of provisions of clause (a) of sub-section (2) of Sec. 74 or for submission of false or forged documents or way bills either covering the entire goods or part of the goods penalty may be imposed. 15. The proviso to sub-rule (5) of Rule 80 of the OVAT Rules, 2005 provides that in case a goods vehicle which is not passed through a check-post or barrier is checked by an officer not below the rank of Sales Tax Officer on the way, the original copy of the way bill shall be tendered to such officer. In the instant case, admittedly at the time of interception of the vehicle in question, the person-in-charge of the vehicle has tendered all the documents to the officer who intercepted the vehicle. 16. Needless to say that no tax or penalty can be levied on any dealer/person unless the charging provision clearly imposes such obligation. If any goods or infraction of any provision does not fall within the four corners of the provision of taxing statute, no tax and/or penalty can be imposed by drawing inference. The operation of provision authorizing imposition of penalty cannot be enlarged so as to encompass the matters not specifically mentioned in the statute. 17. A Constitution Bench of the Hon’ble Supreme Court in G. Narayana Swami v. G. Panneerselvam & Ors., AIR 1972 SC 2284 held that the statute requires to be interpreted giving plain meaning of 12 literal construction, and modification of words used in statutory provisions is not permissible. 18. In Union of India and another V. Hansoli Devi and others, (2002) 7 SCC 273, the Hon’ble Supreme Court held that if the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense. The words themselves alone do, in such case, best declare the intention of the lawgivers. 19. The legal maxim, “A Verbis Legis Non Est Recedendum” means from the words of law, there must be no departure. Therefore, when the language of the statute is plain and unambiguous, then Court must give effect to the words used in the statute and it would not be open to the Court to adopt a hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act. 20. The Hon’ble Supreme Court in the case of Govind Impex Private Limited and Others V. Appropriate Authority, Income Tax Department, (2011) 1 SCC 529, held that a penal statute which makes an act of penal offence or impose penalty is to be strictly construed and if two views are possible, one favourable to the citizen is to be ordinarily preferred. 21. The High Court of Madhya Pradesh in the case of Indore Kolhapur Road Lines (supra), held that once it is found that goods 13 carried on a truck are accompanied by all the documents as are required under the law, no occasion for initiation of the proceedings for penalty would arise. Merely because the truck had taken a different route, this would not be a sufficient ground for taking action under Section 29-CC of the Madhya Pradesh General Sales Tax Act, 1958. 22. The decisions of this Court in Singhal Converter (P) Ltd. (supra), as well as Vinayak Agro Industry (supra), relied upon by the Revenue have no application to the facts of the present case. In Singhal Converter’s case, the vehicle carrying goods from outside the State of Orissa pursuant to the purchase order placed by the assessee, a registered dealer under the Orissa Sales Tax Act, 1949, was intercepted by the Sales Tax Officer (Vigilance), Sambalpur, Orissa and the goods were found to be not covered by any statutory waybill in Form XXXII. The Sales Tax Officer (Vigilance) levied and collected tax and penalty under Section 16C. In that case, this Court held that though the incidence of tax arises only when there is a complete sale, for achieving the object of sealing the loophole of avoidance of sales tax by unscrupulous dealers, measures have been taken by different States. Provisions are made in Sales Tax Acts and Rules to establish check-posts, to intercept vehicles carrying goods while in transit and to levy penalty or both tax and penalty where it is found that goods are carried clandestinely to evade tax and these provisions are valid. 14 In the Vinayak Agro Industry’s case (supra), the petitioner, a registered dealer under the Orissa Value Added Tax Act, 2005, carried on business in manufacturing automobiles spring leaf, tractor trolly, etc. The goods purchased by the petitioner from a dealer in Kolkata and carried in a truck were verified by the Sales Tax Officer at the Jamsolaghat check gate along with the documents accompanying them and it was opined that the spring patti loaded in the vehicle were in good condition readily usable in heavy vehicles and that they could not be treated as scrap materials (scrap spring patti) as disclosed in the way-bill supporting the consignment. Taking into consideration, the report of Technical Committee, the revisional order was passed confirming the levy of tax and penalty by the Sales Tax Officer. On such fact, this Court held that from the show-cause notice and observation/findings of the Sales Tax Officer, in his order, it could be safely said that the driver of the vehicle submitted false/forged documents/way-bills covering the entire goods carried in the vehicle which is a case of fraud and vitiated everything. In the present case, it is nobody’s case that the goods carried in the vehicle was not covered by valid documents or that the person-in- charge of the vehicle has furnished false/forged waybill/document. Therefore, the above cases relied upon by Mr. Raman are of no help to the Revenue. 23. In view of the clear and unambiguous provision of sub- section (5) of Section 74 and the proposition of law settled by the Hon’ble 15 Supreme Court, in the above referred cases we have no hesitation to hold that the Sales Tax Officer (Vigilance), Sambalpur (opposite party no.4) and the Additional Commissioner of Sales Tax, North Zone, Cuttack (opposite party no.2), have acted illegally and the orders passed under Annexures-9 & 10 by opposite party no.4 imposing tax and penalty under the OVAT Act and OET Act and the order passed by opposite party no.2 under Annexure-1 maintaining imposition of penalty made by opposite party no.4 are not legally sustainable. Therefore, the orders passed under Annexures-1, 9 and 10 are liable to be quashed, which we direct. 24. In the result, the writ petition is allowed, but without any order as to costs. ………………………….. B.N. Mahapatra,J V.Gopala Gowda, C.J. I agree. …………………………… Chief Justice Orissa High Court Date 14th March, 2012/ssd/ss/skj 16 "