A Division Bench of the Orissa High Court noted that the tribunal had neglected to provide a justification for its decision to exercise its authority under Section 43(2) of the Orissa Value Added Tax Act, 2004 (OVAT Act) to impose a penalty equal to the amount of tax determined under Section 43(1) while it was considering the petition.
The High Court bench of Justice Murahari Sriraman and Justice B.R. Sarangi set aside the penalty order while upholding the tax liability due to the improper use of the OVAT Act provisions by the concerned authorities.
An appeal against the order of the Odisha Sales Tax Tribunal has been filed by M/s. Dhabaleswar Traders, a partnership firm under Section 80 of the Odisha Value Added Tax Act.
The assessee-petitioner being a registered dealer under the Odisha Value Added Tax Act, carries on its business in edible oil, pulses, dal, sugar, coconut oil, vanaspati ghee and wheat on wholesale-cum-retail basis.
The sales Tax Tribunal, out of eight counts of allegations suggested on the basis of incriminating materials seized by the Investigating Officials, held that on account of hand written slips numbering 1 to 89 which involved an amount of Rs.4,20,812 and One book containing 16 written pages of M/s. Sai Ram Enterprises, which involved an amount of Rs.1,79,520.
The counsel of the appellant submitted that the Sales Tribunal disregarded the submissions and determined the sale suppression to the tune of Rs.4,20,812 with regards to the 89 slips.
Additionally, it was mentioned that the Sales Tax Tribunal acknowledged the fact that some transactions, other than those that were determined to be established, are not suppressed transactions. Because of the legal requirement found in Section 43(2) OVAT, it is important to note that the penalty could not have been applied arbitrarily without justification.
The bench analysed that the department has not undertaken any further enquiry as to receipt of consideration in respect of concluded transaction(s), the same could not have been held to be suppression of the turnover.
The significant words employed in Section 43(2) of the OVAT Act are “he may direct the dealer to pay, by way of penalty”, stated the bench. The language itself gives clear indication of application of discretion.
The division bench noticed infirmity in exercise of power and improper use of discretion to impose a penalty under Section 43(2) of the OVAT Act by the Odisha Sales Tax Tribunal.
As a result, the assessment was in the assessee’s favour; the dealer’s penalty of Rs. 48,026.56 was overturned, and the dealer’s tax liability of Rs. 24,013.28 was upheld.
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