A division bench of the Orissa High Court, while invalidating a VAT re-assessment order has held that the same cannot be made solely on the basis of audit objection under the Orissa VAT Act.
The assessee, M/s Birsa Minerex was aggrieved by the Audit Assessment concluded by the Sales Tax Officer, Barbil Circle, Barbil for the tax periods from 01.07.2007 to 31.03.2010, wherein the claim of exemption of penultimate sale in course of export under Section 5(3) of the CST Act was allowed on appreciation of Certificate of Export in Form H required to be furnished under Rule 12(10) of the Central Sales Tax (Registration and Turnover) Rules, 1957 to the extent of Rs.12,23,71,036/- as against disclosed total turnover of Rs.12,64,00,682/- representing such sales.
The assessee contended that the re-assessment is illegal and need to be set aside.
A bench comprising the Chief Justice Dr. S. Muralidhar and Justice M. S. Raman observed that “the Assessing Authority is empowered to serve notice in Form IVA on the dealer to proceed with the reassessment, if “on the basis of any information in his possession” he is “of the opinion” that the whole or any part of the turnover of the dealer in respect of any period(s) has escaped assessment, or has been under-assessed, or has been assessed at a rate lower than the rate at which it is assessable or that the dealer has been allowed wrongly any deduction from his turnover or exemption under the Act or has been wrongly allowed set off of input tax credit in excess of the amount admissible under clause (c) of sub-rule (3) of Rule 7.”
“Whereas formation of “opinion” is sine qua non for initiation of proceeding under Rule 12(4) of the CST(O) Rules, assignment of reason for such forming “opinion” is necessary concomitant factor. In the instant case, scrutiny of Order Sheet at Annexure-7 shows that vide Order dated 24.08.2013 the Assessing Authority merely directed for issue of notice in Form IVA without forming any “opinion” much less ascribing “reason”. This is indicative of non-application of mind and mechanical application of mind,” the Court said.
Quashing the assessment, the Court held that “In absence of power of review conferred by or under the statute, in the garb of reassessment, the concluded assessment could not be reopened by the Assessing Authority. As the material available on record does not show independent application of mind of the Assessing Authority having regard to the material in his possession, if any, merely based on objection of Auditor General, Odisha issue of notice in Form IVA in exercise of power under Rule 12(4) of the CST(O) Rules for reopening Audit Assessment concluded under Rule 12(3) on examination of books of account, etc. is impermissible in law and such an action is without jurisdiction.”
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