B.P.DAS, J & C.R.DASH, J.
W.P.(C) NO.14629 OF 2008 (Decided on 15.07.2010).
M/S. SHREE MARUTI CLOTH STORE ......... Petitioner.
.Vrs.
THE SALES TAX OFFICER,CUTTACK ........... Opp.Party.
ORISSA ENTRY TAX ACT, 1999 (ACT NO. 11 OF1999 ) - SEC.10.
For Petitioner – M/s. Sri N. Paikray, Sri B.P.Mohanty, Sri A.N.Ray,
Sri K.K.Sahoo & Sri P.K.Mishra.
For Opp.Party - S.K. Patnaik,
Standing Counsel, Commercial Tax.
C.R. DASH, J. Section-9 of the Orissa Entry Tax Act, as it stood before amendment
by Orissa Entry Tax (Amendment) Act, 2005 (referred to as “Act” in short) provided
a limitation of “three years” for reassessment of escaped turn over of a dealer. By the
aforesaid amendment in question in the year 2005 Section-9 of the Act was substituted
by Section-10, in which the provisions of Section-9 were retained, but the period of
limitation of “three years” was substituted by a period of limitation of “five years”. The
short question that arises for determination in the present writ petition is, whether the
jurisdiction invoked by the opposite party after coming into force of the amendment, has
got to cover a period of limitation up to “five years” preceding next the date of issuance
of the impugned notice or the limitation as prescribed in the amended provision is
prospective in nature and it would apply only to reassessments onwards from the date of
coming into force of the amendment?
2. The petitioner is a registered dealer. He deals in sarees under the jurisdiction of
the opposite party. For the period 2003-04 the original assessment under Section-7 of
the Act was completed on 30.12.2006 vide Anenxure-1 computing a refund of
Rs.1,34,485/-. The opposite party vide Anenxure-2, issued notice bearing No.458 dated
14.01.2008 under Section 9(1) of the Act for the assessment period 2003-04 on the
ground that a part of the turn over had escaped from assessment in course of the
assessment vide Anenxure-1. The petitioner filed objection before the opposite
party vide Anenxure-3.While matter stood thus, the opposite party again issued notice
dated 17.7.2008, vide Anexure-4 in Form-E32 under Rule 15D of the Orissa Entry Tax
Rules (“Rules” for short) in respect of escaped turn over or under-assessment for the
self same assessment period 2003-04. The petitioner filed objection vide Anenxre-5.
3. The petitioner in this writ petition impugns the action of the opposite party in
issuing notice in Form E32 under Rule 15D of the O.E.T. Rules vide Annexure- 4 on the
ground that the provisions of Section-10 of the Act read with Rule- 15D of the Rules
having come into force with effect from 19.10.2005, the notice in question vide
Annexure-4 should not have been issued to the petitioner as by the time of issuance of
the impugned notice (Annexure-4 dated 17.7.2008) the period of limitation of three years
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prescribed under Section- 9 of the Act towards initiation for reassessment preceding had
already expired. It is the further case of the petitioner that the amended provision shall
apply only to assessment precedings for the period 2005-06 and onwards, the
amendment having come into force with effect from 19.10.2005. In other words, it is the
case of the petitioner that the escaped turn over being related to the assessment period
from 1.4.2003 to 31.3.2004 admittedly the period of limitation prescribed in Section-9 of
the Act had already expired by 31.3.2007 and the impugned notice vide
Anenxure-4 having been issued on 17.7.2008, issuance of the aforesaid notice itself is
illegal and cannot be sustained in the eye of law. With such interpretation in mind
learned counsel for the petitioner submits that the entire re-assessment proceeding is
vitiated on the ground of defect and illegality in the notice. In order to substantiate his
contention, learned counsel for the petitioner relies on the cases of The Karimtharuvi
Tea Estate Ltd. V. The State of Kerala (A.I.R. 1966 S.C. 1385) and Reliance Jute and
Industries Ltd. V. Commissioner of Income-Tax, West Bengal (1979)120 ITR 921.
4. Mr. S.K. Patnaik, learned Standing Counsel, Commercial Tax, on the other hand
submits that the limitation being a matter of procedure is to be made applicable
retrospectively and the limitation prescribed under Section-10 of the Act read with Rule-
15D of the Rule and Form E32 has to cover a period up to five years preceding the date
of issuance of the notice in question. He relies on the cases of C. Beepathuma and
others V. Velasari Shankaranarayana Kedambolithaya and others (A.I.R. 1965 S.C.
241), M/s. Mysore Rolling Mills (P) Ltd. V. Collector of Central Excise, Belgaum
(A.I.R. 1987 S.C. 1188) and Additional Commissioner (Legal) and another V. M/s.
Jyoti Traders and another etc. (A.I.R. 1999 S.C. 526).
5. Having heard the parties at length, we are of the view that no authority need be
cited for the proposition that rule of strict construction of a taxing statute applies primarily
to charging provisions in a taxing statute and has no application to a provision not
creating a charge, but laying down the machinery for its calculation or procedure for its
collection, and such machinery provisions have to be construed by the ordinary rule of
construction. One of the important consideration in construing a machinery provision is
that it should be so construed as to effectuate the liability imposed by the charging
section and to make the machinery workable- ut res magis valeat quam pereat. In view
of such legal position, it is to be found out first, whether the provisions under which the
notice issued has been impugned in the present writ petition, are machinery provisions
or charging provisions.
6. Charging provisions in a taxing statute are those substantive provisions which
creates the charge and provides for levy of tax. Machinery provisions on the other hand,
are the provisions providing for procedures to carry out the purpose of the statute.
Regard being had to the provisions in amended Section-10 of the Act and Rule-15D of
the Rules, the aforesaid provisions cannot be said to be charging provisions or
substantive provisions from the point of view of a taxing statute. It is also no more res
integra that limitation is a matter of procedure. In view of such fact no strict construction
of Section-10 of the Act and Rule-15D of the Rules can be made.
7. The ratio in the cases of The Karimtharuvi Tea Estate Ltd. V. The State of Kerala
(AIR 1966 SC 1385) and Reliance Jute and Industries Ltd. V. Commissioner of Income-
Tax, West Bengal ((1979) 120 ITR 921), as relied on by the learned counsel for the
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petitioner, has no application to the present case, as those decisions relate to
substantive provisions relating to charge of tax and, the Hon’ble Supreme Court, taking a
strict view of the matter in the aforesaid cases, have held that the provisions cannot be
applied retrospectively.
8. Coming to the fact of the present case, it is beneficial to reproduce the relevant
Sections of the act for a ready reference. Section-10 of the Act has been substituted in
place of section-9 by the Orissa Entry Tax (Amendment) Act, 2005. Prior to the
amendment Section-9 stood thus:
[” 9. Payment of tax for entry of goods escaping assessment.-
(1) Where for any reason all or any of the scheduled goods brought by a dealer has
escaped assessment to tax, the assessing authority may subject to the
provisions of sub-section (3) at any time within a period of three years from
the expiry of the year to which the tax relates, proceed to assess to the best
of his judgment the tax payable on the entry of such goods after issuing a notice
to the dealer and after making such enquiry as he considers necessary.
(2) In making an assessment under sub-section (1) the assessing authority may, if
he is satisfied that the escape from assessment is due to willful non-disclosure of
the entry of such goods by the dealer, direct him to pay in addition to the tax
assessed under sub-section (1) a penalty not exceeding one and a half times the
tax so assessed:
Provided that no penalty under this sub-section shall be directed to be paid
unless the dealer affected has been given a reasonable opportunity of showing
cause against such imposition.
(3) In computing the period of limitation for assessment under this section the time
during which an assessment has been deferred on account of any stay order
granted by any court, shall be excluded.]”
(Emphasis supplied)
After amendment, Section-10, which has been substituted in place of aforesaid
Section-9 reads thus:
[“10. Reassessment in certain cases.-
(1) Where for any reason all or any of the scheduled goods brought by a
dealer has escaped assessment of tax, or where value of all or any of the
scheduled goods has been under-assessed, or any deduction has been allowed
wrongly, the assessing authority, on the basis of information in his possession,
may, within a period of five years from the end of the year to which the tax
period relates, serve a notice on the dealer in such form and in such manner as
may be prescribed and after making such enquiry as he considers necessary
and after giving the dealer a reasonable opportunity of being heard, proceed to
assess the dealer accordingly.
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(2) If the assessing authority is satisfied that the escapement is without any
reasonable cause, he may direct the dealer to pay in addition to the tax
assessed under sub-section (1), by way of penalty, a sum equal to twice the
amount of tax additionally assessed under this section.
(3) Where any order passed by the assessing authority in respect of a dealer
for any period is found to be erroneous or prejudicial to the interest of revenue
consequent to, or in the light of, any judgment or order of any Court or Tribunal,
which has become final and binding, then, notwithstanding anything contained in
this Act, the assessing authority may proceed to reassess the tax payable by the
dealer in accordance with such judgment or order, at any time within a period of
three years from the date of the judgment or order.]”
(Emphasis supplied)
9. Section-10 of the Act came into existence with effect from 19.5.2005. The
purpose of the provisions is to reassess escaped or under-assessed turn over relating to
a particular assessment year within a period of “five years” from the expiry of the year to
which the tax period relates. It is the precise contention of the learned counsel for the
petitioner that the tax period for which the petitioner has been reassessed
being 2003-04, the reassessment for the period in question should have been taken up
within a period of three years from 2003-04, that means the assessment should have
been done within the period from 1.4.2003 to 31.3.2007. The impugned notice according
to learned counsel for the petitioner, in the present case vide Anenxure-4 having been
issued on 17.7.2008, the re-assessment proceeding is barred by limitation as the
provisions in Section-10 has to apply prospectively and not retrospectively.
10. The Hon’ble Supreme Court in the case of Mysore Rolling Mills (P) Ltd. V.
Collector of Central Excise, Belgaum (AIR 1987 SC 1488), on consideration of Sections
4, 11, 11-A and 35-L of the Central Excise and Salt Act, 1944 held that once Rules come
into existence and jurisdiction under the Rule is invoked, it has got to cover a period up
to five years preceding the date of issuance of the notice. In similar situation the Hon’ble
Supreme Court in the case of Additional Commissioner (Legal) and another V. M/s. Jyoti
Traders and another etc. (AIR 1999 SC 526), on consideration of Section 21 and
different provisions of U.P. Trade Tax Act, 1948, held that after coming of the
amendment into force providing a period of limitation of eight years, the assessing
authority has every right to re-open the assessment within eight years preceding the
date of issuance of the notice irrespective of the fact, whether the period of four years
under the old Law had expired or not. The impugned proviso in the aforesaid case was
inserted to Section 21(2) of the U.P. Trade Tax Act with effect from February 19, 1991. It
provided for limitation of eight years for re-assessment, which was hither to four years.
On construction of the provisions of the Act and the amended proviso, the Hon’ble
Supreme Court in clear term held that the proviso to sub-Section (2) of Section 21 is
operative from February 19, 1991 and a bare reading of the proviso shows that the
operation of this proviso relates back to and encompasses previous eight assessment
years.
11. With the aforesaid background of law in mind when the provisions quoted supra
are read, it is clearly understood that Section-10 of the Act has extended the limitation of
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“three years” to “five years” for initiation of a reassessment proceeding in the case of
under-assessment or escaped turn over. The amendment in the present case is
intended to relate back and cover a period of five years from the date jurisdiction under
the Act is invoked. The provision being merely procedural in nature is, therefore,
retrospective in operation and bare reading of the provisions of Section-10 of the Act
quoted supra, shows that the operation of the same relates back to and encompasses
previous five assessment years from the date of coming into force of the provision. In
other words, Section-10 of the Act having come into force on 19.5.2005, it shall relates
back to previous five years, i.e., up to the assessment year 2000-01.
12. Admittedly the notice vide Annexure- 4 in this case has been issued on
17.07.2008 and the alleged “escaped turnover” relates to the period 2003-04. Whatever
be the mode of reckoning of the period of limitation, be it “five years” from the end of the
period 2003-04 or be it “five years” backward from the date of the issuance of the
impugned notice vide Annexure- 4, the initiation of the reassessment proceeding cannot
be held to be barred by limitation.
In view of the discussions supra, we do not find any merit in the writ petition and
the same is dismissed.
Writ petition dismissed.