B.N. Mahapatra, J.@mdashThis writ petition has been filed with a prayer to quash the order of assessment dated 26.11.2013 passed by the Sales Tax Officer, Rourkela Circle, Panposh u/s 43 of the Orissa Value Added Tax Act, 2014 (for short, ''the OVAT Act'') for the period from 01.04.2009 to 06.09.2012 on the ground that the said order is illegal, arbitrary and violative of principles of natural justice.
2. Petitioner''s case in a nutshell is that it is a limited Company carrying on business in manufacturing of Silico Manganese and its manufacturing unit is located at Bhawanipur, Kirei in the district of Sundargarh. It is registered under the provisions of the Orissa Value Added Tax Act, 2004 (for short, ''OVAT Act''), the Central Sales Tax Act, 1956 (for short, ''CST Act'') and the Orissa Entry Tax Act, 1999 (for short, ''OET Act''). It had submitted the return for the tax period from 01.04.2009 to 06.09.2012 disclosing true and correct turnover and paid the tax as per the return filed. It maintains required books of account for its business activities for compliance of the OVAT Act. Pursuant to the notice issued by opposite party No. 2-STO, Rourkela II Circle, Panposh, Rourkela to the petitioner u/s 43 of the OVAT Act, it appeared before opposite party No. 2 on 21.10.2013 and 12.11.2013 along with purchase register, purchase bills, sales registers and sale bills for verification. Petitioner on the said dates prayed opposite party No. 2 to provide the report for submission of reply on the allegation made against it. On 26.11.2013, the petitioner submitted a written note praying opposite party No. 2 to provide a copy of the report. Opposite party No. 2 without providing a copy of the report completed the impugned assessment under Annexure-1 raising demand of Rs. 8,34,77,727/- towards tax, interest and penalty. Hence, the present writ petition.
3. Mr. D. Pati, learned counsel for the petitioner submitted that the allegations on the basis of which the impugned assessment order has been passed are false and fabricated. The main plank of argument of Mr. Pati is that before completing the assessment u/s 43 on the basis of the adverse materials contained in the report, the same was not confronted to the petitioner. No reasonable opportunity of hearing was afforded to the petitioner for submission of its explanation against the allegations raised in the report. Therefore, it was submitted that the impugned order of assessment is not sustainable in law.
4. Mr. R.P. Kar, learned Standing Counsel for the Revenue submitted that there is no infirmity and illegality in the order of assessment impugned in the present writ petition. On the date of visit, no books of account was produced at the place of business. Many incriminating documents and records revealing some of the business transactions were recovered from the business premises of the dealer and seized u/s 73(6) of the OVAT Act. Seized incriminating materials and documents revealed that the dealer-Company was involved in clandestine business transactions and evaded the legitimate tax due from it. The dealer-Company did not appear for offering any statement on confrontation of adverse material after availing number of opportunities. Concluding his argument, Mr. Kar submitted that considering the volume of suppression, volume of purchase and sale transactions, extra tax raised in the impugned assessment order is neither arbitrary nor excessive.
5. On the rival contentions of the parties, the following questions fall for consideration by this Court:-
(i) Whether any reasonable opportunity of hearing has been afforded to the petitioner before passing the impugned order?
(ii) Whether copy of the incriminating material intended to be used against the petitioner has been supplied to the petitioner?
(iii) Whether a dealer is entitled to be supplied with the materials intended to be used against him in the assessment proceeding for his rebuttal?
6. Question Nos. (i), (ii) and (iii) being interlinked, they are dealt with together.
7. Perusal of the impugned assessment order does not reveal that various allegations on the basis of which the impugned order of assessment was passed had been confronted to the petitioner. In the penultimate paragraph of the order of assessment impugned, the Assessing Officer observed as follows:
"I have gone through the fraud case report 01.04.2009 to 06.09.2012 vis-�-vis with written compliance of the Ld. Advocate. The detail reasons of reopening of the case was supplied to the dealer. But the dealers neither submitted any satisfactory explanation nor produced any documentary evidence in order to nullify the allegation made in the tax evasion report submitted by the Enforcement Wing. Thus, it is proved beyond my doubt that the dealer is engaged clandestine business activities and knowingly avoiding to submit the written compliance for his defence. Considering the allegation contained in the tax evasion report submitted by the Deputy Commissioner of Commercial Enforcement, Sambalpur true and correct, the re-assessment order is decided as per fraud case report basing on the information and materials available in the record on merit."
8. Perused the assessment records produced by Mr. Kar from which it reveals that pursuant to the notice issued for assessment of escaped turnover, the petitioner appeared from time to time before the Assessing Officer with books of account and the case was partly heard. Order sheet does not reveal that the materials utilized against the dealer-petitioner in the assessment order were confronted to him and his explanation against each of the allegation was recorded by the Assessing Officer. Statement of the petitioner recorded on 12.11.2013 in course of assessment proceeding is available at page 23 of the assessment record. It would be relevant to extract here the contents of said statement dated 12.11.2013.
"Today, i.e., on 12.11.2013 (Tuesday) at about 11 am, I appeared before the Sales Tax Officer, Rourkela II Circle, Panposh regarding production of books of account for escaped assessment under OVAT, CST & OET Act. On being asked by the STO, I had produced the books of accounts, i.e., return photo copies without certified, purchase register, sale register, purchase & sale bill from the period from 01.04.2006 to 06.09.2012. But I could not produce the documents for the period from 01.04.2008 to 06.09.2012 and committed an assurance before the STO that I will produce the above said documents on 19.11.2013. At last the fraud case report was confronted by the STO to me.
The above statement given by me is true and correct to the best of my knowledge and belief."
9. We are shocked to notice how very casually an order of escaped assessment u/s 43 of the OVAT Act has been passed raising huge demand of Rs. 8,34,77,727/- utilizing various allegations against the dealer without confronting the same to the dealer. So far as the confrontation of fraud case report is concerned, only one line is recorded in the statement dated 12.11.2013, i.e., "at last fraud case was confronted by the STO to me". Neither the order sheet entry nor the statement recorded from the dealer on 12.11.2013 reveal that the incriminating materials in the fraud case report, which the Assessing Officer utilized in the assessment, were confronted to the petitioner and his explanations were considered before passing of the impugned order of assessment. This is a glaring example, how assessment order is passed without observing the principles of natural justice and huge demand is raised, which ultimately adversely affects the interest of the dealer as well as the Revenue. It causes hardship to the dealer when he was compelled to pay a portion of the substantial demand during pendency of appeal/revision in order to carry on his business. It adversely affects the interest of Revenue when such order does not stand to the judicial scrutiny and in many cases, finally the Revenue Department is required to refund the amount collected during pendency of the appeal and revision along with interest as provided under the statute.
10. The Hon''ble Supreme Court in
"The income tax Officer is not bound by any technical rules of the law of evidence. It is open to him to collect materials to facilitate assessment even by private enquiry. But if he desires to use the material so collected, the assessee must be informed of the material and must be given an adequate opportunity of explaining it."
11. The Hon''ble Supreme Court in
"...The tax proceedings are no doubt quasi-judicial proceedings and the sales tax authorities are not bound strictly by the rules of evidence, nevertheless the authorities must base their order on materials which are known to the assessee and after he is given a chance to rebut the same...."
12. In
13. In
"...It is now well-settled that the ''audi alteram partem'' rule which in essence, enforces the equality clause in article 14 of the Constitution is applicable not only to quasi-judicial orders but to administrative orders affecting prejudicially the party-in-question unless the application of the rule has been expressly excluded by the Act or regulation or rule which is not the case here. Rules of natural justice do not supplant but supplement the Rules and Regulations. Moreover, the rule of law which permeates our Constitution demands that it has to be observed both substantially and procedurally...."
14. In
15. This court in J.S. Refineries Ltd. [1998] 109 STC 16 held that any material sought to be utilized against the dealer has to be brought to his notice.
16. This Court in the case of
"Law is well-settled that if any person is likely to be affected by the use of any material against him those are to be brought to his notice for rebuttal. This is the requirement of the natural justice. The principles of natural justice are based on two basic pillars, i.e., (i) nobody shall be condemned unheard (audi alteram partem), and (ii) nobody shall be judge of his own cause (nemo debet esse judex in propria sua causa)."
17. Needless to say that an assessing authority is entitled to collect the materials behind the back of the assessee. It is not necessary that all the materials so collected by the assessing authority need be confronted to the assessee. Only those materials which the assessing authority intends to utilize against the assessee during assessment are bound to be disclosed to the assessee.
18. Considering the facts and circumstances of the case as well as the decisions of the Hon''ble Supreme Court and this Court, we are of the considered opinion that a dealer is entitled to be supplied with the materials intended to be used against him in the assessment proceeding for rebuttal and the dealer''s explanation with regard to those materials is bound to be considered by the assessing officer in the assessment order either accepting or rejecting the same.
19. The next question relates to the stage at which the copy of the seized documents should be supplied to the petitioner - dealer. Should it be supplied before or after production of books of account for verification by the assessing officer? We should keep in mind that in order to plug the leakage of revenue, the fiscal statutes provide various measures to be taken by the departmental officers including surprise visit to the place of business, audit visit, establishment of check-post, inspection of goods in transit, etc. Pursuant to such provisions, very often departmental officers used to pay surprise visit to the business premises of the dealer to find out whether all the transactions effected by a dealer in his day-to-day business are recorded in his regular books of account maintained for the purpose of paying tax. It is not uncommon that unscrupulous businessmen who effect purchase and sale outside, the regular books of account keep note of the same in some slips/chits or secret account for the purpose of their own reference. The inspecting officers while conducting inspection at the place of business of the dealer, invariably try to trace out such duplicate accounts. If any such account comes to their possession, they cross-verify the same with regular books of account maintained by the dealer and submit their verification report to the assessing officer alleging suppression of purchase and/or sale, if any, found on such verification. In such event, the assessing officer is not bound to accept the view of the inspecting officer in respect of the allegations raised against the dealer in the report in entirety. He may not accept the report at all. He may accept the report in part. Therefore, part of the report containing allegation against the dealer and the materials on the basis of which such allegation has been made must have to be disclosed to the dealer for his rebuttal, if the assessing officer wants to utilize the same against the dealer.
20. In view of the above, we have no hesitation to hold that no opportunity of hearing has been afforded to the petitioner before passing the impugned order of assessment. We further hold that the incriminating materials utilized against the petitioner in the assessment order have not been supplied to the petitioner to which the petitioner is entitled to.
21. In the fact situation, we quash the order of assessment dated 26.11.2013 passed u/s 43 of the OVAT Act for the period from 01.04.2009 to 06.09.2012 and remand the matter to the Assessing Officer to make the assessment afresh after confronting the adverse materials he intends to utilize against the petitioner and considering the petitioner''s explanation against such allegation(s). The entire exercise shall be completed within a period of eight weeks from today.
22. In the result, the Writ petition is allowed to the extent indicated above. No costs.
I. Mahanty, J.
I agree.
