M/S Birla Tyres vs. Commissioner Of Sales Tax CT And GST,Odisha

Facts

The Petitioner, M/s. Birla Tyres, challenged an office order dated 16th July, 2020, by which the Deputy Commissioner of Sales Tax adjusted a refund of Rs.65,34,213/- due to the Petitioner under the CST Act against an admitted liability of Rs.79,44,056/- towards interest under the Orissa Entry Tax Act (OET Act). The refund arose from an order dated 24th February, 2020, by the Additional Commissioner of Sales Tax (Appeal) Balasore, which allowed a refund of Rs.4,34,213/- after considering a pre-deposit of Rs.61 lakh. The Petitioner argued that the adjustment was without jurisdiction and unilateral. The revenue contended that Section 11(2) of the OET Act permitted such an adjustment, as the Deputy Commissioner exercised powers under both Acts.

Held

The Court held that the office order dated 16th July, 2020, was unsustainable in law. Firstly, it found that the revenue's contention that the amount due under the OET Act constituted a "first charge" on the refund under the CST Act was erroneous. While a charge might exist, it did not permit a unilateral recovery without notice. Secondly, the Court rejected the argument that the Deputy Commissioner, by exercising powers under both Acts, could unilaterally adjust refunds. It clarified that the functions under the CST Act and OET Act are theoretically distinguishable, and without an express provision in either Act permitting such an adjustment, it was not permissible. The Court also noted that the adjustment was made unilaterally without any notice to the Petitioner, which was a fatal flaw. The Court set aside the impugned order but clarified that the department could proceed to recover the admitted OET Act interest liability in accordance with law. The refund of the excess CST amount was directed to be made to the Petitioner within four weeks.

Key Issues

1. Whether the Deputy Commissioner of Sales Tax had the jurisdiction to unilaterally adjust a refund due to the Petitioner under the CST Act against an admitted interest liability under the OET Act, based on Section 11(2) of the OET Act? Petitioner's Arguments: The Petitioner contended that the adjustment was without jurisdiction, as there is no provision akin to Section 226 of the Income Tax Act for garnishee proceedings to recover dues from separate proceedings. They argued that the OET Act does not permit the adjustment of CST tax refunds against OET Act interest liabilities. The adjustment was also made unilaterally without any notice. Revenue's Arguments: The revenue argued that such an adjustment is permitted under Section 11(2) of the OET Act, citing paragraph 22 of their counter affidavit. They also contended that the Deputy Commissioner, being the same authority exercising powers under both the CST Act and the OET Act, could effect such an adjustment.