M/S. Associated Cement Companies LTD., Bbsr vs. Sales Tax Officer, Cuttack-Ii Circle

JUDGMENT 28th July, 2023

S. Talapatra, J By means of this writ petition, the Petitioner has challenged the order dated 08.01.2018 passed in S.A. No.1934 of 2006-07 by the Odisha Sales Tax Tribunal, Cuttack, Annexure-1 to the writ petition, the order dated 30.03.2021 passed in First Appeal Case No.AA/07/OST/CUII/2018-19 by the First Appellate Authority, Cuttack-II, Annexure-7 to the writ petition and the order dated 28.02.2023 passed by the AFR

Assessing Authority, Sales Tax Officer Cuttack-II Circle, Cuttack, Annexure-10 to the writ petition.

“Thus, in the facts and circumstances of the case discussed above the appeal is allowed in part and the order of the Ld. Sales Tax Officer is Set-aside for fresh assessment after giving the appellant a reasonable opportunity of being heard. The Ld. Assessing Officer to verify and examine the above issues, claims and petitions of the dealer-appellant in relation to Books of Accounts, papers and documents as per the judgments made by the honourable Odisha Sales Tax Tribunal, Cuttack vide S.A. No.1934 of 2006-07. The dealer-appellant is also required to produce the related Books of Accounts, papers and documents etc as required before the Ld. Assessing Officer for necessary verification at the time of completion of fresh assessment. The Ld. Assessing Officer is to complete the re- assessment of the dealer-appellant within a period of four months from the date of receipt of this order.”

In terms thereof, the Assessing Authority by its order dated 28.02.2023, Annexure-10 to the writ petition has carried

out the re-assessment and, by the said order, re-assessed under Section 12(4) of the Odisha Sales Tax Act for the assessment year 2001-02 after recording the materials facts. In the said re- assessment order, Annexure-10 to the writ petition, the Assessing Officer has observed that no documentary evidence is still produced by the taxpayer under the above stated circumstances. In that circumstance, the Assessing Officer has completed the assessment on three primary aspects which were challenged by the assessee in the above mentioned first appeal.

TRADE DISCOUNT OF Rs.77,58,052.00

The assessment record and the appeal records were verified by the Assessing Officer and the Assessing Officer could not find out any evidence towards fresh discount. However, in the order of the Odisha Sales Tax Tribunal dated 08.01.2018 passed in S.A. No.1934 of 2006-07, it was observed as follows:

“However, it is a fact that nothing was produced by the dealer either before the assessing authority or before the first appellate authority showing details of trade discount allowed by it. A detailed list of credit notes issued during

the relevant period has been produced before us by the dealer in the form of Annexure-10 to the written submission filed by it, but the same cannot be taken as proof of the claim of trade discount in the absence of the actual credit notes/invoices etc.”

It has been observed by the Assessing Authority that the appeal record bearing no.AA-67/CU-II/03-04 dated 24.01.2004 for the year 200-01(Odisha Sales Tax) is not called for as in the present case, only the documentary evidence is lacking, which does not admittedly form the part of the appeal record of 2000-01. The assessment order of 2000-01 speaks of the trade discount yet in 2001-02 no credit note is produced towards trade discount. The Orissa High Court order dated 06.07.2022 passed in STREV No.25 of 2013, as produced by the assessee before the Assessing Authority on 06.08.2022, was considered not relevant by the Assessing Authority. It has been clearly observed by the Assessing Authority that the assessee had entered in the business arrangement by an agreement with AMSPL to sell the goods as per the catalogue price. It was agreed that the Petitioner would be allowed trade discount by issuing credit note on product wise sale so that AMSPL could meet with their expenses. It has been held by the Assessing Authority that in the present case, the trade discount is questionable due to lack of credit notes, agreement and other corroborative evidence. Thus, the claim of trade discount to the extent of Rs.77,58,052/- was not accepted and disallowed by the Assessing Authority.

CLAIM OF EXEMPTION OF Rs.2,65,47,426/- SSESSED UNDER BAKERS HUGHES PTE. LTD

It has been observed by the Assessing Authority that the dealer was assessed for the material period on 25.05.2004 and M/s. Bakers Hughes PTE Ltd. was assessed under the BBSR-II Circle on 31.12.2008 as revealed from the photo copy of the said assessment order. In the said assessment order of the latter, the turnover towards ACC Ltd. is not spelt out. The confirmation from the BBSR-II circle has not been yet received and the dealer has failed to produce supporting documents towards claim of exemption of Rs.2,65,47,426/- on the ground that turnover is assessed on account of M/s. Bakers Hughes PTE. Ltd. On the other hand, the dealer through his advocate had been pressing hard for completion of the assessment. As two years had elapsed, since the order dated

CLAIM OF EXEMPTION OF Rs.7,51,081/- (material component of cement under works contract behind BAKER’S HUGHES PTE LTD.)

The assessee had imported cement of Rs.7,51,081/- on stock-transfer against FORM-F for purpose of trading, but subsequently utilized in the execution of the works contract without realizing tax at appropriate rate. Such goods, being ‘first point tax’ paid goods is found to have been utilized under works contract. The dealer’s claim has been disallowed, as there was no document relating to deduction GTO/ITO tax due and payable has been calculated by the Assessing Authority as follows:

“GTO determined

Rs.22,49,55,472.00

Less Sales Tax Collected (-) Rs.1,98,98,672.62

--------------------------

Rs. 20,50,56,799.38

Less tax exempted sale

Rs. 37,67,833.00

Less Labour & service charge

@ 35% of contract value Rs.95,54,477.45

------------------------

TTO determined

Rs.19,17,34,488.93

OST @ 4% on sale against Form IV Rs.6,15,200.56 = Rs.24,608.00

OST @ 8% on work contract for Rs.1.77.44.029.55 = Rs.l4,19,522.00

OST @ 12% on sale of cement

for Rs. 17,33,75,258.82

= Rs.2,08,05,031.00

--------------------------

Rs.2,22,49,161.00

Surcharge @ 15% on tax due of Rs.23,40,182.00 = Rs.3,51,027.00

Surcharge @ 10% on tax due of Rs.1,99,08,979.00= Rs.19,90,898.00

Total tax surcharge payable = Rs.2,45,91,086.00

Less already paid U/r.36 (as disclosed in annual

Revised annual return & challan & PCR)

Rs.2,19,84,988.00

----------------------

To pay = Rs. 26,06,098.00”

Having observed thus, the dealer was re-assessed to pay the balance amount of Rs.26,06,098.00 in terms of the demand notice as raised on the basis of the said assessment.

order was passed on 31.03.2004 for the period 2001-02, Annexure-2 to the writ petition whereby the Assessing Authority has raised the demand of Rs.1,69,309. 64. Against the said order, the assessee preferred the first appeal being AA 193/CU-II/04-05. In the said appeal, the Appellate Authority issued show cause for enhancement of the turnover under Section 23(2) (a) of the OST Act read with Rule 59 (3) of the OST Rules asking the assessee why the deduction allowed on two accounts will not be disallowed and added to the taxable turnover. Finally, by the order dated 30.12.2006, Annexure-4 to the writ petition, the First Appellate Authority revised the order of assessment dated 31.03.2004 passed by the Assessing Authority under Section 12(4) of the OST Act for the period 2001-02 and enhanced the demand to Rs.30,21,653/- from Rs.1,69,310/- and directed the Assessing Authority to issue fresh demand notice for realization of the said tax. It has been observed in the said order dated 30.12.2006 that the assessee had returned the sale turnover at Rs.22,49,55,472. 00. From the said turnover, he has claimed deduction of Rs.77,58,052.00 towards the cash discount, on calculation the percentage of cash discount works out to be about 11% of the GTO returned. But, no evidence of payment of the cash discount to the customers are placed in the record. Although the assessee was called upon to furnish the evidence of payment of cash discount to the customer. The assessee had avoided producing any such evidence. Thus, it has been held by the First Appellate Authority that the assessee did not give any cash discount to the customers at the time of sale of goods. Even there had been no evidence to show that the company allowed cash discount at the time of sale. There was a scheme to grant quantity discount at the end of the year. But as per law, the credit notes are to be issued on monthly basis. The practice, untenable in law, adversely affects the tax due to the State because the assessee adjusted the credit notes from the tax due in subsequent months, while the purchasers had not received the cash discount or quantity discount. It has been further observed that the company adopts a method of availing the tax benefits on discount by issuing credit notes. In the instant case, the company has adjusted an amount of Rs.9,30,966.24 being the tax due on the sale amount by allowing the cash

discount of Rs.77,58,092. 00. The company has adopted novel method in order to avoid the collection of tax. Therefore, the amount of Rs.77,58,052.00 which has been shown as the deduction towards the cash discount.

G.T.O. (D) … … Rs.22,49,55,472.00

S.T.C.

… …(-) Rs.1,98,98,672.00

-------------------------

Rs. 20,50,56,799.38

Labour & Service

Charge & 25% ... (-) Rs.95,54,477.45

Contract valud

----------------------

T.T.O. (D) … … Rs.19,55,02,321.93

------------------------

O.S.T. @ 4% on Rs.9,90,521.00 – Rs.23,620.84

(Sale against form IV)

O.S.T. @ 8% on Rs.1,69,92,948.55 – Rs.13,59,435.00

(works contract)

O.S.T. @ 12% on Rs.17,79,18,852.38 – Rs.2,13,50,262.28

________________

Total tax payable = Rs.2,27,33,318.92

S.C. @ 15% on the tax due to

Rs.27,40,454. = Rs.2,74,045,48

S.C. @ 10% on tax due of

Rs.1,99,92,864.04

= Rs.19,99,286.40

_______________

Total tax & S.C. Payable = Rs.2,50,06,650.88

Already paid u/r.36 = Rs.2,19,84,998.00

_______________

To pay = Rs.30,21,652.88

or = Rs.30,21,653.00”

Having observed thus, the demand was raised for an amount of Rs.30,21,653.00 by revising the order of the Assessing Authority. Being aggrieved by the said order dated 30.12.2006 passed by the First Appellate Authority, the assessee preferred a second appeal to the Odisha Sales Tax Tribunal. It has been contended in that second appeal that the order of the Assessing Authority under Section 12(4) of the OST Act, 1947 is bad in law and the order of the First Appellate Authority is unsustainable for not granting the discount and exemption. In that appeal, the assessee had challenged disallowance of trade discount to the extent of Rs.77,58,052.00 and for not exempting the sale of goods worth Rs.37,67,833.00 for rehabilitation works in the cyclone affected areas of the State for want of proper certificate, as noted above. The said order is questioned for not allowing deduction towards receipt by M/s. Baker Hughes PTE Ltd. amounting to Rs.1,77,44,029.55 and tax charged on utilization of cement in the work-contract of worth Rs.7,51,081. 00. It has amounted to double taxation. That apart, the calculation of surcharge as reflected in the first appellate order is not in accordance with the provision of law, in as much as the assessee did not have any sale transaction for the period from 01.05.2001 to 05.05.2001. Hence, calculation of surcharge needs to be modified @ 10% and 15% by modifying the rate

of surcharge as ascertained by the Assessing Authority, and affirmed by the First Appellate Authority. By the order dated 08.01.2018, Annexure-1 to the writ petition, the Second Appellate Authority had occasion to observe that, both the authorities below (the Assessing Authority and the First Appellate Authority) have created confusion by mixing up the cash discount with trade discount. Both the terms are conceptually different. The Second Appellate Authority has disapproved the observation that there is any requirement of law that the credit notes are to be shown on monthly basis. However, the observation of the Assessing Authority and the First Appellate Authority that the credit notes were not submitted by the assessee either before the Assessing Authority or before the First Appellate Authority showing details of the trade discount allowed. It has been noted that detailed list of credit notes issued during the relevant period has been produced before the Second Appellate Authority by the dealer in the form of Annexure-10 to the written submission. But the same cannot be taken as a proof of the claim of trade discount in the absence of the actual credit

notes/invoices etc. Therefore, it has been held the matter requires further examination/ verification by the Assessing Authority. It has been observed that the trade discount has to be allowed as deduction by computing the sale price as per the settled principle of law as laid down by the Apex Court in M/s. Southern Motors vs. State of Karnataka and others (Civil Appeal Nos.10972-10978 of 2016) . So far as the discount claim for sale of goods amounting to Rs.37,67,833.00 to agencies undertaking rehabilitation works in the cyclone affected areas, it has been stated that the certificate from the competent authority was not produced to the Assessing Authority. But the assessee has claimed that the certificate has been produced before the Assessing Authority and the same has been noted in the order of assessment as follows:

“Such certificate was produced and kept in the file for record.”

The Second Appellate Authority has taken note of the following observation of the First Appellate Authority in this regard:

“But on verification of record, such certificate was found wanting.”

Therefore, the Second Appellate Authority in the order dated 08.01.2018 has observed as follows:

“It would suffice for our purpose to refer to the office orders produced by the learned Addl. Standing Counsel (CT) as mentioned above which clearly show that three purchasing agencies were granted eligibility to make tax free purchase for rehabilitation work. Therefore, there is no reason why the claim for exemption raised by the dealer should be disallowed and hence, the assessment order in so far as it relates to the said claim is hereby restored.”

The implication of the said order is very clear that the assessee was given exemption of tax on the said amount of Rs.37,67,833. 00. As regards exclusion of the amount which was received from M/s. Baker Hughes PTE Ltd. to the extent of Rs.1,77,44,029.55 by the assessee as the sub-contractor cannot be made part of the assessment in view of the law laid down by the apex Court in Gannon Dunkerley & Co. and others vs. State of Rajasthan and others: [1993] 88 STC 204 (SC). The law as decided by the apex Court in Gannon Dunkerley (supra) is that when the principal contractor is registered dealer under the local Sales Tax Act, the liability of the sub-contractor to pay the tax will not rise. In the present case, the assessee is a sub-contractor and the principal

contractor namely M/s. Baker Hughes PTE Ltd. contractor is a registered dealer under the OST Act and it has been assessed for the relevant period. The assessment order passed in respect of the principal contractor is enclosed in the written submission as Annexure-6. Thereafter, the Second Appellate Authority had made the following observation:

“It is, however, not clearly discernible from the said order of assessment as to if the amount in question was included in the GTO of the said principal contractor or not. Undoubtedly, law does not envisage double taxation and hence, it is incumbent upon the assessing authority to make efforts to ascertain as to who has borne the tax relating to the works contract involving the dealer and the principal contractor. This is a matter that requires further examination.”

It has been claimed by the assessee that he had supplied cement worth Rs.7,51,081.00 in the works contract and which has been included in the assessment of the principal contractor and hence, disallowance thereof amounts to double taxation. But the revenue has submitted that the said cement was brought under declaration Form-F on stock transfer basis and such goods being the first point tax paid goods have been rightly taxed being found to have utilized in the works

contract. As against the total receipt of Rs.1,77,44,029.55 from the principal contractor, the dealer claimed to have utilized cement to the tune of Rs.7,51,081.00 and the said amount was disallowed. The order of assessment dated 31.03.2008 passed in respect of the principal contractor, namely, M/s. Baker Hughes PTE Ltd. for the assessment year 2001-02 reveals that cement was deducted as tax paid materials. However, the assessee [the writ petitioner] was assessed in the year, 2004 while the principal contractor was assessed much later, i.e. in the year 2008 for the same assessment year, i.e. 2001-02. In the said circumstances, the observations made in the assessment order passed in respect of the principal contractor regarding cement as tax paid goods is difficult to comprehend because it is not possible on such basis alone to know as to who has paid such tax, if at all. It had been contended therefore that those aspects of the matter requires further examination at the level of the Assessing Authority with reference to the relevant records. Finally, it was contended by the assessee that the surcharge has been levied at 15% even though the rate was amended w.e.f.

Additional Standing Counsel has submitted that despite opportunities given to the assessee for about two years, he could not produce any record. It would be evident from the order dated 20.06.2018, as produced in this record. Several opportunities having been extended, the assessee did not produce any document in support of his claim. The assessee was asked to produce the books of accounts by the Assessing Authority, but it would be apparent from the order dated 14.10.2021, books of accounts were not produced. In lieu of the books of accounts, they produced a photo copy of the assessment order which was interfered in different levels. There had been an initiative to get confirmation from the Joint Commissioner, CT & GST, Circle, BBSR-II, BBSR in respect of a part of the return of M/s. ACC Ltd. to the extent whether M/s. Baker Hughes PTE Ltd. had included the said amount and paid due tax for the year 2001-02. But, no confirmation could be gathered even on 19.02.2022. Several dates were fixed for that purpose. Finally, Mr. Padhi, learned Additional Standing Counsel has pointed out that in the order dated 20.06.2022, it has been recorded as follows:

“The Adv. on behalf of the dealer appeared, filed hazira and written submission. He has requested to verify documents from the original assessment record towards cash/trade discount of Rs.77,58,052/-. The same is verified and no document in that regard is found. He has also requested to call for assessment records of M/s. Baker Hughes PTE Ltd., Singapore (RC No.11-II-3933) towards claim of Rs.2,65,47,426/- against subcontract work.

As no document is found regarding claim of Rs.7,51,081/- towards claim of use of cement in contract work and against claim of cash/trade discount, the dealer is required to produce supporting documents thereof as well as towards claim of Rs.2,65,47,426/- being assessed under the turnover of the principal. The case is adjourned to 14.07.2022.”

Mr. Padhi, learned Additional Standing Counsel has stated that the assessee did not produce single piece of document to the Assessing Authority in order to complete the re-assessment in terms of the order dated 08.01.2018, Annexure-1 to the writ petition. Mr. Ray, learned Senior Counsel, in order to respond to the question of maintainability under Article 227 of the Constitution of India has contended that such challenge maintainability and in support thereof he has made reference to the judgment dated 18.11.2015 as passed by this Court in STREV No.56 of 2013 titled as M/s. Cuttack. We may hasten to note that, during the re-assessment, the Assessing Authority has taken care of the LCRs and made their observation.

made in the order dated 30.03.2021. The Petitioner had not challenged the said order dated 30.03.2021, Annexure-7 to this writ petition. For his participation in the process of re- assessment, he is estopped to challenge the said order dated 30.03.2021. As such, only the order dated 28.02.2023, Annexure-10 to the writ petition is left to be examined by us. We have observed that the Assessing Authority has complied the direction contained in the order dated 08.01.2018, Annexure-1 to the writ petition by granting all opportunities to the Petitioner. We have examined the order sheet as produced before us by Mr. Padhi, learned Additional Standing Counsel. From those orders, it transpires that more than enough time was granted to the Petitioner to produce the documents as referred in the order dated 08.01.2018 passed by the Odisha Sales Tax Tribunal. But the Petitioner could not produce any document and insisted that the cash discount or cash credit notes are available in the records. On scrutiny of the records, the Assessing Authority could not file such records. After that, several opportunities were extended to the Petitioner for filing the documents. We have noticed that in the order dated

as regards the exclusion of the amount returned by the principal contractor to the extent of Rs.2,65,47,426/- and the claim of exemption of Rs.7,51,081.00 the component of cement used in execution of the works contract are concerned, we are of the view that the finding cannot be disturbed in view of absence of the material document placed before the Assessing Authority. Therefore, we hold that unless the documents were shown to the Assessing Authority, it cannot be expected that the Assessing Authority’s order is erroneous or illegal. As the assessee has failed to produce the credit notes over the claim of the trade discount to the extent of Rs.77,58,052.00, the said discount cannot be granted. It was the duty of the assessee to produce such document before the Assessing Authority, but that was not done. Even the claim of exemption of Rs.2,65,47,426/- is concerned, that cannot be also considered in absence of the assessment order for the year 2001-02, in respect of M/s. Baker Hughes PTE Ltd., in as much as, in absence of such assessment order, the Assessing Authority cannot come or expected to come to any conclusion that part of the return was covered by the return filed by the principal contractor, M/s. Baker Hughes PTE Ltd. Hence, we do not find any infirmity in the said observation, which can be interfered with under Article 227 of the Constitution of India. Similar view we are bound to take in respect of the exemption claimed for the cement that was used in the works, as it could not also be shown that the transaction of said cement, valued at Rs.7,51,081.00, was returned and the principal contractor was assessed for that amount. Having scrutinized that aspect, the Assessing Authority has imposed 15% and 10% surcharge for the various period. We hold that as it has been claimed that the principal contractor M/s. Baker Hughes PTE Ltd. has been assessed in the year 2008, if the Petitioner can file the full return and the assessment order of M/s. Baker Hughes PTE Ltd. for the assessment year 2001-02 within 30.11.2023, tax relating to the said amount shall be deducted from the demand. But in the event of failure of submitting the said return and the assessment order for the said period, there shall be no interference in the notice of demand and such demand can be realized in the due process of law. The said analogy is also applicable in respect of exemption of Rs.7,51,081. 00. Having taken exception to the ordinary course of law, we have given the said opportunity to the assessee, only for production of the records. So far as the objection relating to maintainability of the petition, as raised by Mr. Padhi, learned Additional Standing Counsel is concerned, it has sufficient face as usually the scope of appeal is provided by statute, the Court cannot exercise its supervisory juri iction. But in case of juri ictional error, this Court is not bereft of power to examine the challenge.

………………………….

(S. Talapatra, J)

Savitri Ratho, J. I agree.

………………………….

(Savitri Ratho, J) Orissa High Court, Cuttack. The 28th day of July, 2023. Litaram Murmu, Senior Stenographer