M/S. Jindal INDIA Thermal Power LTD. vs. The Commnr. Of Commercial Taxes And GST, Odisha

Facts

The petitioner, M/s. Jindal India Thermal Power Limited, challenged an assessment order dated 31.03.2022 passed by the Sales Tax Officer, Angul Circle, under Section 10 of the Odisha Entry Tax Act, 1999. The order raised a demand of Rs.83,06,37,489/- (Rs.27,68,79,163/- tax and Rs.55,37,58,326/- penalty) for the tax periods from 01.04.2013 to 30.09.2015. The petitioner contended that the assessment for the period 01.04.2013 to 31.03.2014 was barred by limitation under Section 10(1) of the OET Act. Additionally, the petitioner argued that the assessing authority misinterpreted accounting standards regarding the capitalization of plant and machinery additions in the balance sheet for 2014-15, which actually represented pre-operative expenses incurred from 2009-10 onwards.

Held

The Court held that the impugned reassessment order dated 31.03.2022 passed under Section 10 of the OET Act is unsustainable and barred by limitation concerning the tax periods from 01.04.2013 to 31.03.2014. For the remaining tax periods, from 01.04.2014 to 30.09.2015, the assessment order was set aside and remanded to the Assessing Authority. The Court reasoned that the petitioner's explanation regarding the capitalization of pre-operative expenses and compliance with accounting standards had not been given due consideration. The Court found that the figure capitalized in the balance sheet for 2014-15 included work-in-progress from previous years starting from 2009-10 and did not solely relate to purchases during FY 2014-15. The Court emphasized that the onus lies on the assessee to prove that goods have already suffered entry tax or that it was paid by another person, as per Section 3(2) of the OET Act. The ratio is that reassessment proceedings under Section 10 of the OET Act must adhere to limitation periods, and the explanation of the assessee regarding the nature of capitalized expenses, supported by accounting standards, must be duly considered. The assessment for the period 01.04.2014 to 30.09.2015 was remanded for fresh consideration, allowing the petitioner to produce evidence. The writ petition was allowed with these directions.

Key Issues

1. Whether the assessment order for the tax period 01.04.2013 to 31.03.2014 is barred by limitation as envisaged in Section 10(1) of the Odisha Entry Tax Act, 1999? 2. Whether the assessing authority correctly construed the addition of Rs.6019,11,90,908/- shown in the balance sheet against Note-11 (Tangible Assets) for the year 2014-15 as if the entry of goods occurred during that period, considering the petitioner's arguments regarding capitalization of pre-operative expenses and compliance with Accounting Standards (AS-10 and AS-16) and the Companies Act, 2013? Petitioner's contentions: - The assessment for the period 01.04.2013 to 31.03.2014 is time-barred under Section 10(1) of the OET Act. - The alleged escaped turnover is misconceived as the purchase of plant and machinery occurred much earlier (since 2009-10) and the capitalization in the 2014-15 balance sheet was in accordance with Accounting Standards and the Companies Act, 2013, reflecting pre-operative expenses and project development costs. - The assessing authority failed to consider vital facts and previous assessments/withdrawals of notices, making the demand arbitrary and irrational. - Reliance was placed on the petitioner's undertaking in W.P.(C) No.13515 of 2019 regarding payment of entry tax dues. Revenue's contentions: - The judgment records no specific arguments from the revenue's side regarding the issues raised by the petitioner.