MURAHARI SRI RAMAN, J

THE CHALLENGE:

1. Seeking revision of Order dated 01.11.2022 passed by the Odisha Sales Tax Tribunal in Second Appeal bearing No. 165 (ET) of 2010-11 preferred by the petitionercompany directed against Order dated 23.10.2010 passed by the Additional Commissioner of Sales Tax, North Zone, Odisha, Cuttack in the first appeal bearing No. AA/07/OET/ACST (Asst)/SA/2007-08 in connection with Assessment framed under Section 9C of the Odisha Entry Tax Act, 1999, for the tax periods from 01.04.2005 to 30.11.2006, vide Order dated 15.02.2007 the petitioner has posed the following questions of law in the revision petition under Section 19:

“I. Whether, on the facts and circumstances the Hon’ble Full Bench, Odisha sales Tax Tribunal, Cuttack is right in law to hold that the Assistant Commissioner of the Range has jurisdiction to pass the Order of Assessment under the Odisha Entry Tax Act of the petitioner, who is LTU dealer

II. Whether, on the facts and circumstances the Hon’ble Full Bench, Odisha sales Tax Tribunal, Cuttack is right in law to hold the Order of Assessment for the period 01.04.2005 to 18.10.2005 passed under Section 9C of the OET Act read with Rule 15B of OET Rules shall survive, when section 9C and Rule 15 was inserted in the statue on 19.05.2005 and 19.10.2005, respectively

III. Whether, the Hon’ble Full Bench, Odisha sales Tax Tribunal, Cuttack is right in law to hold the Sales Value of the goods to be termed as 'Purchase Value' under Section 2J of the OET Act in case of stock transfer of goods for the purpose of levy of Entry Tax under Section 3 of the OET Act

IV. Whether, in the facts and circumstances of the case stated above the Hon’ble Full Bench, Odisha sales Tax Tribunal, Cuttack is right in law to hold the penalty is imposable in the present case of the petitioner, when issue involved being point of interpretation of law, and the petitioner being a public sector undertaking under the Ministry of Defence, Government of India

V. Any other question of law as the Honourable Court deems fit and proper out of the said order of the Full Bench, Odisha Sales Tax Tribunal, Cuttack.”

2. Sri Chittaranjan Das, learned Advocate for the petitioner furnished following Additional Question of Law to the Court on 23.02.2023:

“Whether the Assessment Order and the consequential orders are not liable to be invalidated as the Audit Team constituted in absence of an “Assistant Commissioner” as provided under Section 9B of the OET Act and Rule 11 of the OET Rules read with Section 41 of the OVAT Act and Rule 43 of the OVAT Rules”

2.1. This Court taking into record the said Additional Question of Law passed the following Order:

“3. Notice. Mr. Sunil Mishra, learned Additional Standing Counsel accepts notice on behalf of opposite party. Since he accepts notice, let a copy of the petition and the application be served on him within three working days.”

2.2. The instant sales tax revision has been taken up along with STREV No.2 of 2023 : Bharat Earth Moving Limited Vrs. State of Odisha which is relating to audit assessment under Section 42 of the OVAT Act for analogous hearing.

2.3. Both the counsel for either side conceded to the proposal for disposal of the present matter along with aforesaid STREV No.2 of 2023.

2.4. Sri Chittaranjan Das, learned Advocate for the petitioner submitted that the Additional Question of Law as posed herein above has already been answered in favour of petitioner by a coordinate Bench of this Court in the case of State of Odisha Vrs. Daehsan Trading (India) Ltd., STREV No.117 of 2013, vide Order dated 13th July, 2022. He has, hence, urged that in such an eventuality, other questions of law need not be answered, as the entire proceeding for assessment under Section 9C of the OET Act gets vitiated.

FACTS:

3. The petitioner, a Government of India Undertaking under the Ministry of Defense having its registered office at Bengaluru with its branch offices spreading over different places in the country, is engaged in manufacture and sale of Heavy Earth Moving Machineries, its spare parts and accessories and lubricant.

3.1. The branch of the company-BEML at Sambalpur, situated at BEML Complex, Panchgachhia, Bareipali, Sambalpur, a registered dealer under the Sales Tax Officer, Sambalpur-I Circle, Sambalpur, has been assigned with Registration Certificate bearing TIN: 21121703495 as Large Tax Payers’ Unit (LTU).

3.2. The dealer-company being selected under Section 9B of the Odisha Entry Tax Act, 1999 (for brevity hereinafter referred to as “OET Act”) read with Section 41 of the Odisha Value Added Tax Act, 2004 (“OVAT Act”, for short), tax audit was accordingly conducted by a team headed by a Sales Tax Officer and an Inspector/Assistant Sales Tax Officer. Audit Visit Report was submitted to the Assistant Commissioner of Sales Tax, Sambalpur Range, Sambalpur-Assessing Authority.

3.3. In obedience to the notice in Form E-30 issued by the Assessing Authority initiating audit assessment proceeding under Section 9C of the OVAT Act as a result of tax audit, the petitioner appeared before him and explained the allegations/objections as raised in said Audit Visit Report.

3.4. The petitioner effected entry of goods brought otherwise than by way of purchase into the local area to the tune of Rs.36,28,31,304/- during the tax periods in question and deposited entry tax by charging 2% on sale of such goods from the customers.

3.5. On the basis of Audit Visit Report, the Assistant Commissioner of Sales Tax, Sambalpur Range, Sambalpur framed assessment under Section 9C vide Order dated 15.02.2007. Taking into consideration the audit objection that whereas the petitioner-dealer has collected entry tax @2% amounting to Rs.76,47,350/- on sale value of goods, it deposited Rs.72,56,626/-, thereby there was short payment of Rs.3,90,724/-. Since the petitioner had collected entry tax of Rs.76,47,350/-, the Assessing Authority discarded explanation of the dealer to adjust from refund flown on account of goods being sent outside the State on the ground that the dealer had not collected entry tax on receipt of goods, but it collected on sale. Accordingly, demand to the tune of Rs.11,72,172/- has been raised which comprised of extra demand of tax of Rs.3,90,724/- and Rs.7,81,448/- penalty computed under Section 9C(5) of the OET Act.

3.6. In the appeal under Section 16 of the OET Act preferred by the company, the Additional Commissioner of Sales Tax, North Zone, Cuttack (“Appellate Authority”, for convenience) did not interfere with the assessment order and confirming the same passed Order on 23.10.2010.

3.7. Aggrieved, the petitioner carried the matter before the the Odisha Sales Tax Tribunal, Cuttack, in Second Appeal bearing No.165 (ET) of 2010-11, which came to be disposed of on 01.11.2022 with certain modifications in the first appellate order.

3.8. Still aggrieved, the petitioner has approached this Court by way of this present revision petition invoking provisions of Section 19 of the OET Act.

ARGUMENTS:

4. Since it has been submitted at the bar that the issue is squarely covered by decision rendered in State of Odisha Vrs. Daehsan Trading (India) Ltd., STREV No.117 of 2013, vide Order dated 13th July, 2022, on the consent of both the sides, the matter is taken up for final hearing along with STREV No.2 of 2023 filed by the instant petitioner which relates to the OVAT Act.

4.1. This Court heard Sri Chittaranjan Das, learned counsel appearing for the petitioner-BEML and Sri Sunil Mishra, learned Standing Counsel (Commercial Tax and Goods and Services Tax Organisation) for the opposite party.

5. Sri Chittaranjan Das, learned Advocate for the petitioner having taken this Court to the provisions contained in Section 9B of the OET Act which in unequivocally speaks of that the provisions of Section 41 of the OVAT Act “shall mutatis mutandis” apply. Referring to Rule 11 of the Odisha Entry Tax Rules, 1999 (“OET Rules” for brevity) read with Rule 43 of the Odisha Value Added Tax Rules, 2005 (referred to as “OVAT Rules”), as it existed prior to substitution by virtue of the Odisha Value Added Tax (Amendment) Rules, 2009, with effect from 25.02.2009, he argued that the Appellate Authority even as misconceived the fact of application of amended provision in OET Act and rules framed thereunder to the tax periods prior to 19.10.2005 on which date the Odisha Entry Tax (Amendment) Rules, 2005 came into force, failed to appreciate the ground, though stands recorded in his order, to the effect that the Audit Visit Report submitted by the Audit Officer is not maintainable for initiating assessment proceeding.

5.1. Sri Chittaranjan Das, learned counsel for the petitionercompany emphatically contended that the Audit Team being not duly constituted in conformity with provisions contained in Section 9B of the OET Act read with Rule 11(3) of the OET Rules, the Audit Visit Report submitted by such an Audit Team could not be utilized for the purpose of Audit Assessment. In this respect the interpretation of this Court in Daehsan Trading (India) Ltd. (supra) would be applicable in all fours..

5.2. It is, therefore, submitted by Sri Chittaranjan Das, Advocate that when foundation is removed, superstructure is bound to collapse. In view of the fact that the Audit Visit Report having not been submitted by the duly constituted Audit Team as envisaged under Rule 11 of the OET Rules read with Rule 43 of the OVAT Rules, on the basis of invalid Audit Visit Report, assessment proceeding as undertaken under Section 9C of the OET Act cannot withstand judicial scrutiny.

6. Sri Sunil Mishra, learned Standing Counsel appearing for the opposite party with his vehemence contended that the Audit Visit Report as submitted by the Sales Tax Officer as Head of the Audit Team being outcome of threadbare examination of books of account with reference to claims made in the returns furnished by the petitioner, subject matter of which got culminated in finding of fact in the assessment order resulting in demand, such assessment proceeding could not be questioned by the petitioner, merely because constitution of Audit Team was not formed as per Rule 11 of the OET Rules read with Rule 43 of the OVAT Rules.

6.1. Valiant attempt was made by Sri Sunil Mishra, learned Standing Counsel (Commercial Tax and Goods and Services Tax Organisation) by drawing the attention of this Court towards merits of the matter. He has submitted that there has been short payment of entry tax detected during the course of tax audit conducted by the Revenue. Such short payment is on account of collection of entry tax from the customers on sale of goods. He submitted that the imposition of penalty is in accordance with the view expressed in the decision of this Court in the case of State of Odisha Vrs. Chandrakanta Jayantilal, (2023) 108 GSTR 81 (Ori). Under such premises, it is uncalled for to address the additional question of law, but it is warranted to address other questions of law.

STATUTORY PROVISIONS:

7. For better comprehension of legal position so far as it is necessary to answer the Additional Question of Law, provisions of Section 9B of the OET Act and Rule 11 are reproduced hereunder:

Section 9B of the OET Act, 1999:

“9B. Identification of taxpayer.—

(1) The Commissioner may select such individual dealers or class of dealers for tax audit on random basis or on the basis of risk analysis or on the basis of any other objective criteria, at such intervals or in such audit cycle, as may be prescribed.

(2) After identification of individual dealers or class of dealers for tax audit under sub-section (1), the Commissioner shall direct that tax audit in respect of such individual dealers or class of dealers be conducted and for the purpose of conduct of such tax audit under this section, the provisions contained in Section 41 of VAT Act shall mutatis mutandis apply:

Provided that the Commissioner may direct tax audit in respect of any individual dealer or class of dealers on out of turn basis or for more than once in an audit cycle to prevent evasion of tax and ensure proper tax compliance.

(3) Tax audit shall ordinarily be conducted in the prescribed manner in the business premises or office or godown or warehouse or any other place, where the business is normally carried on by the dealer or stock in trade or books of account of the business are kept or lodged temporarily or otherwise.”

Rule 11 of the OET Rules, 1999:

“11. Audit.—

(1) (a) The Commissioner shall, under the provision of Section 9B, select by the 31st January or by any date before the close of every year, not less than twenty per cent of registered dealers for compulsory audit during the following year, by random selection with or without the use of computers.

(b) The Commissioner may, where he considers it necessary to safeguard the interest of revenue or where any enquiry is required to be conducted on any specific issue or issues relating to any dealer, or class or classes of dealers, on being referred by any officer as referred to in sub-section (1) of Section 15, direct for specific audit.

(c) The Commissioner may, on the basis of apparent revenue risk of the individual dealers, make selection of dealers for special or investigation audit and the revenue risk shall be determined on objective analysis of the risk parameters or on receipt of intelligence or information regarding evasion of tax.

(d) For the control of large taxpayers, the Commissioner may plan audit checks across the totality of the business of such dealers within an audit cycle of two years.

(2) All audits except those provided under clause (c) of subrule (1) shall be with prior notice to the dealer:

Provided that the Commissioner, for good and sufficient reasons, may dispense with prior notice for tax audit under sub-rule (1) in respect of any specific dealer or class or classes of dealers.

(3) The tax audit under sub-rule (1) shall be undertaken by a team constituted for the purpose by the Commissioner, as he may deem fit and such audit team may consist of one or more authorities appointed under any prescribed designation under VAT Act.

(4) (a) The audit shall ordinarily be taken up in the place of business of the dealer and the dealer shall render all necessary assistance, produce all accounts, documents, records and also allow access to the accounts, if any, maintained electronically, as may be required by the officers conducting audit.

(b) Subject to the provisions of sub-rule (2), where tax audit is conducted under clauses (a), (b) and (d) of subrule (1), the dealer shall be given prior notice in Form E25, intimating the date and time, when the audit is proposed to be conducted, and the dealer shall be required to produce all accounts and records, as may be required, and extend all co-operation to the audit team for smooth conduct of audit.

(c) Where audit of a dealer is proposed to be taken up under clause (c) of sub-rule (1), prior approval of the next higher authority shall be taken:

Provided that when the audit visit is required to be made in course of an investigation or where there is reasonable apprehension that delay may lead to the disposal of the stock-in-trade or removal or destruction of books of account, records and documents, the approval of next higher authority shall be taken post facto, within twenty-four hours of the completion of such visit or return to headquarters, after completion of the audit, whichever is later.

(5) (a) Tax audit shall comprise of verification of all records, documents, books of account including electronic record, relating or incidental to the business of the dealer, physical verification of stock-in-trade, collection of sample of goods and examination of such other records and documents, as may be required to determine the actual tax liability of the dealer.

(b) A dealer, who fails to produce any accounts, record or document, in course of the audit, shall if the officer-incharge of the audit team so requires by notice in Form E26 produce such accounts, records and documents in the office on the date and time specified in that notice.

(c) Audit visit report in Form E27 shall be submitted by the officer-in-charge of the audit team conducting audit to the Commissioner within seven days of the completion of the audit.

(6) The audit team, during any audit visit, shall explain the provisions of the Act and the Rules so that the dealer does not face any difficulty in maintenance of books of account and due discharge of tax liability.”

DISCUSSION AND ANALYSIS:

8. It is the contention of Sri Chittaranjan Das, learned counsel for the petitioner that though the petitionerdealer has raised the issue in the grounds of second appeal before the learned Odisha Sales Tax Tribunal (vide Annexure-4), that “the Audit Report submitted by the learned Audit Officer, the assessment as a result of such audit and consequentially the first appeal is not maintainable on ground of lack of jurisdiction of the Assessing Authorities below” and explained such a stand while pressing for the ground taken in second appeal relating to the OVAT Act, which mutatis mutandis attracts to the present context, the learned Odisha Sales Tax Tribunal has ignored to deal with the same.

9. Bare reading of Section 9B of the OET Act indicates that by virtue of sub-section (2) for the purpose of conduct of tax audit the provisions of Section 41 of the OVAT Act shall mutatis mutandis apply. Further reading of Rule 11 of the OET Rules in sub-rule (3) it has been stated that the tax audit shall be undertaken by a team constituted for the purpose by the Commissioner, as he may deem fit and such audit team may consist of one or more authorities appointed under any prescribed designation under the OVAT Act.

9.1. Considering the purport of Section 41 of the OVAT Act read with Rule 43 of the OVAT Rules, this Court in the case of instant petitioner-company in STREV No.2 of 2023 : Bharat Earth Movers Limited Vrs. State of Odisha (disposed of today by a Judgment) held that since Audit Visit Report has been submitted by the Sales Tax Officer disclosing him to be Head of Audit Team is infirm in law inasmuch as Assistant Commissioner did not form part of the Audit Team which is contrary to mandate of Rule 43 of the OVAT Rules.

9.2. This Court finds that provisions of Section 9C is pari materia with Section 42 of the OVAT Act and Section 9B of the OET Act specifically speaks of application of provisions of the OVAT Act mutatis mutandis to the context of the OET Act.

9.3. In Rajasthan State Industrial Development and Investment Corporation Vrs. Diamond & Gem Development Corporation Limited, (2013) 5 SCC 470 [LQ/SC/2013/176] the meaning of mutatis mutandis has been given as under:

“17. In Ashok Service Centre Vrs. State of Odisha, AIR 1983 SC 394 [LQ/SC/1983/58] = (1983) 2 SCC 82, [LQ/SC/1983/58] this court held as under (SCC p.93, paragraph 17):

‘17. *** Earl Jowitt’s The Dictionary of English Law 1959) defines ‘mutatis mutandis’ as ‘with the necessary changes in points of detail’. Black's Law Dictionary (Revised 4th Edn. 1968) defines ‘mutatis mutandis’ as ‘with the necessary changes in points of detail, meaning that matters or things are generally the same, but to be altered when necessary, as to names, offices, and the like’ *** Extension of an earlier Act mutatis mutandis to a later Act, brings in the idea of adaptation, but so far only as it is necessary for the purpose, making a change without altering the essential nature of the things changed, subject of course to express provisions made in the later Act *** In the circumstances the conclusion reached by the High Court that the two Acts were independent of each other was wrong. We are of the view that, it is necessary to read and to construe the two Acts together as if the two Acts are one, and while doing so to give effect to the provisions of the Act which is a later one in preference to the provisions of the Principal Act wherever the Act has manifested an intention to modify the Principal Act’

Similarly, in Prahlad Sharma Vrs. State of U.P., (2004) 4 SCC 113, [LQ/SC/2004/269] the phrase ‘mutatis mutandis’ has been explained as under:

‘11. The expression ‘mutatis mutandis’ itself implies applicability of any provision with necessary changes in points of detail’. [See also: Mariyappa Vrs. State of Karnataka, AIR 1998 SC 1334 [LQ/SC/1998/231] = (1998) 3 SCC 276 [LQ/SC/1998/231] ; and Janba Vrs. Gopikabai, AIR 2000 SC 1771 [LQ/SC/2000/669] = (2000) 4 SCC 1] [LQ/SC/2000/669] .

18. Thus, the phrase ‘mutatis mutandis’ implies that a provision contained in other part of the statute or other statutes would have application as it is with certain changes in points of detail.”

9.4. In Corporation of Calcutta Vrs. Sirajuddin, AIR 1957 Cal 399 [LQ/CalHC/1957/59] = 1957 CrlLJ 722, the expression mutatis mutandis has been explained as follows:

“When a law directs that a provision made for a certain type of case shall apply mutatis mutandis in another type of case, it means that it shall apply with such changes as may be necessary, but not that even if no change be necessary, some change shall nevertheless be made.”

9.5. In Vasudev Anant Kulkarni Vrs. Executive Engineer, Maharashtra State Electricity Board, Rural Division, Ahmednagar, 1994 SCC OnLine Bom 12, the term mutatis mutandis has been explained as follows:

“The meaning attached to expression ‘mutatis mutandis’ is, ‘when a law directs that a provision made for a certain type of case shall apply mutatis mutandis in another type of case, it means that it shall apply with such changes as may be necessary but not that even if no change be necessary, some change shall nevertheless be made…’ It is an established principle that the same words or phrases, when used in Acts dealing with the same subject matter often bear the same meaning. So also, where a word has been constructed judicially in a certain legal area, it is we think, right to give it the same meaning if it occurs in a statute, dealing with the same general subject matter unless that the word must have a different construction.”

9.6. The expression mutatis mutandis is an adverbial phrase qualifying the verb “shall … apply” and meaning “those changes being made which must be made”. This can mean only that the changes to be made must have reference to the proceedings to which the provision has to be applied and not to the particular clause under which the particular proceeding may be instituted. Given the understanding of the term mutatis mutandis, it is quite clear that whatever is true about the OVAT Act, the same is also applicable to the context of the OET Act. In other words, the audit team constituted for the purpose of tax audit under Rule 43 of the OVAT Rules can also be construed to be constituted for the purpose of tax audit conducted under Section 9B of the OET Act.

10. Under Section 9C of the OET Act read with Section 42 of the OVAT Act, audit assessment has to be completed on the basis of the materials available in the Audit Visit Report. There was no scope for the Assessing Authority to utilize any material other than the materials available in the audit report while making the audit assessment. (See Bhusan Power & Steel Ltd. Vrs. State of Orissa, (2012) 47 VST 466 (Orissa). Therefore, it is urged that when the Audit Visit Report submitted by a team not duly constituted as required under Rule 11 of the OET Rules read with Rule 43 of the OVAT Rules is itself incompetent, the Assessment Order based on such invalid Audit Visit Report cannot be held to be tenable in law.

10.1.In the light of the Judgment passed today in the case of present petitioner, being Bharat Earth Moving Ltd. Vrs. State of Odisha, STREV No.2 of 2023, it is, therefore, held that the Audit Visit Report submitted by the Audit Team, which was not duly constituted and contrary to the requirement of provisions of Rule 11 of the OET Rules read with Rule 43 of the OVAT Rules, is vulnerable. Therefore, the audit assessment under Section 9C of the OET Act based on such Audit Visit Report is vitiated and, liable to be set aside.

DECISION AND CONCLUSION:

11. The petitioner-dealer has raised pertinent question of law. For the elaborate discussions made above and reasons ascribed heretofore, said question of law is answered by holding that the Audit Visit Report submitted by the Audit Team, which was not duly constituted and contrary to the requirement of provisions of Rule 11 of the OET Rules read with Rule 43 of the OVAT Rules, as it existed at the relevant point of time prior to introduction of the Odisha Value Added Tax (Amendment) Rules, 2009, is vulnerable. Therefore, the audit assessment under Section 9C based on such Audit Visit Report is vitiated and, liable to be set aside.

12. Accordingly, the Additional Question of Law is answered in the negative, i.e., in favour of the petitioner-Bharat Earth Movers Ltd. and against the opposite party-State of Odisha represented by the Commissioner of Sales Tax, Odisha, Cuttack.

12.1.As a sequel to the above answer to question of law, Order dated 01.11.2022 in Second Appeal bearing No. 165 (ET) of 2010-11 is quashed. Consequent thereto, Order dated 23.10.2010 passed by the Additional Commissioner of Sales Tax, North Zone, Odisha, Cuttack in the first appeal bearing No. AA/07/OET/ACST (Asst)/SA/2007-08 is set aside as this Court has held that Assessment framed under Section 9C of the Odisha Entry Tax Act, 1999 vide Assessment Order dated 15.02.2007 of the Assistant Commissioner of Sales Tax, Sambalpur Range, Sambalpur for the tax periods from 01.04.2005 to 30.11.2006 based on Audit Visit Report, which is prepared and submitted by an Audit Team constituted contrary to mandate of Section 9B of the OET Act read with Rule 11 of the OET Rules as the provisions of Section 41 of the OVAT Act read with Rule 43 of the OVAT Rules mutatis mutandis apply, cannot withstand judicial scrutiny.

12.2.By determining the Additional Question of Law, since this Court allowed the revision petition in exercise of power conferred under Section 19(4)(a) of the OET Act, other questions of law are not required to be discussed and answered being academic.

12.3.The Assessing Authority is directed to act in accordance with provisions contained in sub-section (6) of Section 19 of the OET Act.

12.4.The revision petition is disposed of with no order as to costs.