Corporate Engineers and Associates Vs State of Odisha (Orissa High Court)
Orissa High Court held that 150 HP Fully Automatic ATS (Auto-Transformer Starter) Control Panel, Motor Starter Panel Board and other Control Panel is comprehended in the term “accessories” under OVAT Act which attracts a rate of tax @ 4% for the tax periods prior to 01.04.2012 and @5% for the tax periods commencing from 01.04.2012 to the periods of assessment.
Facts- M/s. Corporate Engineers and Associates, a partnership firm, has approached this Court invoking provisions of Section 80 of the Odisha Value Added Tax Act, 2004 assailing the Order passed by the Odisha Sales Tax Tribunal in Second Appeal partly allowing the appeal filed by the State of Odisha-opposite party against the Order d passed by the Deputy Commissioner of Sales Tax (Appeal), arising out of Assessment framed vide Order u/s. 42 of said Act, 2004 read with Rule 49 of the Odisha Value Added Tax Rules, 2005 by the Sales Tax Officer, Bhubaneswar-I Circle, Bhubaneswar about the tax periods from 01.04.2011 to 31.03.2013.
The assessee-petitioner being a registered dealer under the Odisha Value Added Tax Act, 2004 (OVAT Act) carries on its business in manufacturing and trading of electrical goods and equipment for industrial use, electric generator, pump sets and their spares and accessories etc. This apart, it is engaged in supply, erection, installation and commissioning of contract work.
Being selected u/s 41 of the OVAT Act, tax audit was conducted and Audit Visit Report was submitted to the Assessing Authority-Sales Tax Officer, Bhubaneswar-I Circle, Bhubaneswar, Assessment u/s. 42 was framed taking into account observation/objection contained in the Audit Visit Report inter alia that the petitioner-dealer had misclassified the item, namely 150 HP Fully Automatic ATS (Auto-Transformer Starter) Control Panel, Motor Starter Panel Board and other Control Panel (“ATS”), as a result of which there was a short levy of value added tax. The Assessing Authority has raised a demand of tax to the tune of Rs.52,517/-. Besides demand of tax, the Assessing Authority imposed penalty twice the amount of tax so assessed invoking provisions of sub-section (5) of Section 42.
The Deputy Commissioner of Sales Tax partly allowed the appeal of the petitioner.
Conclusion- Held that the commodities, i.e., 150 HP Fully Automatic ATS (Auto-Transformer Starter) Control Panel, Motor Starter Panel Board and other Control Panel is comprehended in the term “accessories” as per entry in Serial No.29 of Part-II of Schedule-B appended to the OVAT Act, which attracts a rate of tax @ 4% for the tax periods prior to 01.04.2012 and @5% for the tax periods commencing from 01.04.2012 to the periods of assessment.
In the result, the Order dated 20.06.2017 passed by the Odisha Sales Tax Tribunal, Cuttack in S.A. No. 188 (VAT) of 2015-16 so far as it relates to the issue of classification of ATS is set aside and the determination of tax liability by applying the rate of tax @13.5% as specified in Part-III of Schedule-B is held to be erroneous.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. M/s. Corporate Engineers and Associates, a partnership firm, has approached this Court invoking provisions of Section 80 of the Odisha Value Added Tax Act, 2004, assailing the Order dated 20.06.20 17 passed by the Odisha Sales Tax Tribunal in Second Appeal bearing No. 188 (VAT) of 2015-16 partly allowing the appeal filed by the State of Odisha-opposite party against the Order dated 17.04.2015 passed by the Deputy Commissioner of Sales Tax (Appeal), Bhubaneswar Range, Bhubaneswar in the first appeal bearing No. AA 106221422000213 arising out of Assessment framed vide Order dated 10.09.2014 under Section 42 of said Act, 2004 read with Rule 49 of the Odisha Value Added Tax Rules, 2005 by the Sales Tax Officer, Bhubaneswar-I Circle, Bhubaneswar pertaining to the tax periods from 01.04.2011 to 31.03.2013.
FACTS OF THE CASE:
2. The assessee-petitioner being a registered dealer under the Odisha Value Added Tax Act, 2004 (for short referred to as “OVAT Act”), carries on its business in manufacturing and trading of electrical goods and equipments for industrial use, electric generator, pump sets and its spares and accessories etc. This apart, it is engaged in supply, erection, installation and commissioning of contract work.
2.1. Being selected under Section 41 of the OVAT Act, tax audit was conducted and Audit Visit Report was submitted to the Assessing Authority-Sales Tax Officer, Bhubaneswar-I Circle, Bhubaneswar, consequent upon which Assessment under Section 42 was framed taking into account observation/objection contained in the Audit Visit Report inter alia that the petitioner-dealer had misclassified the item, namely 150 HP Fully Automatic ATS (Auto-Transformer Starter) Control Panel, Motor Starter Panel Board and other Control Panel (hereinafter referred to as “ATS”), as a result of which there was a short levy of value added tax. The Assessing Authority has raised a demand of tax to the tune of Rs.52,517/-. Besides demand of tax, the Assessing Authority imposed penalty twice the amount of tax so assessed invoking provisions of sub-section (5) of Section 42.
2.2. Aggrieved, the petitioner-firm availed the remedy under Section 77 of the OVAT Act by way of filing first appeal bearing No.AA 106221422000213. The Deputy Commissioner of Sales Tax (Appeal), Bhubaneswar Range, Bhubaneswar (“Appellate Authority”, in short) acceded to the explanation proffered by the petitioner and allowed the appeal partly by observing thus:
“*** In course of their visit, the Audit team verified the books of accounts and observed that the dealer had been selling purely electrical goods like 150HP Fully Automatic ATS Control Panel, motor starter panel board and other control panel levying VAT 5% instead of 13.5% under Part-III of Schedule B of the OVAT Act. Basic price of such sales were calculated to be Rs.5,57,534.00. On being confronted by the STO (Audit), the dealer argued that these goods are not the electrical goods in strict sense, rather those are accessories of pump sets exigible to VAT @5% under the OVAT Act. Interpreting the items in question as unspecified ones, the STO (Audit) recommended for realization of differential taxes. The same contention was raised in assessment also and the learned Advocate also submitted that these goods were purchased from registered dealers on payment of VAT @4%. The contention of the learned Advocate having been found to be unsatisfactory, the learned Assessing Authority rejected the averment and, thereby, accepted the allegation levelled in the AVR. Thus the dispute relates to taxability of the ‘Control Panel, Motor Start Panel Board and other Control Panel’.
The learned Advocate, in the grounds of Appeal, has submitted that in the instant case, the dealer basically deals in ‘Pump sets, Accessories and Spare parts’ thereof under agriculture and PHD Sector. The appellant-dealer is also used to purchase the accessories and spare parts of pumps from registered dealer of inside the State by paying the tax as the rate applicable for pump sets as @4% or @5%. The copy purchase bills issued by M/s. S.L. Associates, TIN-21885600440, Bhubaneswar was furnished in this forum for confirmation and consideration. Entry No.29 of Part-II of Schedule B of the Act says that ‘Centrifugal, Monoblock and Submersible pumps and pump sets for handling water operated electrically or otherwise and parts and accessories thereof’ are exigible to VAT @4% / 5% as the case may be.”
2.3. Alleging that the Appellate Authority having blindly accepted the explanation of the petitioner, the first appellate order being perverse, the State of Odisha represented by the Commissioner of Sales Tax, Odisha carried the matter before the Odisha Sales Tax Tribunal under Section 78 of the OVAT Act which was registered as S.A. No.188 (VAT) of 2015-16 on the ground amongst others that the ATS attracts levy of value added tax @13.5% as it falls within ken of Part-III of Schedule-B appended to said Act.
2.4. Accepting the plea, the learned Sales Tax Tribunal allowed the second appeal preferred at the behest of the State of Odisha by stating thus:
“After going through all the aspects of the case, it is my considered opinion that, in the instant case the demand has been raised on two grounds: (i) Tax was levied @13.5% towards sale of 150HP fully automotive ATS control panel, Motor starter panel pump and other control panel as unspecified goods. Whereas the First Appellate Authority has allowed the said items to be taxed @5% as a spare parts/accessories of pump sets on the ground that the fora below has not inquired into the veracity of the items dealt by the dealer-respondent. It is pertinent to mention here that, the First Appellate Authority himself has not made any inquiry before arriving such a conclusion of taxing of aforesaid items at a lower rate. Therefore the findings given by Assessing Authority is now sustained.
Secondly, with regard to the reversal of ITC on the peruse the order of learned DCST and found the transaction relating to inverter battery is interpreted as a case of sale suppression. So an amount of Rs. 14,826.00 is added to the gross turnover disclosed. Further, he has included 10% towards profit margin. Accordingly, the dealer has disclosed the purchase in the purchase register. In the above facts and circumstances the action of the learned DCST cannot be said to be wrong.”
Accordingly, the learned Odisha Sales Tax Tribunal setting aside the order of the Appellate Authority, remanded the matter to the Assessing Authority for fresh assessment by applying rate of tax @13.5% on sale of ATS as per entry specified in Part-III, Schedule-B.
3. Dissatisfied, the petitioner-dealer, with a prayer to quash the Order-in-Second Appeal dated 20.06.2017 (Annexure-4) moved this Court by way of instant revision under Section 80 of the OVAT Act, and posited the following questions of law:
I. Whether, on the facts and circumstances of the case, the Single Bench, Judicial Member-II, Odisha Sales Tax Tribunal was right in law in holding that 1 50HP fully automotive ATS control panel, motor starter control panel and other panel are unspecified goods liable to tax at 13.5% and not falling under Entry Sl. 29 of Part II of Schedule B of the OVAT Act.
II. Whether, on the facts and circumstances of the case the Single Bench, Judicial Member-II, Odisha Sales Tax Tribunal is right in law, in remanding the matter to the Sales Tax Officer for fresh assessment by directing to demand tax @13.5% on the goods 150HP fully automotive ATS control panel, motor starter control panel and other panel, which also gives scope for imposition of penalty under Section 42(5) of the OVAT Act, when the issue involved is classification and interpretation of goods, whether the above goods are falling under Entry Sl. No. 29 of Part II of Schedule B or are unspecified goods.
III. Any other question of law as the Honourable Court deems fit and proper out of the said order of the Division Bench, Odisha Sales Tax, Tribunal, Cuttack?
QUESTION OF LAW FRAMED FOR ADJUDICATION:
4. This Court while entertaining revision petition, passed the following Order on 12.03.2018:
“Heard Mr. C.R. Das, learned counsel for the petitioner.
This Sales Tax Revision is admitted on the following substantial question of law:
I. Whether in the facts and circumstances of the case, the Single Bench, Judicial Member-II, Odisha Sales Tax Tribunal was right in law in holding that 150 HP fully automotive ATS control panel, motor starter control panel and other panel are unspecified goods liable to tax at 13.5% and not falling under Entry Serial No.29, Part-II of Schedule-B of the OVA T Act.
Issue notice. ***”
4.1. At the stage of hearing of the matter, Sri Chitta Ranjan Das, learned counsel confined his arguments to the aforesaid question of law as framed by this Court.
4.2. Therefore, this Court is called upon to consider whether on the facts and in the circumstances of the case, the tax periods involved in the assessment being 01.04.2011 to 31.03.2013, ATS falls within the scope of Entry Serial No.29 of Part-II of Schedule-B so as to attract levy of value added tax @4% [prior to 01.04.20 12] and @5% [with effect from 01.04.2012] or subject to tax @13.5% as per entry in Part-III of Schedule-B appended to the Odisha Value Added Tax Act, 2004?
4.3. Accordingly, this Court proceeded to hear the matter on the consent of the counsel for the respective parties.
ARGUMENTS ADVANCED BY THE RESPECTIVE PARTIES:
5. Sri Chitta Ranjan Das, learned counsel for the petitioner submitted that the explanation of the petitioner that the commodities in question (ATS), being “accessories” used exclusively for “Centrifugal, Monoblock, Submersible pump and pump sets for handling water” do comprehend within the description in Entry at Serial No.29 of Part-II of Schedule-B appended to the OVAT Act, but the same was treated under misconception by the Assessing Authority to be “electrical goods” so as to attract levy of tax @13.5% under residuary entry contained in Part-III, Schedule-B.
5.1. Sri Chitta Ranjan Das, learned counsel urged that it is erroneous approach of the learned Odisha Sales Tax Tribunal that the Appellate Authority instead of investigating the matter for himself, observing that the Assessing Authority did not conduct any enquiry with regard to issue as to whether ATS would fall within the meaning of the term “accessories” could not have nullified the demand. He, thus, went on to submit that fishing and roving enquiry is anathema to the assessment. When the petitioner-dealer had made rightful claim with respect to classification, without any material on record and justifiable reason the Assessing Authority ought not to have turned down the explanation of the dealer.
5.2. The learned counsel for the petitioner further submitted that ATS falls within ambit of Entry in Serial No.29 of Part-II of Schedule-B subject to levy of tax @4% [up to 3 1.03.2012] and @5% [with effect from 01.04.20 12], and therefore, other registered dealers including manufacturers and sellers charge said commodities accordingly. The instant petitioner-dealer could not have been saddled with huge burden of tax @13.5% by treating the same to have fallen within scope of residuary entry as per Part-III, Schedule-B. The Appellate Authority was correct in observing that “neither the STO (Audit) nor the learned Assessing Authority enquired into, at any point of time, the business activities of the selling dealer, M/s. S.L. Associates, TIN 21885600440, Bhubaneswar and other dealers dealing in these goods”.
5.3. It is vehemently contended that the Assessing Authority should not have mechanically accepted the version of the STO (Audit) and discarded the explanation of the Assessee-petitioner. It has consistently been the stand of the petitioner-firm that ATS sold by the dealer is nothing but accessories to pump and pump sets. As the term “accessory” is not defined in the statute, reference has been made to the meaning given in Black’s Law Dictrionary, Fifth Edition. Sri Chitta Ranjan Das, learned Advocate advancing argument further would submit that though ATS is not indispensable to the main article, for convenient functioning of it, the same is used. Motor Starter and Control Panel consist of electrical goods, like power contactor, thermal overload relays, AMPs, volt meters, etc. Hence ATS is “accessory” for Centrifugal, Monoblock and Submersible pumps and pump sets for handling water. For this purpose, the learned counsel for the petitioner has placed reliance on the ratio of Mehra Bros. Vrs. Joint Commercial Tax Officer, (1991) 80 STC 233 (SC) = AIR 1991 SC 1017 = 1990 SCR Supl. (3) 61. Sri Chitta Ranjan Das, therefore, opposed the finding and conclusion of the learned Tribunal and submitted that it is inapt to hold that ATS would fall within scope of Part-III of Schedule-B.
6. Sri Sunil Mishra, learned Standing Counsel for the Commercial Tax & Goods and Services Tax Organisation supporting the Order-in-Second Appeal, submitted that no infirmity can be imputed against the Order so passed by the learned Odisha Sales Tax Tribunal. Since there was no enquiry conducted by the Appellate Authority, the objection raised in the Audit Visit Report has been confirmed in the Assessment, as such the impugned Order warrants no interference. The petitioner was rightly fastened with liability @13.5% as per Part-III of Schedule-B.
7. Sri Chitta Ranjan Das, learned counsel for the petitioner at this juncture brought to the notice of this Court that in obedience to the Order dated 10.01.2023, he filed Certificate issued by the manufacturer/supplier-M/s. BCH Electric Limited forming part of an Affidavit dated 26.06.2023 sworn to by Sri Arbinda Patra, Managing Partner of M/s. Corporate Engineers and Associates, Authorised dealer of said Company. The learned counsel submitted that said Company having expertise in Switchgear and Low Voltage Panel manufacturing, certified that the commodities in question are made exclusively for Centrifugal, Monoblock and Submersible pump and pump sets for handling water. The veracity of such certificate having not been questioned by Sri Sunil Mishra, learned Standing Counsel for the Commercial Tax & Goods and Services Tax Organisation, the dispute set up by the Assessing Authority is to be resolved in favour of the Assessee-dealer.
7.1. Though this Court granted opportunity to Sri Sunil Mishra, learned Standing Counsel, for filing of objection, he did not wish to furnish objection to the aforesaid Affidavit dated 26.06.2023, but insisted for proceeding with the hearing of the matter basing on the material available on the record. Sri Sunil Mishra, learned Standing Counsel appearing for the opposite party fervently prayed for remitting the matter to the Assessing Authority for fresh adjudication on the issue raised in the present case inasmuch as none of the authorities below has examined the issue in its proper perspective. To a specific query, Sri Sunil Mishra submitted that no (further) material was placed before the learned Odisha Sales Tax Tribunal to substantiate the issue raised by the Revenue in the second appeal.
8. Having heard counsel for both the sides, this Court proceeds to dispose of the matter on merit basing on the material available on record.
ENTRIES IN THE SCHEDULE AND TAX RATES:
9. Entries in the Schedule appended to the OVAT Act, so far as relevant, runs thus:
