IN THE HONBLE HIGH COURT OF ORISSA : CUTTACK.

W.P. (C) No. __________ of 2 0 1 5.

Code No. 170403

In the matter of:

An

application

under

Articles

226

and

227

of

the

Constitution of India, 1950;

AND
In the matter of:
An application under the Central Sales Tax Act, 1956 and
rules framed thereunder;

AND
In the matter of:
An application challenging the assessment order dated
20.02.2015 passed by the Joint Commissioner of Sales
Tax, Sundargarh Range, Rourkela under Rule 12(3) of the
Central Sales Tax (Odisha) Rules, 1957 for the period from
01.04.2011 to 31.03.2013;
AND
In the matter of:

An application assailing the sanctity and legality of audit

visit

report

purported

to

have

been

prepared

and

submitted by the Deputy Commissioner of Sales Tax,

Rourkela-II Circle, Panposh under Rule 10 of the Central
Sales Tax (Odisha) Rules, 1957 pursuant to which the
impugned assessment order dated 20.02.2015 was passed
by the Joint Commissioner of Sales Tax, Sundargarh
Range, Rourkela under Section 12(3) of the said Rules for
the period from 01.04.2011 to 31.03.2013;
AND
In the matter of:
An

application with

prayer

to

hold

imposition

of

mechanical penalty invoking exercise of power under

Section 12(3) of the Central Sales Tax (Odisha) Rules,
1957 without issue of notice and/or calling for show-cause;
AND
In the matter of:
M/S. SIEMENS LTD.
A company registered under the Companies Act, 1956
having its registered office at 130, Pandurang Budhkar
Marg, Worli, Mumbai in the state of Maharastra and a
Branch Office at Qr. No. C/320, Koelnagar,

Rourkela

769 014, District: Sundargarh in the State of Odisha

bearing TIN No.21922000069 represented by Power of

Attorney Sri Prithanu Bhattacharjee, Manager Indirect Tax
........ Petitioner
Versus
1. STATE

OF

ODISHA

represented through its

Secretary, Finance
Odisha Secretariat
Bhubaneswar
District : Khurda, Odisha.
2. COMMISSIONER

OF

SALES TAX, ODISHA

having his office

at: Banijyakar Bhawan
P.O.: Buxibazar
City & District: Cuttack 753 001, Odisha.
3. JOINT COMMISSIONER

OF

SALES TAX

Sundargarh Range, Rourkela

At/po-Uditnagar, Rourkela, Dist-Sundargarh, Odisha.
4. DEPUTY COMMISSIONER

OF

SALES TAX

Rourkela-II Circle,
At/po-Uditnagar, Rourkela, Dist-Sundargarh, Odisha.
...
To

Opposite parties.

THE

HONBLE SHRI PRADIP KUMAR MOHANTY, LL.B.,

THE ACTING CHIEF JUSTICE OF ORISSA HIGH COURT AND HIS
COMPANION JUSTICES OF THE SAID HONBLE COURT.
Humble petition of the
petitioner above named;
MOST

1.

RESPECTFULLY SHEWETH:

The petitioner in this writ petition challenges

(a) the assessment order dated 20.02.2015 passed under
Rule 12 of the Central Sales Tax (Odisha) Rules, 1957 [in
short CST (O) Rules] by the Joint Commissioner of Sales
Tax, Sundargarh Range, Rourkela-opposite party No.3 as
the same is violative of principles of natural justice,
arbitrary, illegal and tainted with perverse finding of fact.
The petitioner asserts that the assessment order is
liable to be quashed as it is barred by limitation, and also
against the provisions of the C.S.T. (O) Rules.
It is salient feature of the principles of natural justice
that a person should not be judge of his own cause. The
assessment being undertaken and completed by passing
order by an authority who was involved in the audit
process, the entire proceeding is vitiated in view of ratio
laid down in Tata Sponge Iron Ltd. Vrs. Commissioner of
Sales Tax, (2012) 49 VST 33 (Ori) and ABB Ltd. Vrs. State
of Odisha, (2015) 77 VST 124 (Ori).

(Original copy of the assessment order is filed

herewith and marked as Annexure-1.)
(b)

The order of the assessment is also against the

provisions of the Central Sales Tax Act, 1956 and rules

made thereunder as it has rejected the petitioners claims
of exemption of second sales.
Subsequent sales made under section 6(2) of the
C.S.T. Act on vague reasonings thereby violating the
provisions of the article 286 of the Constitution of India.
(c)

The order of assessment is also illegal because the

assessing authority has sought to reject the petitioners

sale under section 6(2) of the C.S.T. Act, 1956 without
giving a proper notice of show cause to the petitioner
before rejecting the same, and by first adding the turnover
of said subsequent sale to the turnover under the OVAT
Act. The assessing authority has also traversed beyond the
contents of the audit Visit Report (AVR).
The order of the assessment is therefore arbitrary, illegal
and bad in law and against the provisions contained in the
Central Sales Tax act, 1956, and against the provisions contained
in Articles 19(1)(g) and 286 of the Constitution of India and
liable to be quashed.

2.

The petitioner prays for an order for quashing the order of assessment
in Annexure-1.

3.

The petitioner is a Company registered under the Companies Act, 1956

having it's Registered Office at Pandurang Budhkar Marg, Worli,
Mumbai in the State of Maharastra and has a

branch office at

C/320,Koel Nagar, Rourkela in the district of Sundargarh in the State of

Odisha. That most of the shareholders of the petitioner company are
citizens of India and carry on the business of manufacture and supply
of Electrical Equipments etc. throughout the country. The cause of
action arises within the territorial jurisdiction of this Hon'ble Court.

4.

The facts leading to the present Writ Application inter alia are:

(a)

The

petitioner

is

Company

registered

under

the

Companies Act, 1956 having it's Registered Office at Worli,

Mumbai in the State of Maharashtra and a local office at
Rourkela in the district of Sundargarh in the State of Odisha.

(b)

The petitioner carries on the business of manufacture, sale

and supply of Electrical Equipments and Electrical Goods and

also carries on the business of Works Contracts for erecting the
said Equipments and Goods at Customer's Sites throughout the
State of Odisha. For the aforesaid transactions the petitioner is
registered as a "Dealer" under the Odisha Value Added Tax
Act,2004 and under the Central Sales Tax (Registration &
Turnover) Rules, 1957 with the Deputy Commissioner of Sales

Tax (Hereinafter for short mentioned as DCST) O.P.No.4

bearing TIN 21922000069.The petitioner has been filing its
returns regularly and paying the admitted taxes thereon. That
for the present impugned period being 1.4.2011 to 31.3.2013,
the petitioner has executed contracts with Tata Steel Ltd,
Bhushan Steel Ltd, Indian oil Corporation Ltd, Praxaair India Pvt
Ltd, Mcnally Bharat Engg Co. Ltd., Thermax Ltd., OCL Iron &
Steel Ltd., Steel Authority of India Ltd., Bhushan Energy Ltd.,
Bhushan Power & Steel Ltd., Essar Projects (India) Ltd., Hindalco
industries Ltd., Rungta Mines Ltd., Utkal Alumina International
Ltd., Jindal Stainless Ltd., Vedanta Aluminium Ltd., BOC India
Ltd., Bhilai Engineering Corporation Ltd., BRG Iron and Steel,
Concast Steel & Power Ltd., Reliable Hitech Infrastructure Pvt
Ltd., Sterlite Energy Ltd., Ultratech Cement Ltd., Larsen & Toubro
Ltd.,

Hindustan

Coca-Cola

Beverages,

Thermax

Ltd.,

Tata

Projects Ltd., (hereinafter for short mentioned as CUSTOMERS

for design, engineering, manufacture, procurement and supply of
electrical equipments and for erecting the said equipments at
customer's sites in Odisha. ( A photocopy of the contract
between the petitioner and the Vedanta Aluminium Ltd. is
enclosed herewith and marked as Annexure- 2).
(c)That under the aforesaid contracts, the petitioner was to design
the equipments, manufacture and supply Electrical Equipments
either by itself or through Sub-Vendors approved by the
CUSTOMERS. Under the said contract the Equipments are to be

designed and engineering done and after the same are done,
they are to be approved by the CUSTOMERS and after the
designs are approved, they would be manufactured either in the
petitioner's works situated in various places throughout the
country or through approved Sub-Vendors of the aforesaid
CUSTOMERS.
same

are

That after the said goods are manufactured the

tested

by

the

CUSTOMERS

Works/Sub-Vendor's Works and

at

the Petitioner's

after the CUSTOMERS are

satisfied that the said goods are manufactured in pursuance to

the

specifications

despatch

mentioned

clearance

and

the

in

the

contracts,

equipments

they give

are thereafter

despatched to the CUSTOMERS in the State of Odisha. The

Consignor mentioned in the Lorry Receipt is the Sub-Vendor or
the petitioner situated in the Non-Odisha States and the
Consignee is the CUSTOMERS situated inside the State of
Odisha.
(d) The invoices are raised by the Sub-Vendors on SIEMENS i.e.
the petitioner and thereafter the petitioner raises an invoice on
the aforesaid CUSTOMERS. The first sale is between the SubVendor and SIEMENS in the Non-Odisha States covered under
the provisions of Section 3(a) of the Central Sales Tax Act and
relevant Sales Tax has been paid by the Sub-Vendor at a
concessional rate in the State from where the goods have
commenced their Inter-State journey. That since these are
contracted goods i.e. specific, ascertained and tailor-made good

as per specifications mentioned in the pre-existing contract

between the parties and moved from the NON-ODISHA State
into the State of Odisha, they are clearly Inter-State Sales under
the provisions of Section 3(a) of the Central Sales Tax Act, 1957
and the State from where the goods commenced their InterState journey will be the appropriate State to levy and collect
the Central Sales Tax and therefore the Central Sales Tax at a
concessional rate

is rightly paid in the State from where the

goods commenced their Inter-State journey. That while the

goods are in movement from the Non-Odisha State into the
State of Odisha, the petitioner i.e. the first purchaser sells the
goods by transfer of documents of title to the goods i.e. the lorry
receipt and delivery challan, and raises an invoice on the
ultimate purchaser i.e. the

CUSTOMERS

and the said sale is

a "subsequent sale" and therefore the second sale is exempted

from being taxed further under the provisions of Section 6(2) of
the Central Sales Tax Act, 1956. The invoices raised by the
petitioner on the ultimate purchaser i.e. the CUSTOMERS is as
per the rates or values of specific goods as detailed out in the
pre-existing contracts between the parties because of the fact
that specific/contracted goods have a specific/contracted price
for it. The petitioner will not be able to charge a higher price
other than what is mentioned in the contract.

The goods enter

into the State of Odisha in the Way Bill of the ultimate purchaser
i.e.

the

CUSTOMERS

and

the

aforesaid

ultimate

10

purchaser/CUSTOMERS pays the Entry Tax inside the State of

Odisha on the said goods for causing entry of goods into the
State of Odisha and the said Entry Tax has been rightly levied
and collected by the State of Odisha from the CUSTOMERS.
(e) It can never be said that the equipments manufactured by
the approved Sub-Vendor/Sub-Supplier of SIEMENS and the
items supplied by SIEMENS to the CUSTOMERS are two different
items because if that be so and if the goods are not a part of the
contracted goods, then the CUSTOMERS will not accept the same
and will neither make payment of the price and neither issue a
C Form to SIEMENS and therefore in other words the said
equipments
pursuance

supplied
to

are

the

specific goods manufactured

in

pre-existing contracts between the

CUSTOMERS and SIEMENS and have been supplied by the SubVendors to

SIEMENS and thereafter by SIEMENS to the

CUSTOMERS and the CUSTOMERS have made a payment of the

invoice and issued 'C Form for the invoice value on SIEMENS.
SIEMENS accordingly has issued a C Form to the Sub-Vendor
and the Sub-Vendor to complete the transaction and for paying
concessional rate of Central Sales Tax has issued a 'E-l' Form to
SIEMENS. (Photocopy of two copies of all documents relating to
the sales are enclosed herewith marked as Annexure -3
Series).
(f) The petitioner submits that the contract between the
Petitioner and the CUSTOMERS in the present case mentions

11

only the broad headings of the equipments to be supplied. It

does not mention each and every small item of equipments that
is to be supplied. Therefore the invoice raised by the Sub-Vendor
of the customer is a sub-heading item and in the invoices raised
by the petitioner on the CUSTOMERS, the description of the item
given is the broad heading item which finds place in the contract.
Had it been some other goods which were supplied by the SubVendor of the CUSTOMERS and the goods supplied by the
petitioner

on

the

CUSTOMERS

were

different,

then

the

CUSTOMERS would not have accepted or received such goods

and would not have paid the price of the goods to the petitioner,
nor given a 'C declaration form giving the invoice value of the
petitioner's invoice on the CUSTOMERS. There is also sufficient
proof that the CUSTOMERS have actually received and paid for a
specific tailor-made goods as per the specifications mentioned in
the contract because of the fact that the CUSTOMERS have
brought the said goods on its own Way Bill and also paid Entry
Tax on the said goods to the State of Odisha and which Entry
Tax, the State of Odisha has duly received and accepted.
(g) The petitioner hereby submits that as far as subsequent
sales u/s. 6(2) of the Central Sales Tax Act is concerned, the
only element to be seen is, as to whether there was a preexisting contract, whether specific or tailor-made goods have
moved from one State to another in pursuance to the preexisting contract and whether there is a subsequent sale from

12

the ultimate seller to the ultimate buyer by transfer of

documents of title to the goods during the said movement.
Once the aforesaid three conditions are fulfilled, the transaction
will be a sale under section 3(a) of the Central Sales Tax Act and
thereafter a subsequent sale under Section 6(2) of the Central
Sales Tax Act and exempt from taxation under Section 6(2) of
the Central Sales Tax Act. It is immaterial as to whether it is a
belated transaction i.e. the time gap between the first invoice
i.e. the invoice between the Sub-Vendor and SIEMENS and the
second invoice i.e. the invoice between the petitioner and the
CUSTOMERS,

has a long time gap or there is an overlapping of

those invoices in different assessment years and such vague

reasonings cannot be taken into account for rejecting a sale u/s.
6(2) of the Central Sales Tax Act.
5.

That the tax audit under Rule 10 of the CST (O) Rules was undertaken
by the DCST Opp. Party No.4 in pursuance to a direction given by the
assessing authority being the JCST Opp. Party No.3. While the audit
was going on the DCST who was conducting audit had requested the
petitioner to submit the certain documents which the petitioner
produced and filed. Other than the aforesaid documents, the DCST
never asked

for the

contract between the petitioner and the

CUSTOMERS. The DCST has therefore stated about non-submission of

declaration forms. (A photo copy of the HAZIRA is enclosed herewith
and marked as Annexure-4 Series)

13

6.

Audit visit report communicated to the petitioner along with the notice
in Form IV for assessment as a result of audit is witness to the fact
that the AVR was not submitted in terms of Rule 10(3) of the C.S.T.
(O) Rules. It has been laid down by this Honble Court in Jindal
Stainless Ltd. Vrs. State of Odisha, (2012) 54 VST 1 (Ori) that if AVR is
not submitted within the period stipulated under Section 41(4), the
assessment under Section 42 is not sustainable in the eye of law. AVR
being taken as the foundation for audit assessment under Rule 12(3)
of the CST (O) Rules, the petitioner reasonably believes that the AVR
had not been submitted within the period stipulated under Rule 10(3).
( A photocopy of the AVR in Form III AA as communicated to the
petitioner along with notice in Form IV for assessment under Rule
12(3) of the CST (O) Rules is enclosed herewith as Annexure-5)

7.

A glance at the notice in Form IV in Annexure-5 reveals that the said

notice was issued on 28.04.2014 fixing date of appearance and
production of records on 30.05.2014. It is asserted by the petitioner
that the said notice having been tendered on the Advocate, on
30.04.2014 the notice itself is invalid being served on improper
person. By the date the notice was served on the advocate, the
company did not appoint him to plead on its behalf. Therefore, in view
of ratio laid down in Manekia Vrs. Commissioner of Sales Tax, (1977)
39 STC 426 (Bom) and Srikanth Trading Co. Vrs. State of Andhra
Pradesh, (1998) 109 STC 590 (AP) that service of notice on person not
authorised is invalid.

14

8.

That as the authority failed to adhere to statutory requirement

contained in Rule 12(3)(c) of the CST (O) Rules, the assessment
proceeding is vitiated. It has been stipulated under the said rule that
the assessing authority was duty bound to specify thirty days for
production of relevant books of account and documents. The words
not less than employed in Rule 12(3)(c) of the CST (O) Rules make it
clear that the assessing authority at any rate is not authorized to
reduce the period of thirty days. Since the authority had served the
notice the Advocate on 30.04.2014 (who was not authorized to act on
behalf of the company-petitioner as on 30.04.2014) directing the
assessee-petitioner to appear and produce the books of account and
documents on 30.05.2014, he has clearly transgressed his jurisdiction
in proceeding with the assessment. The notice could have been served
on the petitioners branch office at Rourkela for reasons best known to
the JCST the same was served on the advocate. In terms of decision
rendered by this Honble Court in the case of Patitapaban Bastralaya
Vrs. Sales Tax Officer, 2015 (I) OLR 183 and Delhi Footwear Vrs. Sales
Tax Officer, (2015) 77 VST 146 (Ori), the assessment order is liable to
be quashed.

9.

That the JCST assumed jurisdiction in utter violation of principles of

natural justice. Reading of opening paragraph of the AVR in Form VAT303 [which forms part of writ application relating to challenge made
against assessment order passed under the OVAT Act] would reveal
the following:

15

and Letter No.8568/CT, dated 26.03.2013 and

subsequently

communicated

by

the

JCCT,

Sundargarh Range, Rourkela communicated vide

Letter No.1479(2)/CT, dated 31.05.2013.
Rule 10 of the CST (O) Rules read with Section 41(2) of
the OVAT Act speaks that after identification of dealers for tax
audit, the Commissioner is required to direct tax audit in respect
of such dealers to be conducted. The Commissioner, in exercise
of power conferred on him under Section 5 of the OVAT Act, vide
Notification

bearing

No.

6780-V(VI)-53/2005-CT.,

dated

06.04.2009 delegated his power under Section 41(2) to the Joint

Commissioner of Sales Tax. (Photocopy of the AVR under the
OVAT Act is enclosed herewith marked as Annexure-6)
10.

The opening paragraph of the AVR as quoted above read with

the aforesaid notification shows that the Joint Commissioner of
Sales Tax has exercised his power under Section 41(2) of the
OVAT Act and directed the audit team to conduct the tax audit of
the petitioner-company. Since the Joint Commissioner of Sales
Tax had been involved in the process of audit, in view of
decisions of this Honble Court in Tata Sponge Iron Ltd. Vrs.
Commissioner of Sales Tax, (2012) 49 VST 33 (Ori) and ABB
Ltd. Vrs. State of Odisha, (2015) 77 VST 124 (Ori), the said
officer-opposite party No.3 was not competent to take up and
conclude the assessment order under Section 42.

16

11.

That the petitioner asserts that even though there was no categorical
observation or allegation made in the AVR as regards transactions
effected by the petitioner in terms of Section 6(2) of the Central Sales
Tax Act, 1956 [CST Act for brevity], the Joint Commissioner of Sales
Tax with an oblique bent of mind to disallow the entire transaction
covered under Section 3(b) read with Section 6(2) of the CST Act and
raise huge astronomical demand traversed beyond the terms of AVR.
At this juncture it may be necessary to have a glance at
paragraph 15 of the AVR in Form VAT-303 which reads as
follows:
In addition to this the dealer failed to furnish the
required Form E-I certificates at a time in support of
the sale effected under Section 6(2) of the CST act
which may be treated as VAT sales
12.

In the AVR in Form IIIAA no allegation has been made

against the claim of exemption under Section 6(2) except

making an observation that the dealer partly could not furnish E1 Forms.
13.
It is humbly submitted that the suggestion of the audit
team is without comprehension either of the law or of the fact.
Conceding for the sake of argument, if a transaction of sale
effected from outside the State of Odisha is not disputed and
pursuant to agreement with the CUSTOMERS with the present
petitioner is not in dispute, the transaction disclosed as falling
within the scope of Section 6(2) of the CST Act on its rejection

17

can only be comprehended within the ken of Section 3(a) of the

CST Act.
14.
The dealer-petitioner also in its explanation clearly stated
which was recorded by the assessing authority in the following
words [see assessment order under the OVAT Act]:
In regard to above allegation, it is explained that
non-submission of E-I certificate relates to tax
exempted sale under Section 6(2) of the CST Act
wherein the goods have been dispatched directly
from outside the State to the ultimate buyers of
Odisha State on the strength of the way bill in Form
VAT-402

issued

by

the

purchaser.

Hence,

the

transaction being in course of inter-State trade or

commerce, taxing of the same under the State Act in
the hands of the company is illegal and arbitrary.
15.

The dealer-company as regards transactions covering

Section 6(2) of the CST Act explained and placed all relevant
materials to show that the vendors of the petitioner commenced
movement of the goods required to be supplied to the
CUSTOMERS [which movement triggered by virtue of agreement
between the CUSTOMERS and the petitioner-company] which is
first inter-State sale falling within Section 3(a) of the CST Act
and thereafter during such movement second inter-State sale
was effected by the petitioner to the contractee by way of
endorsement and the way bills were issued by the contractees

18

for transportation of the goods moved from outside the State of

Odisha to its place of business. These documents, even though
without any ambiguity, led to show that the transactions in
question very well fall within scope of Section 6(2), the Joint
Commissioner of Sales Tax, opposite party No.3 acted in
complete defiance of law and being swayed away by the
suggestion of his subordinate officers made in AVR, held that the
transactions would be exigible to sales tax under the OVAT Act.
The conclusion arrived at by the opposite party No.3 is
fallacious and irrational particularly when it is not disputed that
the waybills were given by the CUSTOMERS for taking delivery at
their end.
16.

That the petitioner after entering into agreement(s) with CUSTOMERS

placed purchase orders on different vendors outside the State of
Odisha and instructed them to dispatch the goods directly to the above
CUSTOMERS who would furnish way bills. At paragraph 5, page 19 of
the assessment order under the OVAT Act it has been observed as
follows:
All lorry receipts meant for loading of goods and
commencement of 1st inter-State movement were
issued for direct delivery of goods at the work site of
the ultimate purchaser inside the State of Odisha in
the account of the instant dealer and there was no
endorsement made by the buyer i.e. instant dealer

19

on the L.R. transferring title to goods in favour of

ultimate purchaser.
17.

The assessing authority was under the misconception that

transfer of document of title can only be by endorsement in lorry

receipt. This conclusion would be contrary to the provisions of
the Sale of Goods Act. When the finding is that the delivery
inside the State of Odisha would be taken at the site of the
ultimate purchaser, there is no scope for entertaining any doubt
that the entire transaction is inter-State sale. The very same
goods while being in transit were diverted to be taken into the
mass of the goods of the CUSTOMERS. The fallacy in finding of
fact is apparent when the following reasoning of the assessing
authority is read page 16 para (vii) of the assessment order
under the OVAT Act)
TO QUOTE
Verification of documents reveals that the dealercompany has purchased goods from outside the
State on its own account, transported the same
into the State of Odisha as its own goods without
any

change

of

ownership

or

change

in

the

documents of title to goods and has sold the same

to different customer inside the State of Odisha
acting as an agent or dealer and principal to the
buyer inside the State. Hence, being an agent like

20

factor or pakka adatiya or dealer between the

outside seller and ultimate purchaser, it is liable to
pay VAT on the said sale of goods.
UNQUOTE.
18.

Though the assessing authority found that the dealer-petitioner

was agent, and he did not dispute the movement of goods from
outside the State of Odisha and accepted that CUSTOMERS have
furnished waybills for movement of goods directly to their
premises for taking delivery, the opposite party No.3 failed to
appreciate the fact that the inter-State journey of the goods
could only be terminated in the premises of the CUSTOMERS.
The assessing authority fell in error of law by levying tax under
the OVAT Act on these transactions.

19.

That since no allegation was contained in the AVR with regard to

suggestion to disallow transactions covered under Section 6(2) of the
CST Act, the assessing authority unilaterally without calling for any
show-cause from the petitioner should not have jumped to the
conclusion and rejected the claim of the petitioner. The assessing
authority could not have proceeded to record finding and examine
such fact which was not contained in the AVR in view of principle
stated in Bhushan Power & Steel Ltd. Vrs. State of Odisha, (2012) 47
VST 466 (Ori).

20.

The notice for assessment contained only AVR allegations which were
explained by the dealer-petitioner to the assessing authority. The

21

assessing authority could not take up and decide the issue which was
not put to the notice of the petitioner. Nowhere in the assessment
order the reason for rejection of claim of sale under Section 6(2) of the
CST Act has been stated by the assessing authority. There has been
blatant infringement of natural justice while raising huge arbitrary and
whimsical demand.
21.

That it is humbly submitted that the assessing authority proceeded on

presumptions and conjectures without bringing on record analysis of
each and every transaction. The assessing authority has accepted the
position that the name of place located outside the State from which
goods are consigned and the final delivery address of the last
purchaser inside the State of Odisha are mentioned on the lorry
receipt (see page 19 of assessment order under the OVAT Act). This is
clear indicative of the fact that the transactions are inter-State in
nature. Even if the transactions are held to be out of the purview of
Section 3(b), the same would at best fall within the scope of Section
3(a) of the CST Act, but nevertheless would be encompassed within
the OVAT Act.

22.

That the determination of tax liability under the OVAT Act vis--vis the
transactions disclosed under Section 3(b) read with Section 6(2) of the
CST Act shows that the assessing authority committed grave error of
procedure leading to infer that he was committed to tax the
transactions under the local sales tax law. At page 6 of assessment
order passed under the CST Act it is stated as follows:

22

The 2nd and 3rd allegation made in the AVR having

been dealt in separately and discussed in detail in
the assessment order passed today under the OVAT
Act and OET Act, there is no need to discuss the
same again in this order
23.

It may be pointed out from the assessment order under

the CST Act that allegation Nos.2 and 3 are that out of claimed
transactions under the purview of Section 6(2), the petitioner
could not furnish certain certificates in E-I and transactions
relating to McNally Bharat disclosed under Section 6(2). The
allegations do not contain that total rejection of claim of
exemption under Section 3(b) read with Section 6(2) of the CST
Act.
24.

The

observation

of

the

assessing

authority

in

the

assessment order under the CST Act indicates that he took the
view to add the turnover representing transactions disclosed
under Section 3(b) read with Section 6(2) of the CST Act in the
assessment under the OVAT Act. In other words, the assessing
authority had passed order of assessment under the OVAT Act
first by assessing the tax liability in respect of transactions
shown under Section 3(b) read with Section 6(2) of the CST Act.
Therefore, it is urged that prior to rejection of transactions
falling within the scope of Section 3(b) read with Section 6(2) of
the CST Act, the assessing authority could not have taken the
said turnover into the assessment under the OVAT Act.

23

25.

This fact is amply clear from the orders dated 17.01.2015 and
20.02.2015 maintained in the order-sheet. The following orders
are passed on the aforesaid two dates:
17.01.2015:
The learned advocate of the dealer company appeared today,
filed hazira, produced declaration forms in F and EI parts, and
stated that they have not received the balance declaration in
Form C and EI from the purchaser and sellers respectively till
date. It is also requested to conclude the assessment proceeding
on the basis of documents produced and statutory declaration
already furnished. Accoreingly, the cases were heard. It is
admitted that they have no more explanation to offer other than
those explained in the written submission. It is also admitted
that no books of accounts to record expenditure incurred on
account of labour and service charges manufactured for which
they have deducted the amount towards labour and service
charges following the percentage fixed as per appendix to Rule
6(e) of OVAT Rules. Put up for detail study and passing of
assessment order under the OVAT Act, CST Act and OET
Act.
Sd/17.01.2015
20.02.2015:
Called for the records, gone through the AVR submitted by the
DCST, Audit, RKL-Ii Circle under OVAT Act, OET Act and CST Act.
Examined the written submission submitted by the learned
advocate of the dealer company explaining the discrepancies
pointed out in the AVRs. The documents submitted at the time of

24

audit and at the stage of hearing were examined thoroughly. The

declaration forms in EI and EII worth Rs.81,51,86,787/- and C
form covering transaction worty Rs.126,07,54,920.00 and F
Forms for Rs.3,77,37,614.00 furnished in original till 17.01.2015
were examined. The dealer company failed to furnish EI and EII
declaration

forms

Rs.235,16,38,408/-,

covering
C

form

transaction

covering

transaction

worth
worth

Rs.288,94,73,539/- and F Form covering transaction worth

Rs.12,14,18,185.00, in original for the period under audit,
despite

availing

adequate

opportunities.

The

documents

produced in support of claim of exemption under Section

6(2) of CST Act were verified and it was found that the
documents of title to goods in each transaction had not
been transferred during the movement of goods from one
State to another. Close scrutiny further revealed that the
dealer company after taking delivery of the goods from
the carriers inside the State of Odisha had forwarded the
LRs, inter-State invoices, delivery notes to the ultimate
purchasers inside the State of Odisha. The details in this
regard have been discussed in the assessement orders
passed separately under the OVAT Act, OET Act and CST
Act. The dealer company has also failed to furnish declaration
Form F in support of claim of dispatch of goods worth
Rs.12,14,18,185/- to its branches located outside the State. The
dealer company admitted to have not maintained books of

25

accounts to record expenditure incurred towards labour and

service charges in regard to execution of civil works. Considering
all the aspects assessment order under the OVAT Act, OET Act
and CST Act passed today raising demand amounting to
Rs.180,71,64,744/-, Rs.21,12,43,767/- and Rs.5,26,05,784/respectively. Issue assessment orders and demand notices under
the above Acts.
Sd/-

26.

20.02.2015
[Emphasis laid on the bold letters]
That while the former order dated 17.01.2015 would

indicate that the assessing officer reserved the matter for further
study, the latter order dated 20.02,2015 shows that jumping to
the conclusion by rejecting the transactions claimed exempted
under Section 3(b) read with Section 6(2) of the CST Act. It is
apparent from both the orders quoted above would show that
after

examining

the

documents

produced

by

the

dealer-

petitioner, the assessing officer formed an opinion to reject the

claim of the petitioner under Section 3(b) read with Section
6(2).

The

assessing

authority

has

rejected

the

claim

of

exemption under Section 3(b) read with Section 6(2) without

affording any opportunity after 17.01.2015.
27.
Thus, the petitioner had had no opportunity to read the
mind of the assessing authority to rebut and/or explain before
him. The view taken by the assessing authority to reject the
transactions under the CST Act and add the same to the OVAT
Act was behind the back of the petitioner. At this juncture, the

26

petitioner seeks to rely on the principle stated by this Honble

Court in the context of rejection of transactions under Section
3(b) read with Section 6(2) of the CST Act and addition of the
said transactions under the OVAT Act in Siemens Ltd. Vrs. State
of

Odisha,

W.P.(C)

No.10467

of

2004,

disposed

of

on

23.11.2004.
28.

That out of the aforesaid contracts, the Joint Commissioner of Sales

Tax( hereinafter for short mentioned as JCST), O.P.No.3 in his order
of assessment passed under the Central Sales Tax Act, has taken into
account the contracts between the petitioner and the CUSTOMERS. He
has not dealt with any other particular contract between the petitioner
and the CUSTOMERS. The JCST in his order of has given reasonings for
rejecting the claims of the turnover of sales under Section 6(2) of the
Central Sales Tax Act made by the petitioner to its CUSTOMERS and
has not given any reasonings as far as the sales under Section 6(2) of
the Central Sales Tax Act made by the petitioner to the other aforesaid
CUSTOMERS, drawing an inference that the contractual clauses of the
contract between SIEMENS and all its CUSTOMERS are all identical.
However the admitted fact is that the Assessing Authority has
accepted the first sale under section 3(a) of the Central Sales Tax Act
and has also accepted that the goods have moved in pursuance to preexisting contracts from one State to another i.e. from a NON-ODISHA
State into the STATE OF ODISHA.

27

29.

That the assessing authority should have also gone into each and
every contract between the petitioner and its CUSTOMERS and should
have arrived at specific findings in respect of each and every contract
instead of generalizing the issue by combing all the contracts. The
JCST had never directed for production of all the contracts between the
petitioner and its CUSTOMERS, but had requested the petitioner to
submit copies of three to four contracts which the petitioner filed.
(Photocopy of Haziras are enclosed herewith marked as Annexure-7).
The same is against the view laid down by the Honble Court in the
case of Bhushan Steel and Strips Ltd. Vs State of Orissa & Others.
(Orders dated 06.03.2007 and 30.06.2009 in W.P. (C) No.2442 of
2007).

30.

That it is humbly submitted that Section 6(2) of the CST Act provides
that sales subsequent to an inter-State sale is exempted from being
levied with tax. The said sales should be supported by transfer of
documents of title to the goods during the movement. Section 2(4) of
the Sale of Goods Act permits transfer of goods by endorsement or
delivery of documents of title. The documents of title of goods can be
transferred by mere delivery or by endorsement on document. Section
6(2) provides that in order to claim the exemption there under
certificate in the prescribed form was required to be obtained from the
registered dealer. It is not disputed or denied by the assessing
authority that in most of the transactions claimed to be covered under

28

Section 3(b) read with Section 6(2), there existed required certificates.
In the present case, all the conditions for valid transit sale is fulfilled
by the petitioner-company. The petitioner-company has also produced
the required declaration certificates in respect of most of the
transactions before the assessing authority during the course of audit
as well as assessment. The denial of benefit without analyzing the fact
and repercussion that the registered dealer situated outside the State
had furnished details of transactions to their respective assessing
authorities claiming the same to be falling under Section 3(b) read
with Section 6(2) of the CST Act. In the similar way, the CUSTOMERS
(situated within the State of Odisha) have disclosed the transactions in
their respective returns. The State of Odisha cannot be benefited
doubly by the same transactions.

31.

That the impugned assessment order passed by the opposite party

No.3 levying tax and huge penalty under the OVAT Act after rejecting
the claim of in-transit sale under the CST Act suffers from want of
jurisdiction in applying the test of passing of property. The assumption
of jurisdiction by the assessing authority under the OVAT Act by
deleting the transactions from the CST Act is wholly irrelevant and
contrary to mandate of Article 286 of the Constitution of India read
with Section 4 of the CST Act.

32.

That the order of assessment is replica of other assessment order(s)

passed in respect of other dealers-assessees. The facts of other
dealers were not akin to that of the present transactions of the

29

petitioner. Therefore, such copied assessment should be quashed as

non-est in the eye of law.
33.

That the penal provision contained in Rule 12(3) of the CST (O) Rules
being confiscatory in nature, even though there was bona fide claim of
exemption under the CST Act, imposition of penalty without leaving
any discretion for the assessing authority to apply his mind to
particular fact situation offends Article 14 and infringes mandate of
Article 19(1)(g) of the Constitution of India.

34.

That when the opposite parties have not disputed the figures disclosed
in the returns and the said returns were accepted as self-assessed, it
is apparent that the department had been accepting the mode of
transactions and claim of exemption under Section 3(b) read with
Section 6(2) of the CST Act. Therefore, taking up assessment for a
period of two years and imposing penalty for the entire two years
would militate against the basic tenets of law, i.e., reasonableness,
rational application of mind and judicial approach. This Honble Court
may warrant interference with the offensive assessment order to
uphold the majesty of justice, equity and good conscience.

35.

That when the transactions were reflected in the returns furnished

under the provisions of the CST Act, there was no scope for imposition
of penalty under Section 42(5) of the OVAT Act. When there is dispute
as to the claim of benefit and nature of transactions and there is no
allegation of transactions being out of account, no penalty should have
been imposed mechanically. In this respect Sree Krishna Electricals

30

Vrs. State of Tamil Nadu, (2009) 23 VST 249 (SC) and Commissioner
of Central Excise & Customs Vrs. Aditya Alloys Limited, 2014 (I) ILR CUT- 401.
36.

That the order of assessment appears to have suffered from vice of

limitation as the same is not passed within the period stipulated under
Rule 12(3)(h) of the CST (O) Rules. Notice in Form IV having been
issued on 28.04.2014, the assessment order was required to be
passed within six months. The assessment order does not whisper as
to whether the assessing authority has invoked terms of proviso to
clause (h) of sub-rule (3) of Rule 12.

37.

That it is further humbly submitted that the action of authorityopposite party No.3 is arbitrary, irrational and cannot be held to be
tenable in the eye of law.

38.

That though alternative remedy is provided under Section 9 of the CST

Act read with Section 77 of the OVAT Act to challenge the assessment
order, since there has been violation of principles of natural justice and
the assessment order is barred by limitation, and that the assessing
authority has acted without jurisdiction, the petitioner has approached
this Honble Court by way of writ petition.

39.

That the petition is made bona fide.

31

PRAYER
It is therefore prayed that this Honble Court may graciously be
pleased to issue notice; after hearing both sides allow this
petition,
And issue writ of certiorari quashing the assessment order in
Annexure-1;
And issue writ of mandamus quashing the order of assessment
and demand notice in Annexure-1;
And for this act of kindness, the petitioner, as in duty bound,
shall ever pray.
CUTTACK
through

Date: 23.03.2015

By the petitioner

ADVOCATE