Orissa High Court
Case Details
ORISSA HIGH COURT : CUTTACK STREV No. 2 OF 2023 In the matter of an application under Section 80 of the Odisha Value Added Tax Act, 2004. --------------- M/s. Bharat Earth Movers Limited (BEML Ltd.) Bareipali, Sambalpur … -VERSUS- State of Odisha represented by the Commissioner of Sales Tax … Odisha, Cuttack Petitioner Opposite Party Counsel appeared for the parties: For the Petitioner : M/s. Chittaranjan Das, Ramesh Kumar Sahoo and Sidharth Parida, Advocates for the petitioner For the Opposite Party : Mr. Sunil Mishra, Standing Counsel (Commercial Tax and Tax and Goods Organisation). Services P R E S E N T: THE HONOURABLE DR. JUSTICE B.R. SARANGI AND THE HONOURABLE MR. JUSTICE MURAHARI SRI RAMAN Date of Hearing: 01.09.2023 :: Date of Judgment: 01.09.2023 STREV No.2 of 2023 Page 1 of 34 JUDGMENT MURAHARI SRI RAMAN, J.— THE CHALLENGE: Seeking revision of Order dated 01.11.2022 passed by the Odisha Sales Tax Tribunal in Second Appeal bearing No. 254 (VAT) of 2010-11 preferred by the petitioner- company 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/06/VAT/ACST (Asst)/SA/2007-08 in connection with Assessment framed under Section 42 of the Odisha Value Added Tax Act, 2004, 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 filed under Section 80: “I. Whether the constitution of Audit Team under Rule 43 of the OVAT Rules read with Section 41 of the OVAT Act, in absence of Assistant Commissioner, the Audit Visit Report out of such Audit Team and the consequential demand thereof is proper. correct and survive in the eye of the law, when the constitution of Audit Team is invalid one? II. Whether the Sales Tax Officer as reporting official and who prepares the Audit Visit Report, can approve his own report as the Head of the Audit Team and became a judge of his own cause? III. Whether, the goods under question i.e. plates, discs, angles, rings, washers, wire rods of iron and steel shall be classifiable under Entry Sl.No.68 of Part-II STREV No.2 of 2023 Page 2 of 34 of Schedule-B, subject to VAT @ 4% or classifiable under the residuary part i.e. Part-III of Schedule-B and subject to VAT @ 12.5 ? IV. Whether, credit notes raised in the OVAT regime (01.04.2005 to 30.11.2006) for the sales effected under OST regime (01.04.2003 to 31.03.2205), due to return of goods by purchasing dealers, shall be allowed as deduction under OVAT regime? V. Whether the appellant being a Public Sector Undertaking under the Ministry of Defence of Government of India and in absence of fulfilment of the conditions of Section 42(1), the order of Penalty under Section 42(5) is sustainable? VI. Whether the Order of Confirmation of Penalty by the Tribunal vide order dated 01.11.2022 equal to two times of tax assessed is correct when sub-section (5) of Section 42 of the OVAT Act has been amended for imposition of penalty equal to the amount of tax assessed with effect from 01.10.2015 ? VII. 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.” FACTS: 2. 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. STREV No.2 of 2023 Page 3 of 34 2.1. 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). 2.2. The dealer-company being selected under 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 in Form VAT-303 was submitted to the Assistant Commissioner of Sales Tax, Sambalpur Range, Sambalpur-Assessing Authority. 2.3. In obedience to the notice in Form VAT-306 issued by the Assessing Authority initiating audit assessment proceeding under Section 42 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. 2.4. The Assessing Authority appreciated the evidence with respect to trade discount vis-à-vis credit notes and allowed the claim of the petitioner to the extent of Rs.15,74,887.61, but disallowed credit notes for an amount of Rs.5,64,623.39. This apart, the claim of application of rate of tax @4% on the turnover STREV No.2 of 2023 Page 4 of 34 representing ring, plates and discs, angles, channels, wire rods and engine, etc. has been rejected on the ground that they are treated not to fall within the meaning of “capital goods” in view of Section 2(8) read with Schedule-D of the OVAT Act and accordingly, such turnover was levied with tax @ 12.5% as per Part-III of Schedule-B classifying the goods as “machinery spares”. The Assessing Authority raised the demand to the tune of Rs.59,23,943.59 comprising tax of Rs.19,41,405.43, interest Rs.99,727.00 under Section 34(1) for late payment of tax and Penalty of Rs.38,82,810.00 under Section 42(5). 2.5. In the appeal under Section 77 of the OVAT Act preferred by the company, the Additional Commissioner of Sales Tax, North Zone, Cuttack (“Appellate Authority”, for convenience) though did not interfere with the aspect of classification of commodity and with respect to imposition of penalty under Section 42(5), held that the imposition of interest @ 2% was not in conformity with provisions of the statute and recomputed quantum of interest. 2.6. Aggrieved, the petitioner carried the matter before the the Odisha Sales Tax Tribunal, Cuttack, in Second Appeal bearing No.254 (VAT) of 2010-11, which came to
Decision
be disposed of on 01.11.2022 with certain modifications in the first appellate order. STREV No.2 of 2023 Page 5 of 34 2.7. The learned Odisha Sales Tax Tribunal while considering the ground of the petitioner that plates, discs, angle, rings, washers and wire rods would fall within Entry 68 and nuts, bolts, screw and fastener within Entry 115 of Part-II of Schedule-B appended to the OVAT Act attracting rate of tax @ 4%, repelled such claim of the dealer by observing that instant dealer, deals in earth moving machineries and spares thereof, and thereby none of the goods is comprehended within the scope of entries in Part-II of Schedule-B. It has further been observed that the spares like angles, rings, washer and wire rods claimed to have fallen within ambit of Entry 68 of Part-II of Schedule-B would not attract levy of tax @ 4% in view of the fact that the petitioner is not a dealer in iron and steel goods. Further, machineries and spares, i.e., angles, rings, washer and wire rods do not fall within entries specified under Serial No.115 of Part-II of Schedule-B. 2.8. Referring to the decision of Hon’ble Supreme Court of India in the case of CIT Vrs. Kalinga Tubes Ltd., (1996) 101 STC 162 (SC) that where assessee follows mercantile system of accounting, the claim of deduction was to be confined to the relevant assessment year, the learned Odisha Sales Tax Tribunal held that since the transactions in respect of which the petitioner has issued credit notes to claim deductions related to the periods 2003-04 and 2004-05 when erstwhile Odisha STREV No.2 of 2023 Page 6 of 34 Sales Tax Act, 1947 was in vogue, the dealer is not entitled to claim any credit in respect of such sales. 2.9. On the question of imposition of penalty under Section 42(5) of the OVAT Act, relying on the ratio of State of Odisha Vrs. Chandrakanta Jayantilal, (2023) 108 GSTR 81 (Ori), held that no fallacy can be attached to the view expressed by the Appellate Authority in sustaining imposition of penalty by the Assessing Authority. 3. Still aggrieved, the petitioner has approached this Court by way of this present sales tax revision petition invoking provisions of Section 80 of the OVAT Act. 3.1. This Court on 23.02.2023 while entertaining the revision petition directed issue of notice to the opposite party. Since Sri Sunil Mishra, learned Standing Counsel (Commercial Tax and Goods and Services Tax Organisation) appeared on behalf of the opposite party and accepted notice, copy of revision petition was directed to be served on him. Accordingly matter was posted today for hearing of the matter. 3.2. Sri Chittaranjan Das, learned Advocate for the petitioner at the outset with his usual humility submitted that question of law No.(I) as posed herein above is squarely covered by the interpretation put forth 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 STREV No.2 of 2023 Page 7 of 34 that in such an eventuality, other questions of law need not be answered, as the entire proceeding for assessment under Section 42 of the OVAT Act gets vitiated. 3.3. On the consent of both the sides, the matter is taken up for final hearing. 3.4. 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. ARGUMENTS: 4. Sri Chittaranjan Das, learned Advocate for the petitioner having taken this Court to the provisions contained in 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, argued that the observation of the Appellate Authority to the effect that “Undisputedly the team consisted of STO and ASTO which was a valid team in accordance with Rule 43 of the OVAT Rules” is fallacious, infirm and contrary to said provision. 4.1. Sri Chittaranjan Das, learned counsel for the petitioner- company emphatically contended that such observation runs counter to what has been laid down in Daehsan Trading (India) Ltd. (supra). STREV No.2 of 2023 Page 8 of 34 4.2. Sri Chittaranjan Das, Advocate laid stress on the following ground as specifically taken before the learned Odisha Sales Tax Tribunal, Cuttack: “For that the Audit Visit Report submitted in VAT-303 is not maintainable for initiating assessment proceedings being inherently violative of the clear directives of the law. It is now submitted: THAT Rule 43 of the OVAT Rule prescribes that the audit u/s 41 of the OVAT Act shall be undertaken by a team that ‘may consist of one or more Assistant Commissioner, Sales Tax Officer and Assistant Sales Tax Officer as deemed fit by the commissioner’. It clearly means that the audit team may consist of personnel from three different designations consisting of at least one ACCT, one STO and one ASTO. However the Commissioner can exercise his discretion and can increase the number of personnel of a given designation from one to more than one. It is submitted that as the audit of the dealer was undertaken by a team formed without an Assistant Commissioner— which for the purpose of carrying out the audit, stands as an incomplete and therefore an invalid team. Should the law relating to formation of audit team for tax audit be construed in the fashion as has been done in the instant case, then any single officer of the three designations can two also cause audit without officers of other designations. the audit conducted and Audit Visit Report being prepared by an invalidly formed team should not have been treated as maintainable for initiating assessment.” therefore urged that is It 4.3. 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 Page 9 of 34 STREV No.2 of 2023 the duly constituted Audit Team as envisaged under Rule 43 of the OVAT Rules, on the basis of invalid Audit Visit Report, assessment proceeding as undertaken under Section 42 cannot withstand judicial scrutiny. 4.4. Under 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 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. 5. Sri Sunil Mishra, learned Standing Counsel appearing for the opposite party with his vehemence contended that the Audit Visit Report in Form VAT-303 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 STREV No.2 of 2023 Page 10 of 34 constitution of Audit Team was not formed as per Rule 43 of the OVAT Rules. 5.1. 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 the claim of the deductions on the score of issue of credit notes which related to prior to introduction of the OVAT Act, 2004 has been rightly rejected by all the fact-finding authorities including the learned Odisha Sales Tax Tribunal and with respect to classification of items in question which were claimed by the petitioner to be falling within scope of “iron and steel goods” has been elaborately discussed by the learned Tribunal to come to conclusion that the dealer is liable to be taxed @ 12.5% instead of 4%. He submitted that the imposition of penalty is in accordance with the view expressed in the decision of this Court in the case of Chandrakanta Jayantilal (supra). Under such premises, it is uncalled for to address the question of law No.(I), but it is warranted to address other questions of law. STATUTORY PROVISIONS: 6. For better comprehension of legal position so far as it is necessary to answer the question of law No.(I), provisions of Section 2, Section 41 of the OVAT Act, 2004, as it stood prior to its amendment by virtue of the STREV No.2 of 2023 Page 11 of 34 Odisha Value Added Tax (Amendment) Act, 2015, and Rule 43 of the OVAT Rules, as it existed prior to and post amendment of the Odisha Value Added Tax (Amendment) Rules, 2009, are reproduced hereunder: Section 2 of the OVAT Act, 2004: “2. Definitions.— In this Act, unless the context otherwise requires,— *** (5) “Assessment” means determination of tax liability under this Act and includes self-assessment, provisional assessment, audit assessment, assessment of escaped turnover, assessment of unregistered dealers liable to be registered, assessment of casual dealers and reassessment; (6) “Audit Assessment” means an audit assessment made under Section 42;” Section 41 of the OVAT Act, 2004: “41. Identification of tax payers for tax audit.— (1) (2) 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. 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 in accordance with the audit programme approved by him : 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. STREV No.2 of 2023 Page 12 of 34 (3) (4) 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. After completion of tax audit of any dealer under sub-section (3), the officer authorised to conduct such audit shall, within seven days from the date of completion of the audit, submit the audit report, to be called “AUDIT VISIT REPORT”, to the assessing authority in the prescribed form along with the statements recorded and documents obtained evidencing suppression of purchases or sales, or both, erroneous claims of deductions including input tax credit and evasion of tax, if any, relevant for the purpose of investigation, assessment or such other purposes.” Rule 43 of the OVAT Rules, 2005: Rule 43 of the Odisha Value Added Tax Rules, 2005 as it stood prior to its substitution 43. The tax audit to be conducted by an audit team.— tax audit The under Rule 41 shall be undertaken by team a constituted for the purpose and such audit team may consist of one or more Assistant Commissioner, Rule 43 as it stands by virtue of substitution vide the Odisha Value Added Tax (Amendment) Rules, 2009, with effect from 25.02.2009 43. The tax audit to be conducted by an audit team.— (1) The tax audit under Rule 41 shall be undertaken by a team constituted by the Commissioner. (2) The audit team referred to in sub-rule (1), for audit of dealers assigned with TIN, shall comprise two or more officers, one of whom shall not be below the rank of Sales Tax Officer and the senior most officer in rank shall function as the head of the audit team. STREV No.2 of 2023 Page 13 of 34 Sales Tax Officer Assistant and Tax Sales Officer, as the Commissioner may deem fit. (3) The audit team for audit of dealers assigned with SRIN shall comprise two or more officers not below the rank of Assistant Sales Tax Officer and the senior most member shall function as the head of the audit team. DISCUSSION AND ANALYSIS: 7. Record is silent and nothing is placed on record by Sri Sunil Mishra, learned Standing Counsel for the Commercial Tax and Goods and Services Tax Organisation to suggest that the petitioner-company at any stage of second appellate proceeding “did not press” ground No.3 of the Memorandum of Second Appeal. This Court, thus, being persuaded to take up question of law No.(I), considers as to whether Audit Visit Report having been submitted by the Sales Tax Officer, disclosing himself as the Head of the Audit Team, based on which a valid Assessment under Section 42 of the OVAT Act, 2004 could be framed? 7.1. It is the contention of Sri Chittaranjan Das, learned counsel for the petitioner that though the petitioner- dealer has raised the issue in the grounds of second appeal before the learned Odisha Sales Tax Tribunal (vide Annexure-4), that “the Audit Visit Report submitted in VAT-303 is not maintainable for initiating assessment proceedings being inherently violative of the clear directives of the law” and explained such a stand (as already extracted in the foregoing paragraphs), the STREV No.2 of 2023 Page 14 of 34 learned Odisha Sales Tax Tribunal has ignored to deal with the same. 7.2. Under Section 80 of the OVAT Act, this Court is vested with the power to adjudicate any question of law arising out of order of the Tribunal. As the question of law was raised before the Odisha Sales Tax Tribunal, but it failed to decide the same, question of law arises for this Court to deal with. In Commissioner of Income Tax Vrs. Scindia Steam Navigation Co. Ltd., AIR 1961 SC 1633 = (1961) 42 ITR 589 (SC) = (1962) 1 SCR 788, the principles propounded by the Constitution Bench of the Hon’ble Supreme Court of India are as follows: “39. The result of the above discussion may thus be summed up: (1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order. (2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order. (3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order. (4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be order a question arising out its of STREV No.2 of 2023 Page 15 of 34 notwithstanding that it may arise on the findings given by it. 40. Stating the position compendiously, it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order.” 7.3. This Court also wishes to remind the quasi judicial authorities of the following dicta of this Court rendered in Bhagirath Agarwal and Brothers Vrs. Sales Tax Officer, Ganjam-I Circle, (1975) 36 STC 566 (Ori), wherein it has been cautioned as follows: “6. *** We clarify that subordinate the position authorities are bound to acquaint themselves with the decisions of this Court and in case these authorities are not followed, in appropriate cases they are liable to be proceeded with for contempt.” 7.4. Section 78 of the OVAT Act which deals with “Appeal to Tribunal and stay of recovery of dues during pendency of appeal”, in sub-section (4) thereof specifies that “the Tribunal shall, after giving both parties to the appeal a reasonable opportunity of being heard, dispose of the appeal” and in sub-section (5) it has been laid down that “for the purpose of sub-section (4), the Tribunal shall have the same powers and shall be subject to the same conditions as provided in sub-section (7) of Section 77, and any order passed under sub-section (4) shall be final”. Section 77 dealing with provisions of “Appeals” in sub-section (7) spells out that: STREV No.2 of 2023 Page 16 of 34 “In disposing of an appeal, the appellate authority may, after giving the appellant a reasonable opportunity of being heard and after causing such enquiry as he may deem necessary— (a) Confirm, reduce or annul the assessment of tax, or the imposition of interest or levy of penalty, if any; or (b) Enhance the assessment including any part thereof whether or not such part is the subject-matter in the appeal; or (c) Set aside the assessment and direct the assessing authority to make a fresh assessment after such further enquiry as may be directed.” 7.5. Sri Chittaranjan Das, learned Advocate for the petitioner on specific query by the Bench during the course of hearing asserted that he having appeared before the learned Tribunal in connection with hearing of second appeal has raised the specific plea taken. He has submitted that the tax audit under Section 41 of the OVAT Act being conducted prior to substitution of Rule 43 by virtue of the Odisha Value Added Tax (Amendment) Rules, 2009, the constitution of Audit Team was not in conformity with the provisions of the statute. Such a fact is apparent from the order of the Appellate Authority, who had interpreted said provision erroneously and repelled the contention of the counsel for the dealer. The present petitioner reiterated the same stand before the Tribunal vide ground No.3 to the Second Appeal which has not been considered. To fortify his ground, he placed reliance on the Order dated STREV No.2 of 2023 Page 17 of 34 13.07.2022 of this Court in the case of State of Odisha Vrs. Daehsan Trading (India) Pvt. Ltd., STREV No.117 of 2013. This Court, considering that ground taken, but not dealt with by the Tribunal, would have remanded the matter to the Odisha Sales Tax Tribunal, Cuttack for rehearing of the second appeal afresh, but keeping in view the authoritative pronouncement made by the coordinate Bench of this Court in Daehsan Trading (India) Pvt. Ltd. (supra) and the fact that the assessment is of the tax periods from 01.04.2005 to 30.11.2006 pertaining to the OVAT Act, 2004, which Act stands repealed so far as it relates to goods other than the goods appearing in Entry 54 of List-II of the Seventh Schedule to the Constitution of India vide Section 174 of the Odisha Goods and Services Tax Act, 2017, does not feel it expedient to pass order of remit. 7.6. Section 78 of the OVAT Act read with Rule 101 of the OVAT Rules makes it clear that even where the appellant does not appear either in person or by his agent when the second appeal is called for hearing, “the Tribunal may decide the same on merits, after hearing the appellant or his agent, if present”. It is quite clear, therefore, that the appellate powers have the same amplitude in a second appeal as in a first appeal. When an Appellate Authority is considering a second appeal against a first appellate order, it is examining an order which can broadly be described as an order of STREV No.2 of 2023 Page 18 of 34 assessment. It is a final order disposing of an appeal which, in a sense, is a continuation of the assessment. A second appeal against such an order is an appeal against an order of assessment. [See, Tel Utpadak Kendra Vrs. Deputy Commissioner of Sales Tax, (1981) 48 STC 248 (SC). 7.7. The power is given to the Tribunal to give its decision and pass orders in respect of all grounds urged (which must be on behalf of the appellant) in respect of the decision appealed against. It is elementary that if a party appeals, he is the party who comes before the Appellate Tribunal to redress a grievance alleged by him. If the other side has any grievance, he has a right to file a cross-appeal or cross-objection. But if no such thing is done, the other party, in law, is deemed to be satisfied with the decision. He is, of course, entitled to support the judgment of the first officer on any ground open to him but he is not entitled to raise a ground so as to work adversely to the appellant and in his favour. It is not open to the Tribunal to give a finding adverse to the assessee, which does not arise from any question raised in the appeal nor is it open to it to raise any grounds which would work adversely to the assessee and pass an order which makes his position worse than it was under the order appealed against. It may be stated for benefit that though the Appellate Authority can consider the issues allied to the main issue raised in the appeal, the STREV No.2 of 2023 Page 19 of 34 appellate authority cannot consider an issue which is totally unconnected to the issue raised in the appeal. 7.8. In the instant case, the revision-petitioner has categorically assailed the competence of the Assessing Authority to proceed with the assessment under Section 42 of the OVAT Act when the Audit Visit Report in Form VAT-303 was submitted by the Sales Tax Officer as Head of the Audit Team inasmuch as the constitution of Audit Team is not in consonance with the manner prescribed under Rule 43 of the OVAT Act. Therefore, this Court is inclined to address the question of law No.(I) as posed by the petitioner. 8. Looking at the grounds of appeal before the Appellate Authority it is transpired that the petitioner-dealer has taken a specific stand as to maintainability of assessment proceeding questioning the framing of Audit Visit Report by an audit team incompetent to submit. Dealing with such a stance, the Appellate Authority vide Order dated 23.10.2010 has framed the issue and recorded the following reason: “Now the following questions are to be formulated for answer by this forum: 1. Whether the construction of Audit Visit Report suffers from illegality? *** STREV No.2 of 2023 Page 20 of 34 1. On, the perusal of the audit report, it is seen that the said report is furnished in VAT Form No.303. It was sent by the STO as head of the audit team. The contentions of the appellant is that according to Rule 43 of the OVAT Rules in pursuance with Section 41 of the OVAT Act, the audit team may have consisted personnel three different designations consisting of one Assistant Commissioner of Commercial Taxes, one Sales Tax Officer and one Assistant Commercial Tax Officer. from On perusal of Rule 43 of the OVAT Rules as one stood on the relevant time, the audit team may be consisted of one or more Assistant Commissioner, Sales Tax Officer and Assistant Sales Tax Officer as the Commissioner may deeded fit. Thus, it is relevant that the audit team should have persons of more than one designation. It is not relevant that a person with designation of Assistant Commissioner is to be included in the team. Understandably the team consisted of Sales Tax Officer and Assistant Sales Tax Officer which was a valid team in accordance with Rule 43 of the OVAT Rules. There is no infirmity in the construction of the Audit Visit Report.” 8.1. Section 41(3) of the OVAT Act requires that tax audit shall be conducted “in the prescribed manner”. Section 2(33) defines the term “prescribed” to mean “prescribed by rules”. 8.2. In Jindal Stainless Ltd. Vrs. State of Odisha, (2012) 54 VST 1 (Ori) the following principle has been reiterated: “21. Law is also well-settled that when the statute requires doing certain thing in certain way, the thing STREV No.2 of 2023 Page 21 of 34 must be done in that way or not at all. Other methods or modes of performance are impliedly and necessarily forbidden. The aforesaid settled legal proposition is based on a legal maxim “Expressio unius est exclusion alteris”, meaning thereby that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner and following other course is not permissible. [See Taylor Vrs. Taylor, (1876) 1 Ch.D. 426; Nazir Ahmed Vrs. King Emperor, AIR 1936 PC 253; Ram Phal Kundu Vrs. Kamal Sharma, Indian Bank’s Association Vrs. Devkala Consultancy Service, AIR 2004 SC 2615].” (2004) 2 SCC 759; 8.3. Said principle has also been repeated many times in taxation matters by this Court; namely, Bhusan Power & Steel Ltd. Vrs. State of Odisha, (2012) 47 VST 466 (Ori) = 2012 (Supp.-I) OLR 564; Patitapabana Bastralaya Vrs. Sales Tax Officer, (2015) 79 VST 425 (Ori) = 2015 (I) OLR 183; and Balaji Tobacco Store Vrs. Sales Tax Officer, Cuttack-I East Circle, Cuttack, 2015 (I) OLR 880 = (2015) 81 VST 170 (Ori) = 2015 (I) ILR-CUT 1079 = 2015 SCC OnLine Ori 85. 9. Rule 43 of the OVAT Rules prescribes the constitution of “audit team” which is required to be comprised of “one or more Assistant Commissioner, Sales Tax Officer and Assistant Sales Tax Officer”. The learned Standing Counsel for the Commercial Tax and Goods and Services Tax Organisation suggested that the word “may” used in Rule 43 being directory, it is not necessary for every STREV No.2 of 2023 Page 22 of 34 Audit Team to be Headed by Assistant Commissioner. If such construction is accepted, then the conjunction “and” used in the expression “one or more Assistant Commissioner, Sales Tax Officer and Assistant Sales Tax Officer” shall be rendered redundant. Had that been the intention, in the said expression instead of “and” the word “or” would have been employed. 9.1. In Crawford on Statutory Construction (1940) Edition it is stated at page 322 that: “In ordinary use the word ‘or’ is a disjunctive that marks and alternative which generally corresponds to the word ‘either’ In face of this meaning however, the word ‘or’ and the word ‘and’ are often used interchangeably. As a result of this common and careless use of the two words in legislation, there are occasions, when the court, through construction, may change one to the other. This cannot be done if the statute’s meaning is clear, or if the alteration operates to change the meaning of the law. It is proper only in order to more accurately express, or to carry out the obvious intent of the legislature, when the statute itself furnishes cogent proof of the error of the legislature, and especially where it will avoid absurd or impossible consequences or operate to harmonize the statute and give effect to all of its provisions.” Sutherland, Statutory Construction (3rd Edition) Volume 2, also refers to the subject of conjunctive and disjunctive words at page 450: “Where two or more requirements are provided in a section and it is the legislative intent that all of the requirement must be fulfilled in order to comply with the STREV No.2 of 2023 Page 23 of 34 statute, the conjunctive ‘and’ should be used. Where a failure to comply with any requirement imposes liability, the injunctive ‘or’ should be used. There has been, however, so great laxity in the use of the set terms that the words are Courts have generally said interchangeable and that one any be substituted for the other, if to do so is consistent with the legislative intent”. that Reference may be had to Goodyear India Ltd. Vrs. The Executive Officer, AIR 1969 P&H 379. 9.2. The word ‘and’ should normally be given its ordinary meaning and should be understood in a conjunctive sense. (See Srinivasa Electricals Vrs. Additional Commissioner of Commercial Taxes, (2006) 147 STC 265 (Kar). Depending upon the context, ‘or’ may be read as ‘and’ but the Court would not do it unless it is so obliged because ‘or’ does not generally mean ‘and’ and ‘and’ does not generally mean ‘or’. (See R.S. Nayak Vrs. A.R. Antuley, (1984) 2 SCC 183. 9.3. In ordinary usage, ‘and’ is conjunctive which merely joins together two sentences and sometimes word ‘and’ is disjunctive. No doubt, at times to give effect to clear legislative intent gathered from the context, ‘and’ may be read as ‘or’ in place of conjunctive or vice versa, but if such reading of ‘and’ as ‘or’ produces grammatical distortion; absurd results and makes no sense of the portion following ‘and’, ‘or’ cannot be read in place of ‘and’. [Ajay Construction Vrs. ACTO, (2006) 147 STC 396 (MP)]. STREV No.2 of 2023 Page 24 of 34 9.4. The word “or” is normally disjunctive and “and” is normally conjunctive (Union of India Vrs. Kamlabhai Harjiwandas Parekh, (1968) 1 SCR 463). However, there may be circumstances where these words are to be read as vice versa to give effect to manifest intention of the Legislature as disclosed from the context. Of course, these two words normally “or” and “and” are to be given their literal meaning, unless some other part of same statute or the clear intention of it requires that to be done. However, wherever use of such a word, viz., “and”/“or” produces unintelligible or absurd results, the Court has power to read the word “or” as “and” and vice versa to give effect to the intention of the Legislature which is otherwise quite clear. Refer State of Bombay Vrs. RMD Chamarbaugwala, (1957) 1 SCR 874; J Jayalalitha Vrs. Union of India, (1999) 5 SCC 138; Mazagaon Dock Ltd. Vrs. CIT & Excess Profits Tax, (1958) 34 ITR 368, 315 (SC) = (1959) 1 SCR 848; Spentex Industries Ltd. Vrs. CCE, (2015) 35 GSTR 332 (SC). 9.5. In Hyderabad Asbestos Cement Products Vrs. Union of India, (2000) 1 SCC 426 the use of the word “and” has been stated to be thus: “The language of the rule is plain and simple. It does not admit of any doubt in interpretation. Proviso shows (i) and (ii) are separated by the use of the conjunction within “and”. They have to be read conjointly. The requirement of both the provisos has to be satisfied to avail the benefit. Clauses (a) and (b) of proviso (ii) are separated by the use STREV No.2 of 2023 Page 25 of 34 of an “or” and there the availability of one of the two alternatives would Suffice.” 9.6. Taking into consideration the interpretation of “and” as expounded by different Courts, it is but quite obvious that the word “and” placed in the expression “one or more Assistant Commissioner, Sales Tax Officer and Assistant Sales Tax Officer” is to be read in the sense of “also” or “as well as”. 10. This Court notices provisions contained in Rule 3(1) of the OVAT Rules which prescribes designations of Sales Tax Authorities. The designation of “Assistant Commissioner of Sales Tax” is placed above “Sales Tax Officer” and as per Rule 3(3), Sales Tax Officer is stated to be subordinate to the Assistant Commissioner. It is also noticed that by dint of Resolution of Finance Department bearing No. CTD-30/2008-37800/F., dated the 8th August, 2008, after implementation of the VAT system, some of the designations attached to the Officers in Commercial Taxes Wing were not found compatible with designation as provided in the OVAT Act. So in tune with the prescribed designation in the OVAT Act and to maintain parity of designation available in other States, Government have decided to redesignate inter alia all the posts of Assistant Commissioner of Commercial Taxes in O.F.S.-I (S.B.) grade excepting 12 (twelve) posts of Assistant Commissioner of Commercial Taxes in charge of 12 (twelve) Territorial Ranges and 3 (three) posts of STREV No.2 of 2023 Page 26 of 34 Assistant Commissioner of Commercial Taxes in the Office of the Commissioner of Commercial Taxes, Odisha, Cuttack, namely, Assistant Commissioner of Commercial Taxes (Law), Assistant Commissioner of Commercial Taxes (Administration) and Assistant Commissioner of Commercial Taxes (VAT) are redesignated as Deputy Commissioner of Commercial Taxes; and all the posts of Commercial Tax Officer in O.F.S.-I (J.B.) are redesignated as Assistant Commissioner of Commercial Taxes. By the Resolution of Finance Department bearing No. CTD-30/2008- 37805/F., dated the 8th August, 2008, inter alia 12 (twelve) posts of Assistant Commissioner of Commercial Taxes in O.F.S.-I (SB) grade in charge of 12 (twelve) Territorial Ranges, 3 (three) posts of Assistant Commissioners of Commercial Taxes, O.F.S.-I (SB) grade in the office of Commissioner of Commercial Taxes, Odisha, Cuttack namely Assistant Commissioner of Commercial Taxes (Law), Assistant Commissioner of Commercial Taxes (Administration) & Assistant Commissioner of Commercial Taxes (VAT) are upgraded to (O.F.S. Super Time) grade and redesignated as Joint Commissioner of Commercial Taxes; 13 (thirteen) posts of Additional Commercial Tax Officer in O.F.S.-II are upgraded to Commercial Tax Officer, O.F.S.-I (JB) exclusively for VAT Audit in the Territorial Ranges (except Cuttack- II Range, Puri Range and Sambalpur Range) including four posts for Enforcement in 4 (four) STREV No.2 of 2023 Page 27 of 34 Enforcement Range except Cuttack Range and are redesignated as Assistant Commissioner of Commercial Taxes. Upon such redesignation of the posts, the Odisha Value Added Tax Rules, 2005 got amended with effect from 25.02.2009 by virtue of the Odisha Value Added Tax (Amendment) Rules, 2009, whereby Rule 43 has been substituted. From aforesaid events, it can safely be construed that the terms “Assistant Commissioner” and “Sales Tax Officer” are not interchangeable, and they function in different cadres. As suggested by the Appellate Authority to constitute an Assistant Commissioner of Sales Tax as member of the Audit Team as alternative is fallacious. The Appellate Authority, therefore, misdirected himself by holding that Audit Team comprising the Assistant Commissioner of Sales Tax is optional. 11. It has already been held in Daehsan Trading (India) Pvt. Ltd. (supra) that: “The word ‘may’ occurring in Rule 43 as it stood prior to 25th February, 2009 qualified the words ‘one or more’. The discretion of the Commissioner was, therefore, limited to deciding whether in the audit team there should be one or more Assistant Commissioner.” 11.1. In Jindal Stainless Ltd. Vrs. State of Odisha, (2012) 54 VST 1 (Ori) it has been observed as follows: “40. Question No. (iv) is whether the Audit Visit Report is vitiated on the ground that the same has been STREV No.2 of 2023 Page 28 of 34 submitted by an officer who was neither a part of nor the head of the team of audit. 41. *** It is a matter of record that the audit at Bhubaneswar Office of the petitioner was under the supervision of the Assistant Commissioner of Sales Tax, Enforcement Range, Balasore whereas report has been approved by the Assistant Commissioner, Enforcement Range, Berhampur. This renders the approval of the report vulnerable and a case of mechanical exercise of power without application of mind by an incompetent and unauthorized officer. Therefore, the report and their approval are void and non est in the eye of law; therefore liable to be quashed. *** 43. Therefore, an Audit Visit Report if submitted by an officer, who is neither a part of nor is the head of the team of audit, is vitiated in law. 44. *** While a led by ACST- team of officials Enforcement Range, Berhampur visited the factory premises, the registered office premises was visited by STO (I), Berhampur and ASTOs of Investigation Unit of Bhubaneswar under the supervision of the ACST, Enforcement Range, Balasore. Thus, the ACST, Enforcement Range, Berhampur was in- charge of the audit team conducting audit in factory premises. But the Audit Visit Report reveals that the same has been submitted by the STO, Investigation Unit, Bhubaneswar as head of the audit team. Thus, the Audit Visit Report has not been submitted by the officer in-charge of the audit team authorized to conduct the audit in the factory premises as required under Section 41(4) of the OVAT Act read with Rule STREV No.2 of 2023 Page 29 of 34 45(3) of the OVAT Rules. Therefore, the said report is vitiated in law. *** 49. In the fact situation, completion of audit assessment on the basis of AVR which has been submitted in violation of statutory provisions of Section 41(4) of the OVAT Act read with Rule 45(3) of the OVAT Rules and upon issuance of notice in Form VAT-306 in violation of Section 42(2) is not sustainable in law. Accordingly, we set aside the impugned assessment order dated October 20, 2008 and the consequent demand notice.” 11.2. Taking note of definitions of the terms “Assessment” and “Audit Assessment” contained in clauses (5) and (6) of Section 2 of the OVAT Act, it is observed that Audit Assessment is required to be undertaken as provided for in Section 42. Section 42 empowers the Assessing Authority to initiate proceeding for “audit assessment” after completion of tax audit of any dealer under sub- section (3) of Section 41 and upon submission of Audit Visit Report by “the officer authorized to conduct such audit” which “results in the detection of suppression of purchases or sales, or both, erroneous claims of deductions including input tax credit, evasion of tax or contravention of any provision of this Act affecting the tax liability of the dealer”. It is considered opinion of this Court that “the officer authorized” to conduct tax audit must be the officer who is constituted within the framework of Rule 43 of the OVAT Rules. Taking cue STREV No.2 of 2023 Page 30 of 34 from the underlying principle laid down in the aforesaid Judgment in Jindal Stainless Ltd. (supra) that Audit Assessment framed under Section 42 of the OVAT Act on the basis of the Audit Visit Report submitted not in conformity with requirement stipulated in the statutory provisions cannot be sustained in the eye of law. 11.3. In Balaji Tobacco Store (supra) following observation of this Court is noteworthy: “16. The matter can be looked at from a different angle. Under 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 utilise any material other than the materials available in the audit report while making the audit assessment. [See Bhushan Power & Steel Ltd. Vrs. State of Odisha, (2012) 47 VST 466 (Ori)].” 11.4. At this juncture, it would be profitable to refer to the Judgment of this Court in the case of Krushna Chandra Sahoo Vrs. Bank of India, AIR 2009 Ori 35 = 106 (2008) CLT 713, wherein following observations are made: “8. A Constitution Bench of the Hon’ble Supreme Court in Sukhdev Singh and others Vrs. Bhagatram Sardar Singh Raghuvanshi and another, AIR 1975 SC 1331 = (1975) 1 SCC 421 held that the statutory authorities cannot deviate the statutory provisions and any deviation, if so made, is required to be enforced by legal sanction of declaration by the Courts invalidating such actions in violation of the statutory Rules and Regulations. A similar view had from STREV No.2 of 2023 Page 31 of 34