Holding

The High Court's order quashing the show‑cause notice is set aside as it failed to consider the requirement of exhausting the alternative remedy, and the assessee must file its response to the notice.

Summary

The appellant, C.C.T. Orissa & Ors., challenged a Supreme Court judgment that set aside a High Court order quashing a show‑cause notice issued to the respondent‑assessee, Indian Explosives Ltd., under the Orissa Sales Tax Act. The assessee, a registered dealer, had filed a consolidated return for AY 2000‑01 claiming exemption for goods purchased for manufacture, paying tax as per Entry 48 of a notification. The assessing authority later re‑assessed and issued a show‑cause notice under Section 23(4)(a) read with Rule 80. The assessee filed a writ petition; the Orissa High Court quashed the notice. On appeal, the Supreme Court held that the High Court erred by not applying the principle of exhaustion of alternative remedy and by ignoring the precedent in ICI India Ltd. v. State of Orissa. Consequently, the High Court’s order was set aside and the assessee was directed to file a response to the show‑cause notice and the authorities to dispose of the matter according to law.

Issues considered

Whether a writ petition under Article 226 is maintainable when an alternative statutory remedy (filing a response to a show‑cause notice) is available.
Whether the show‑cause notice issued under Section 23(4)(a) of the Orissa Sales Tax Act and Rule 80 of the Rules is valid in view of the declaration made under Entry 48 of the notification and the 5th proviso to Section 5(1).

Legislation cited

Orissa Sales Tax Act, 1947s. 11, s. 12(8), s. 23(4)(a), s. 5(1)

Subjects

Sales TaxShow‑cause noticeExhaustion of alternative remedyJurisdiction of High CourtArticle 226Assessment and re‑assessmentOrissa Sales Tax ActTax litigation

Judgment

[2008] 3 S.C.R. 621
_,.
'
C.C.T. ORISSA & ORS. A
v.
INDIAN EXPLOSIVES LTD.
(Civil Appeal No. 5123 of 2005)
FEBRUARY 28, 2008
B
(DR. ARIJIT PASAYAT, C.K. THAKKER AND
LOKESHWAR SINGH PANTA, JJ.)

Orissa Sa/es Tax Act, 1947; 5th Proviso to S.5(1) and
Ss. 11, 23(4)(a)/Orissa Sales Tax rules, 1947; r. 80 and Entry c
48 of Notification issued uls.5(1)of 1947 Act:
Sa/es Tax - Assessee filing return declaring certain
goods purchased for manufacture of other goods paying sales
tax @ 4% on value of such goods in terms of Entry 48 of a
Notification - Accepted by assessing authority - Re- D
~ ~

assessment - Issuance of show-cause Notice - Challenge to
- Allowed by High Court - Correctness of - Held: Incorrect -
High Court failed to take into notice the parameters highlighted
by Supreme Court relating to exhaustion of alternative remedy
as laid down in the case of IC/ India Ltd. vs. State of Orissa - E
Hence, judgment of the High Court indefensible - Thus, set
aside - Assessee directed to file response to the show-cause
Notice and authorities to dispose of the proceedings in
,... accordance with law - Judicial discipline - Adhering to.
Respondent-assessee, a registered dealer under the F
Orissa Sales Tax Act, filed a consolidated return in terms
of s.11 of the Act claiming that the goods purchased by it
as specified in the Certificate of Registration being used
· in the manufacture of goods for sale. The assessee
furnishing declaration to that effect in Form IV to the Seller G
of such goods and making payment of sales tax @ 4%
... ~
on the value of such goods in terms of Entry 48 of the·
Notification issued by the authorities u/s. 5(1) of the Act.
The claim was accepted by the authorities. Later, the
621 H

a
622 SUPREME COURT REPORTS [2008] 3 S.C.R.
. \.-
.
A authorities re-assessed the liability of the assesse'e and
issued a show-cause notice, which was challenged by
the assessee by filing a writ petition. The High Court
allowed the petition by quashing the show-cause notice.
Hence the present appeal.
B Appellant contended that the High Court ought not
to have entertained the writ petition more particularly
when it had reject~d the stand of the assessee for the
assessment year 1997-98 and 1998-99. But the High Court
did not even refer to the said decision in the instant case.
c
Partly allowing the appeal, the Court
HELD: 1.1 The High Court seems to have completely
lost sight of the parameters highlighted by this Court in a
large number of cases relating to exhaustion of alternative
D remedy. Additionally the High Court did not even refer to
the judgment of another Division Bench for the ~ ~

assessment years 1997-98 and Assessment years 1998-
99 in the decided case of ICI India Ltd.* In any event, the
High Court ought to have referred to the ratio of the
E decision in the said case. That judicial discipline has
not been adhered to. Looked at from any angle, the
High Court's judgment is indefensible and is set aside.
(Para - 7) [625-A, BJ
*IC/ India Ltd. vs. State of Orissa (2007)) 10 SCR 433 -
F relied on.

1.2 The respondent-assessee shall file its response,
if any, to the show cause notice dated 14.1.2004. The
Commissioner shall consider the reply to the show cause
notice filed, if any, and dispose of the proceeding in
G
accordance with law. (Para - 8) [625-C, DJ
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 5123
,. ....
of 2005.
From the final Order/Judgment dated 7.1.2005 of the High ·
~
C.C.T. ORISSA & ORS. v. INDIAN EXPLOSIVES LTO. 623
[PASAYAT, J.]
~.

Court of Orissa at Cuttack in W. P. (C) No. 1931 /2004 A
Kirti Renu Mishra for the Appellants.
G. Ramakrishna Prasad for the Respondent.

The Judgment of the Court was delivered by
B
Dr. ARIJIT PASAYAT, J. 1. Challenge in this appeal is to
~·
the judgment of a Division Bench of the Orissa High Court
allowing the writ petition filed by the respondent (hereinafter
referred to as the 'assessee').

2. Background facts in a nutshell are as follows: c
The assessee is registered as a dealer under the Orissa
Sales Tax, Act, 1947 (in short the 'Act') and the Orissa Sales
Tax Rules, 1947 (in short the 'Rules'). For the assessment year,
2000-2001 the assessee filed consolidated return under Section
D
11 of the Act before the Assistant Commissioner of Sales Tax,
)
- Sundergarh Range, Rourkela (Assessment). In the said return
the assessee claimed that it had purchased goods including
Ammonium Nitrate which was specified in its Certificate of
Registration as being intended for use in the manufacture of
E
goods for sale by furnishing declaration to that effect in Form IV
to the seller of such goods and 4% on the value of such goods
purchased by the Assessee was paid by it as provided in Entry
48 of the Notification issued under Section 5(1) of the Act. The
.Jo.
claim was accepted by the Assistant Commissioner of Sales
Tax Sundergarh Range, Rourkela (Assessment). Subsequently F
the said authority initiated proceedings for re assessment under
Section 12(8) of the Act. The same was dropped, and instead
a show cause notice under Section 23(4)(a) of the Act read
with Rule 80 of the Rules was issued by the Commissioner of
Sales Tax on 14.1.2004. Assessee challenged the said show G
cause notice by filing the writ application. With reference to
.., ~
various decisions of this Court it was submitted that the notice
was without jurisdiction. It was submitted that a plain reading of
both Entry 48 of the Notification issued under Section 5(1) of
the Act and 5th Proviso to Section 5(1) to the Act shows that the H
624 SUPREME COURT REPORTS [2008] 3 S.C.R.
.. ~

~
·,
A goods specified in the Certificate of Registration and purchased
by a dealer must only be used in the manufacture of goods inside
the State of Orissa and such goods manufactured may be also
intermediate products used in further manufacture of furnished
goods for sale inside or outside the State of Orissa.
B The Revenue filed its counter affidavit. When the writ
petition was taken up for hearing, it was pointed out that disputed
questions of fact arise for decision which can be adjudicated
by the authorities under the Act and the High Court should not
exercise power under Article 226 of the Constitution. It was also
c submitted that the interpretation given by the assessee was not
correct. It was pointed out that in the case of Mis ICI Ltd., a
subsidiary of the respondent-assessee, a Division Bench had
clearly rejected a similar plea. The High Court was of the view
that the writ petition can be entertained even though an alternative
D remedy is available. Accepting the stand of the assessee the
High ~eurt held that the notice issued was to be quashed and y (_

accordingly quashed the impugned notice dated 14.1.2004.
3. Learned counsel for the appellant submitted that the High
Court ought not to have entertained the writ petition more
E particularly when for the assessment year 1997-98 and 1998-
99 another Division Bench in Writ Petition Nos. OJC Nos. 16928
of 1998 and 1500 of 2000 had rejected the stand of the
assessee. Though it was brought to the notice of the High Court
that such is the position, unfortunately the High Court did not
F even refer to the said decision.
4. It is pointed out that in the counter affidavit filed before
the High Court, at para9, specific reference has been made to
the judgment dated 9.10.2001 that in the aforesaid two writ
petitions similar stand had been rejected.
G
5. It is pointed out that this Court in /C/ India Ltd. v. State of
Orissa (2007 (10) SCR 433) has upheld the view expressed by ~

the High Court in OJC Nos.16928 of 1998 and 1500 of 2000.
6. There is no appearance on behalf of respondent-
H
C.C.T. ORISSA & ORS. v. INDIAN EXPLOSIVES LTD. 625
... . [PASAYAT, J.]
assessee when the matter was called. A
7. The High Court seems to have completely lost sight of
the parameters highlighted by this Court in a large number of
cases relating to exhaustion of alternative remedy. Additionally
the High Court did not even refer to the judgment of another
Division Benc.h for the assessment years, 1997-98 and B
Assessment years 1998-99 in respect of ICI India Ltd. In any
event the High Court ought to have referred to the ratio of the
decision in the said case. That judicial discipline has not been
adhered to. Looked at from any angle, the High Court's judgment
is indefensible and is set aside. c
8. The respondent-assessee shall, within a period of eight
weeks from today, file its response, if any, to the show cause
notice dated 14.1.2004. The Commissioner shall consider the
reply to the show cause notice filed, if any, and dispose of the
D
j ~
proceeding in accordance with law.
9. The appeal is allowed to the aforesaid extent without
any order as to costs.
S.K.S. Appeal partly allowed.
E