B.S. Chauhan, C.J.
1. In this writ petition the petitioner challenges the notice dated July 16, 2008 issued under Sub-rule (2) of Rule 44 of the Orissa Value Added Tax Rules, 2005 (hereinafter referred to as, 'the OVAT Rules') under annexure 1 for the purpose of conducting tax audit for the period from April 1, 2005 till the date of audit visit on the ground that the audit assessments for the period April 1, 2005 to March 31, 2006 and April 1, 2006 to October 31, 2006 were already completed earlier under Section 42 of the Orissa Value Added Tax Act, 2004 (hereinafter called as 'the OVAT Act') vide assessment orders dated December 2, 2006 (annexure 3 series). Hence, the second notice issued under annexure 1 is not sustainable in the eyes of law.
2. The factual matrix of the case, eliminating unnecessary details, is as follows:
The petitioner is a retailer of stationery and allied goods and runs his business in Municipal Market Complex, Talcher. He is registered under the OVAT Act having TIN No. 212713031452. Prior to issuance of the impugned notice dated July 16, 2008 under annexure 1 in form VAT 301, notices under Sub-rule (1) of Rule 49 of the OVAT Rules (vide annexure 2 series) in form VAT 306 for audit assessment for the periods 2005-06 and April 1, 2006 to October 31, 2006 had been served on the petitioner. In response to such notices, the petitioner produced books of account for the said periods before the assessing officer.
3. The assessing officer vide his order dated December 2, 2006 completed the audit assessment for the periods from April 1, 2005 to March 31, 2006 and from April 1, 2006 to October 31, 2006 under Section 42 of the OVAT Act raising demand of Rs. 22,143 and Rs. 6,966, respectively, including penalty under Section 42(5) of the OVAT Act vide annexure 3 series. Thus, according to the petitioner the subsequent notice under Rule 44(2) of the OVAT Rules in form 301 for the purpose of conducting tax audit for the period from April 1, 2005 till the date of audit visit vide annexure 1 issued to the petitioner is nothing but to harass him, who is a registered dealer under the OVAT Act.
4. Learned Counsel appearing on behalf of the petitioner submitted that the notice under challenge, issued for the purpose of conducting tax audit for the period from April 1, 2005 till the date of audit visit is not permissible under the law in view of the fact that previously the audit assessment under Section 42 of the OVAT Act has been completed for the same period on December 2, 2006 under annexure 3 series. Even though the petitioner was not satisfied with the said order of assessment, he decided not to challenge the same in appeal considering commercial expediency and the cost involved in the litigation. Thus, the assessment became final for the aforesaid period. Concluding his argument, he submitted that once an audit assessment for a particular period is completed under Section 42 of the OVAT Act, it is no longer open for the Department to issue notice for tax audit for the same period and to make a second audit assessment under Section 42 of the OVAT Act.
5. Learned Counsel appearing on behalf of the Revenue submitted that there is no bar to conduct repeated tax audits as provided under Section 41 of the OVAT Act read with rules 41, 42, 43 and 44 of the OVAT Rules for making audit assessment under Section 42 of the OVAT Act for a particular tax period in respect of which an earlier audit assessment order under Section 42 was passed.
6. In view of the rival contentions of the respective parties, the question which falls for consideration by this Court is as follows:
Whether it is permissible to conduct tax audits as provided under Section 41 of the OVAT Act repeatedly for passing fresh audit assessment orders under Section 42 of the OVAT Act for a particular period in respect of which earlier an order of assessment under Section 42 of the OVAT Act was passed
7. To resolve the issue it is necessary to know the relevant provisions contained in the OVAT Act and Rules pertaining to tax audit and audit assessment and assessment of escaped turnover. Those are Section 41 of the OVAT Act read with Rule 41, Rule 42, Rule 43, Rule 44 and Rule 45 of the OVAT Rules which deal with identification of tax-payers for tax audit and how the tax audit is to be conducted. Section 42 of the OVAT Act and Rule 49 deal with audit assessment. Section 43 and Rule 50 deal with turnover escaping assessment. The relevant provisions of Section 41, Section 42 and Section 43 of the OVAT Act are quoted below:
Section 41. Identification of tax-payers for tax audit.-(1) The Commissioner may select such individual dealers or class of dealers for tax audit on random basis or on the basis of risk analysis or on the basis of any other objective criteria, at such intervals or in such audit cycle, as may be prescribed.
(2) After identification of individual dealers or class of dealers for tax audit under Sub-section (1), the Commissioner shall direct that tax audit in respect of such individual dealers or class of dealers be conducted 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.(3) Tax audit shall ordinarily be conducted in the prescribed manner in the business premises or office or godown or warehouse or any other place, where the business is normally carried on by the dealer or stock-in-trade or books of account of the business are kept or lodged temporarily or otherwise.
(4) 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.
Section 42. Audit assessment.-(1) Where the tax audit conducted under Sub-section (3) of Section 41 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, the assessing authority may, notwithstanding the fact that the dealer may have been assessed under Section 39 or Section 40, serve on such dealer a notice in the form and manner prescribed along with a copy of the audit visit report, requiring him to appear in person or through his authorised representative on a date and place specified therein and produce or cause to be produced such books of account and documents relying on which he intends to rebut the findings and estimated loss of revenue in respect of any tax period or periods as determined on such audit and incorporated in the audit visit report.
(2) Where a notice is issued to a dealer under Sub-section (1), he shall be allowed time for a period of not less than thirty days for production of relevant books of account and documents.
(3) If the dealer fails to appear or cause appearance, or fails to produce or cause production of the books of account and documents as required under Sub-section (1), the assessing authority may proceed to complete the assessment to the best of his judgment basing on the materials available in the audit visit report and such other materials as may be available, and after causing such enquiry as he deems necessary.
(4) Where the dealer to whom a notice is issued under Sub-section (1), produces the books of account and other documents, the assessing authority may, after examining all the materials as available with him in the record and those produced by the dealer and after causing such other enquiry as he deems necessary, assess the tax due from that dealer accordingly.
(5) Without prejudice to any penalty or interest that may have been levied under any provision of this Act, an amount equal to twice the amount of tax assessed under Sub-section (3) or Sub-section (4) shall be imposed by way of penalty in respect of any assessment completed under the said sub-sections.
(6) Notwithstanding anything contained to the contrary in any provision under this Act, an assessment under this section shall be completed within a period of six months from the date of receipt of the audit visit report:
Provided that if, for any reason, the assessment is not completed within the time, specified in this sub-section, the Commissioner may, on the merit of each such case, allow such further time not exceeding six months for completion of the assessment proceeding.(7) No order of assessment shall be made under Sub-section (3) or Sub-section (4) after the expiry of one year from the date of receipt of the audit visit report.
Section 43. Turnover escaping assessment.-(1) Where, after a dealer is assessed under Section 39, 40, or 44 for any tax period, the assessing authority, on the basis of any information in his possession, is of the opinion that the whole or any part of the turnover of the dealer in respect of such tax period or tax periods has:
(a) escaped assessment, or
(b) been under-assessed, or
(c) been assessed at a rate lower than the rate at which it is assessable,
or that the dealer has been allowed:
(i) wrongly any deduction from his turnover, or
(ii) input-tax credit, to which he is not eligible,
the assessing authority may serve a notice on the dealer in such form and manner as may be prescribed and after giving the dealer a reasonable opportunity of being heard and after making such enquiry as he deems necessary, proceed to assess to the best of his judgment the amount of tax due from the dealer.
(2) If the assessing authority is satisfied that the escapement is without any reasonable cause, he may direct the dealer to pay, by way of penalty, a sum equal to twice the amount of tax additionally assessed under this section.
(3) No order of assessment shall be made under Sub-section (1) after the expiry of five years from the end of the tax period or tax periods in respect of which the tax is assessable.
8. The purpose of tax audit is to examine the correctness of the return/ returns filed. From amongst the returns filed by the dealer the Department shall select a few for the purpose of tax audit in the manner prescribed in Rule 41. Twenty per cent dealers will be selected at random basis for audit in a year preferably by use of computer. It will be done on the basis of objective criteria and, hence, there will be no human bias in selection. Thus audit cycle will be of five years. The selection shall be done by January 31, or by any date before the end of the year. However, Rule 41 empowers the Commissioner to direct audit of any specific issue or issues relating to any dealer or class of dealers in case of any reference by subordinate officers to check tax evasion. He may select for special or investigation of audit on the basis of apparent revenue risk. He may plan audit checks across the totality of the business of tax-payers within an audit circle of two years. Tax audit shall comprise of verification of all records, documents, books of account including records relating to or incidental to the business of the dealer, computation of the input-tax credit as admissible, calculation of output tax charged, physical verification of stock-in-trade, collection of sample goods and examination of such other records and documents as may be required to determine the actual tax liability of the dealer. In course of tax audit, dealer is required to render all necessary assistance to produce all accounts, documents, records and also allow access to the accounts, if any, maintained electronically, as may be required by the officer conducting the audit. [See rules 44(1) and 45(1)]. After completion of tax audit, the officer in-charge of the audit shall submit the audit visit report in form VAT-303 within seven days to the assessing authority along with the statements recorded and documents obtained evidencing suppression of purchase or sale or both, erroneous claims of deduction including input credit, and evasion of tax, if any, relevant for the purpose of investigation, assessment or such other purpose [see Section 41(4) and Rule 45(3)].
9. 'Audit assessment' means an audit assessment made under Section 42 of the OVAT Act. If any tax audit results in the deduction or suppression of purchase or sale or both and erroneous claim of detection including input-tax credit, evasion of tax or contravention of any provision of the OVAT Act affecting tax liability of the dealer for tax period or tax periods, the assessing authority may, notwithstanding the fact that the dealer may have been self-assessed or assessed provisionally shall make an audit assessment. In order to make an audit assessment the assessing officer shall serve on such dealer a notice in form VAT-306 along with copy of the audit visit report requiring him to appear in person or through his authorized representative on a date and place specified therein and produce or cause production of such books of account and documents relying on which he intends to rebut the findings and estimated loss of revenue in respect of any tax period or periods as determined on such audit and incorporated in the audit visit report. [See Section 42(1) read with Rule 49(1)]. As it appears 'audit assessment' is similar to scrutiny assessment or regular assessment in which detailed verification of return is made by scrutinizing the accounts, documents, records and every evidence produced by the dealer to substantiate the correctness of the return filed by him. Section 42(4) of the OVAT Act provides that where a dealer to whom a notice is issued to produce the books of account and other documents, the assessing officer may after examining all the materials as are available with him and on record and those produced by the dealer and after causing such enquiry as he deems necessary, assess the tax due from that dealer. Rule 49(6) provides that the assessing authority shall after hearing the dealer assess to the best of judgment the amount of tax payable by the dealer in respect of a tax period or tax periods for which the assessment proceeding has been initiated and impose penalty under Sub-section (5) of Section 42 of the OVAT Act. Rule 49(7) provides that in the event of default by a dealer to comply with the requirement of the notice in form VAT-306, the assessing authority may make to the best of his judgment an ex parte assessment of the tax payable by such dealer in respect of such tax period or tax periods and pass order of assessment recording the reasons therein. Section 42(6) provides that notwithstanding anything contained to the contrary in any provision under the OVAT Act an assessment under Section 42 shall be completed within a period of six months from the date of receipt of the audit visit report. If for any reason the assessment is not completed within the time specified, the Commissioner may, on the merits of each such case, allow such further time not exceeding six months for completion of assessment proceeding. Section 42(7) provides that no order or assessment shall be made after the expiry of one year from the date of receipt of the audit visit report.
10. Section 43 read with Rule 50 deals with turnover escaping assessment. Where after a dealer is assessed under Sections 39, 40 and 42 for any tax period, the assessing authority on the basis of any information in his possession is of the opinion that the whole or any part of the turnover of the dealer in respect of such tax period or periods has (a) escaped assessment, or (b) under-assessed, or (c) been assessed at a rate lower than the rate at which it is assessable or that the dealer has been allowed wrongly any deduction from his turnover or input-tax credit to which he is not eligible he (the assessing authority) may proceed to assess the amount of tax due from the dealer. To make such assessment the assessing authority shall serve a notice on the dealer in VAT-307 and after giving the dealer a reasonable opportunity of being heard and after making such enquiry as he deems necessary proceed to assess to the best of his judgment the amount of tax due from the dealer. Thus self-assessment made under Section 39, a provisional assessment under Section 40, an audit assessment under Section 42 can be reopened under Section 43 and the escaped turnover can be assessed on fulfilment of the condition stated in Section 43. Section 43(3) provides that no order of assessment of escaped turnover shall be made after expiry of five years from the end of the tax period or periods in respect of which the tax is assessable.
11. Besides audit assessment and assessment of escaped turnover, the OVAT Act and OVAT Rules also contain provisions for self-assessment, provisional assessment, and assessment of a dealer who being liable to tax fails to register and assessment of casual dealer.
12. Thus, we have seen that the OVAT Act and OVAT Rules provide a complete mechanism for making different types of assessment. 'Assessment' is a term relatable to 'assessee'. 'Assessment' means the process to determine the amount of tax payable by the assessee. The word 'assessee' as defined under Section 2(3) of the OVAT Act means the dealer by whom tax or any other sum of money is payable under the OVAT Act and includes every dealer in respect of whom any proceeding under the OVAT Act has been initiated for the assessment of tax payable by him.
13. We are here concerned with the audit assessment. In order to make audit assessment under Section 42 of the OVAT Act tax audit report is necessary. Tax audit report is submitted on the basis of tax audit conducted in the place of business of the dealer.
14. In the present case, audit assessment has already been made under Section 42 of the OVAT Act for the period from April 1, 2005 to March 31, 2006 and April 1, 2006 to October 31, 2006 vide annexure 3 series pursuant to notices for assessment of tax as a result of audit report issued to the petitioner under Sub-rule (1) of Rule 49 (vide annexure 2 series). After completion of the audit assessment, if the assessing officer for the reasons stated in Section 43 is of the opinion that there was under-assessment or any turnover has escaped assessment, he can proceed to reopen the completed audit assessment and make the reassessment as provided under Section 43 of the OVAT Act. The OVAT Act and the Rules framed thereunder have taken care of the situation where a dealer is under-assessed or its turnover has escaped assessment while making audit assessment under Section 42 of the Act. The interest of the Revenue is well protected under Section 43 which provides longer period of limitation of five years to take action under that section, in respect of the period(s) where audit assessment under Section 42 of the OVAT Act had been completed.
15. Thus, there being adequate safeguard provided in the statute for assessing the undisclosed/escaped turnover/under-assessments for different reasons as contained in Section 43, resorting to Section 41 for repeated tax audits and audit assessments is wholly unjustified, arbitrary and illegal and thereby provision of Section 43 in relation to assessment made under Section 42 would be rendered redundant. Sections 41 and 42 of the OVAT Act should not be interpreted so as to circumvent Section 43 of the Said Act.
16. When the statute provides for a particular procedure, the authority has to follow the same and cannot be permitted to act in contravention of the same. It is well-settled legal position that where a statute requires to do a certain thing in a certain way, the thing must be done in that way or not at all. Other methods or mode of performance are impliedly and necessarily forbidden. The aforesaid settled legal proposition is based on a legal maxim 'Expressio unius est exclusio alterius', meaning thereby that if a statute provides for a thing to be done in a particular, then it has to be done in that manner and in no other manner and following other course is not permissible. (Vide Taylor v. Taylor [1875] 1 Ch. D. 426, Hukam Chand Shyam Lal v. Union of India : [1976]2SCR1060 , Commissioner of Income-tax, Mumbai v. Anjum M.H. Ghaswala : [2001]252ITR1(SC) , Nazir Ahmed v. King Emperor , Deep Chand v. State of Rajasthan : [1962]1SCR662 ). In Him Cement Workers Union v. State of Orissa [2001] 92 CLT 184, this Court held that where a power has been given to do a certain thing in a certain way, the thing must be done in that way or not at all, and other methods of performance are necessarily forbidden.
17. Once an audit assessment is completed under Section 42 as mentioned ' above for a particular tax period(s), there is no further scope for tax audit and audit assessment invoking provisions of Section 41 and Section 42 of the OVAT Act for the same tax period. Moreover, the Legislature never intended to have repeated tax audits and audit assessments for the same tax period (s) because such an interpretation would render the provisions contained in Sub-sections (6) and (7) to Section 42 redundant, as the Department in case of failure to complete an audit assessment within the time prescribed can always start a new audit for fresh audit assessment and thereby it will become a never-ending process.
18. It is well-settled principle of law that what cannot be done directly that cannot be done indirectly. In this context, it would be useful to refer the decision of the honourable Supreme Court in S.R. Chaudhuri v. State of Punjab reported in : AIR2001SC2707 . The issue before the honourable Supreme Court in appeal was : Can a non-member, who fails to get elected during the period of six consecutive months, after he is appointed as a Minister or while a Minister has ceased to be a legislator, be reappointed as a Minister, without being elected to the Legislature after the expiry of the period of six consecutive months? The honourable apex court held that reappointment of Shri Tej Prakash Singh, the respondent, as a Minister with effect from November 23, 1996, after his resignation from the Council of Ministers on March 8, 1996, during the term of the same Legislative Assembly, without getting elected in the meanwhile, was improper, undemocratic, invalid and unconstitutional. His reappointment is accordingly set aside though at this point of time, it is of no consequence.
19. It would be subverting the Constitution to permit an individual, who is not a Member of the Legislature, to be appointed a Minister repeatedly for a term of 'six consecutive months', without getting himself elected in the meanwhile. The practice would be clearly derogatory to the Constitutional scheme, improper, undemocratic and invalid. Article 164(4) is at best only in the nature of an exception to the normal rule of only Members of the Legislature being Ministers, restricted to a short period of six consecutive months. This exception is essentially required to be used to meet a very extraordinary situation and must be strictly construed and sparingly used. The clear mandate of article 164(4) that if an individual concerned is not able to get elected to the Legislature within the grace period of six consecutive months, he shall cease to be a Minister, cannot be allowed to be frustrated by giving a gap of a few days and reappointing the individual as a Minister, without his securing confidence of the electorate in the meanwhile. Democratic process which lies at the core of our Constitutional schemes cannot be permitted to be flouted in this manner.
20. Reappointment of such a person, who fails to get elected as a Member within the period of grace of six consecutive months, would not only disrupt the sequence and scheme of article 164 but would also defeat and subvert the basic principle of representative and responsible Government. Resignation by the individual concerned before the expiry of the period of six consecutive months, not followed by his election to the Legislature, would not permit him to be appointed as Minister once again without getting elected to the Legislature during the term of the Legislative Assembly. The 'privilege' of continuing as a Minister for 'six months' without being an elected Member is only a one-time slot for the individual concerned during the term of the Legislative Assembly concerned.
21. Obligation of the judiciary is to administer justice according to law but the law must be one that commands legitimacy with the people and legitimacy of the law itself would depend upon whether it accords with justice.
22. If the contention of the Revenue that there is no restriction in conducting repeated tax audits for passing fresh audit assessment orders is accepted then that would result in placing an unrestricted power of conducting tax audits and making audit assessments in the hands of the Revenue authorities with their changing moods. This is certainly not the intention of Legislature.
23. Besides, once audit assessment under Section 42 is completed for a particular period, the assessing officer becomes functus officio for the same period so far second and subsequent assessment under that section is concerned. But there is no embargo for reopening the audit assessment earlier made, under Section 43 of the OVAT Act.
24. In view of the above, the present notice issued vide annexure 1 for tax audit for the period from April 1, 2005 till the date of audit visit is bad in law and liable to be quashed.
25. With the above observation, the writ petition is allowed and the notice under annexure 1 is quashed.
26. There shall be no order as to costs.