1996 (5) TMI 406 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the legality of notices issued by the assessing authority under section 25-A of the Karnataka Sales Tax Act, 1957 for the assessment years 1986-87, 1987-88, and 1988-89.

Analysis:
The petitioner, a registered dealer in sweetmeats and kharas, contested the legality of notices issued by the assessing authority under section 25-A of the Act to amend completed assessments for the mentioned years. The dealer had been granted composition benefit under section 17(4) of the Act, assuming the dealer to be a hotelier or restaurateur. The assessing authority sought to rectify these assessments based on circular instructions issued by the Commissioner of Commercial Taxes. The dealer challenged the notices as being without jurisdiction, invalid, and illegal.

The power of rectification under section 25-A is quasi-judicial, and the authority must not be influenced by external directives. The authority cannot rectify an order solely based on subsequent circulars unless there is a mistake apparent from the record. The notices issued by the assessing authority for the years 1986-87 and 1987-88, relying on a circular, were deemed invalid as the circular did not constitute a retrospective legislative amendment or overrule a judicial decision. The assessing authority failed to apply proper judgment and was influenced by the circular instructions.

Even the notice for the assessment year 1988-89 was found to be flawed, as the assessing authority changed its opinion based on a circular not considered during the original assessment. Rectification can only be made for mistakes apparent on the face of the record, not for a change of opinion. The order granting composition benefit could not be rectified in this manner. The court allowed the petitions, quashing the notices issued under section 25-A as being without jurisdiction.

The judgment did not delve into whether the dealer's activities qualified as hotel or restaurant business. The decision was based on the assessing authority's improper use of section 25-A to withdraw the composition benefit. The petitions were allowed, with parties directed to bear their own costs.