2011 (3) TMI 1514 - HC - VAT and Sales Tax

Whether P.U. resin can, by no stretch of imagination, be held to be synthetic adhesive and, therefore, could not be taxed at 16 per cent under entry No. 91 of the notification dated March 27, 1995? Held that - While holding that this question falls within the four corners of section 37 of the Act dealing with the rectification of mistake apparent on the face of the record, this court is inclined to set aside all the three orders passed by the three authorities below and remand the case back to the assessing authority itself. Accordingly, this revision petition is allowed and the three orders, namely, order dated March 13, 2000 passed by the assessing authority, order dated August 22, 2000 passed by the Deputy Commissioner (Appeals) and order dated August 16, 2004 passed by the learned Tax Board are set aside and the matter is remanded back to the learned assessing authority, who will decide the rectification application on the merits de novo after giving an opportunity of hearing to the assessee and allowing him to adduce relevant evidence in support of his contentions before him.

Issues Involved:
1. Applicability of Section 37 of the Rajasthan Sales Tax Act, 1994 for rectification of mistake.
2. Correct rate of tax applicable to Polyurethane (P.U.) resin.
3. Whether the issue raised constitutes a "mistake apparent from the face of the record."
4. Appropriate remedy for the assessee for disputing the tax rate.

Issue-wise Detailed Analysis:

1. Applicability of Section 37 of the Rajasthan Sales Tax Act, 1994 for rectification of mistake:

The assessee filed a revision petition under Section 86 of the Rajasthan Sales Tax Act, 1994, challenging the order of the Tax Board, which had set aside the first appellate authority's decision allowing the rectification application under Section 37. The Tax Board held that the issue raised by the assessee regarding the tax rate on P.U. resin fell outside the scope of Section 37. The court emphasized that Section 37 is a remedial measure designed to rectify mistakes apparent on the face of the record, including legal mistakes. The court stated that the term "mistake apparent from the face of the record" should not be narrowly interpreted and can include mistakes in the application of the law.

2. Correct rate of tax applicable to Polyurethane (P.U.) resin:

The primary contention was whether P.U. resin should be taxed at 10% under the residuary entry or at 16% under entry No. 91, which applies to synthetic adhesives. The assessee argued that P.U. resin is not a synthetic adhesive and should be taxed at 10%. The original assessment had levied a 16% tax rate, which the assessee claimed was a mistake. The court noted that the assessing authority did not provide a show-cause notice or an opportunity for the assessee to argue this point during the original assessment.

3. Whether the issue raised constitutes a "mistake apparent from the face of the record":

The court considered various precedents to determine whether applying the wrong tax rate could be considered a "mistake apparent from the face of the record." It concluded that such a mistake, if clear and discernible from the record, falls within the scope of Section 37. The court cited several cases where higher courts allowed rectification for similar mistakes, emphasizing that the essence of rectification is to align the order with the correct application of the law.

4. Appropriate remedy for the assessee for disputing the tax rate:

The Revenue argued that the assessee should have filed an appeal under Section 84 against the original assessment order. However, the court held that the assessee could also seek rectification under Section 37 if a mistake was apparent. The court decided that the issue of the correct tax rate on P.U. resin should be addressed on its merits rather than dismissed as outside the scope of Section 37. The court remanded the case to the assessing authority to reconsider the rectification application, providing the assessee an opportunity to present evidence.

Conclusion:

The court allowed the revision petition, set aside the orders of the Tax Board, Deputy Commissioner (Appeals), and the assessing authority, and remanded the case back to the assessing authority. The assessing authority was directed to decide the rectification application de novo, considering the merits and allowing the assessee to present relevant evidence. The court expected the assessing authority to complete this process within six months.

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