2011 (7) TMI 1054 - HC - VAT and Sales Tax

Revision against the rectification order passed by the Karnataka Appellate Tribunal under section 25A read with section 22(6) of the Karnataka Sales Tax Act, 1957 Held that - After looking into sections 5 and 5A and the two notifications which are the subject-matter of these proceedings, rightly came to the conclusion that when the assessee has not paid any tax under section 5A, he is not entitled to the benefit of reduction of payment of turnover tax from three per cent to one per cent and he is liable to pay turnover tax at three per cent before. The same does not call for interference. When the earlier order did not properly comprehend as to the dispute between the parties and decided the appeal by proceeding tangentially altogether on a different point, a case of error apparent on the face of the record, is clearly made out and the KAT was justified in rectifying the mistake it had committed by rectifying the earlier order. In fact section 22(6) confers on the KAT the power to review any order passed by it under section 4 on the basis of the fact it was not before it when it pass ed the order. Therefore, when the KAT did not look into the fact which was before it and took into consideration which was not before it and passed the order, rectification of such an order is valid and legal and does not suffer from any legal infirmity which calls for interference. No merit in this revision petition.

Summary

Issues:
1. Interpretation of exemption notification under the Karnataka Sales Tax Act, 1957.
2. Applicability of turnover tax under section 6B of the Act.
3. Rectification power of the Karnataka Appellate Tribunal (KAT) under section 22(6).

Interpretation of Exemption Notification:
The case involved a manufacturer of motor vehicle components claiming exemption from sales tax under a notification exempting tax payable for sales to another company. The manufacturer contended that a subsequent notification reducing turnover tax to one percent applied to them. However, the court held that the exemption notification must be strictly construed and applied. The court clarified that the exemption was specific to section 5 and did not extend to section 5A. As the manufacturer did not pay tax under section 5A, the subsequent notification reducing turnover tax did not apply. The Karnataka Appellate Tribunal (KAT) initially erred in granting the benefit but correctly rectified its decision, concluding that the manufacturer was liable to pay turnover tax at three percent.

Applicability of Turnover Tax:
The manufacturer argued that the turnover tax should be reduced to one percent based on a subsequent notification. However, the court emphasized that the conditions for applying the second notification included payment of sales tax under section 5A. As the manufacturer did not make any payment under section 5A but claimed exemption under section 5, the subsequent notification reducing turnover tax did not apply. The court upheld the decision that the manufacturer was liable to pay turnover tax at three percent.

Rectification Power of KAT:
The Tribunal rectified its earlier order that erroneously granted the benefit of reduced turnover tax to the manufacturer. The court explained that the KAT has the power to rectify orders with apparent errors. The rectification was deemed valid as the original order did not properly address the dispute and the KAT rectified the mistake. The court upheld the rectification under section 22(6) of the Act, dismissing the revision petition as lacking merit.