2011 (9) TMI 545 - HC - VAT and Sales Tax

Clarification in respect of revised tax under KVAT Act - Appellant manufacturer of fruit juices sought clarification from Advance ruling - Commissioner revised the order passed by advance ruling - Held That - Advance Rulings Authority without following the judgment of the Tribunal, erroneously has granted an order in favour of the Respondent. - Further Commissioner is justified in regard to the classification of the Resin Coated Sand under Residuary Clause. In view of Division bench order of the Commissioner cannot be retrospective and it could be prospective only.

Summary

Issues:
Challenge to conferment of power of SUO MOTO Revision under Section 64(2) on the Commissioner; Validity of notice issued by Commissioner under Section 64(2) proposing to revise a previous clarification; Effect of the order to be passed by the Commissioner on the Petitioner.

Analysis:
The Petitioner sought a declaration regarding the conferment of power of SUO MOTO Revision under Section 64(2) on the Commissioner, specifically related to a clarification issued by ACAR, alleging violation of constitutional Articles and the scheme of Section 60 of KVAT Act. However, the Petitioner's advocate clarified that the prayer could be treated as a request for a prospective effect of the order based on a notice, not retrospective. The Petitioner, a fruit juices manufacturer, received a clarification from the Authority for Clarification and Advance Rulings under Section 60 of the KVAT Act in 2007, paying taxes accordingly. Subsequently, the Commissioner issued a notice in 2010 proposing to revise the clarification, leading to this challenge.

The Authority's clarification binding the Petitioner determined tax liability at 4%, which the Petitioner had been paying. However, the Commissioner's notice under Section 64(2) sought to revise this clarification, alleging it to be erroneous and prejudicial to the revenue. The key issue revolved around whether the Commissioner's order would have a prospective or retrospective effect. Referring to a previous judgment, the Court emphasized that the order should be prospective, not retrospective, based on the principle that the Advance Rulings Authority's decision, known to the Assessee, was not properly considered by the Commissioner.

The Court refrained from delving into the merits of the matter due to the Petitioner's ability to file objections to the notice. Ultimately, the judgment clarified that the order to be passed by the Commissioner would have a prospective effect from the date of issuance, resolving the writ petition.