2015 (8) TMI 589 - HC - VAT and Sales Tax

Exemption granted on Invalid F-Form Invocation of revision jurisdiction In original assessment appellant was granted exemption on basis of F-forms issued by consignment agent of appellant Further notice was issued against which court granted stay of all proceedings pursuant to notice While so, Commissioner of Commercial Taxes issued notice to appellant under section 37 of Kerala General Sales Tax Act, 1963 proposing to set aside assessment order Whether Commissioner was right in invoking powers conferred under section 37 of KGST Held that - Commissioner by impugned order found that assessment was completed granting exemption on portion of turnover based on F form Subsequent information revealed that F form furnished was invalid Granting of exemption on strength of invalid declaration was prejudicial to interests of Revenue It was also found that there was no need for order which was sought to be revised to be found erroneous It was not necessary at all for exercise of power under section 37 that Commissioner must find that order was both erroneous as also prejudicial to interest of Revenue, as that was not requirement of section 37 If there was error resulting in revenue losing tax, it would be prejudicial to interests of Revenue Law does not require that order was erroneous for invocation of power under section 37 There was no period of limitation prescribed for exercising power under section 37 In such circumstances, impugned order upheld Appeal dismissed Decided in favour of Revenue.

Issues Involved:
1. Jurisdiction of the Commissioner of Commercial Taxes under Section 37 of the Kerala General Sales Tax Act.
2. Erroneous and prejudicial nature of the assessment order.
3. Validity of parallel proceedings by the Department.
4. Impact of subsequent disqualification of the dealer who issued statutory forms on the exemption claimed.
5. Limitation period for reassessment.

Detailed Analysis:

1. Jurisdiction of the Commissioner of Commercial Taxes under Section 37 of the Kerala General Sales Tax Act:
The appellant challenged the jurisdiction of the Commissioner to invoke powers under Section 37 of the Act based on material not available at the time of the original assessment. The court examined various precedents and concluded that the Commissioner has the authority to scrutinize and act upon subsequent information that reveals an error prejudicial to the interests of the Revenue. The court emphasized that Section 37 does not require the order to be erroneous, only that it be prejudicial to the interests of the Revenue.

2. Erroneous and prejudicial nature of the assessment order:
The appellant argued that the assessment order was not erroneous or prejudicial to the Revenue. The court referred to previous judgments, including the Supreme Court's interpretation in Malabar Industrial Co. Ltd. v. Commissioner of Income-tax, which clarified that an order resulting in loss of revenue due to an error is considered prejudicial. The court noted that under Section 37, it is sufficient if the order is prejudicial to the interests of the Revenue without necessarily being erroneous.

3. Validity of parallel proceedings by the Department:
The appellant contended that the initiation of suo motu proceedings under Section 37 while reassessment proceedings were pending constituted parallel proceedings, which is impermissible. The court held that the Commissioner's power under Section 37 is distinct and can be invoked independently of other proceedings, provided the order is prejudicial to the interests of the Revenue.

4. Impact of subsequent disqualification of the dealer who issued statutory forms on the exemption claimed:
The appellant claimed exemption based on F forms issued by a consignment agent, which were later invalidated. The court distinguished this case from others where subsequent cancellation of registration did not affect past transactions. The court held that the invalidation of the F forms at the point of issue, even if discovered later, justified the Commissioner's action to revise the assessment.

5. Limitation period for reassessment:
The appellant argued that the reassessment was barred by limitation under Rule 6(7) of the Central Sales Tax (Kerala) Rules, 1957. The court noted that the limitation period for invoking Section 37 was not transgressed. Therefore, the question of the original assessment being barred by limitation was not considered relevant to the appeal against the order under Section 37.

Conclusion:
The court upheld the Commissioner's order, allowing the appellant to raise all contentions regarding the invalidation of F forms in subsequent proceedings. The appeal was dismissed, with the court clarifying that the Commissioner's action under Section 37 was justified based on subsequent information prejudicial to the interests of the Revenue.

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