2016 (9) TMI 1222 - HC - VAT and Sales Tax

Rectification of re-assessment order under Section 69(2) of the VAT Act - fabrication of iron and steel gates and windows etc - Entry Sl.No.4 of the Sixth Schedule taxable at 4% and at 5.5% after issuance of clarification on 26.3.2015 - Entry Sl.No.23 of Sixth Schedule taxable at 12% - Whether the re-assessment was permissible under the head of Rectification of the order in purported exercise of the power under Section 69 of Karnataka Value Added Tax Act, 2003 on the basis of a clarification issued by the Commissioner which itself is after the order of re-assessment dated 28.6.2010? Held that - the material which did not exist at all at the time of order of re-assessment was passed on 28.6.2010 would not form basis for rectification of the re-assessment order. When it is undisputed position that the basis of the exercise of power for rectification is the clarification order dated 21.2.2012 issued by the Commissioner which in any case has come into existence after the order of re-assessment, the power of rectification was unavailable. Further, it is not the case of respondent-revenue that any other clarification like 21.2.2012 was already in existence prior to 28.6.2010 i.e. date on which the order of re-assessment was passed. No material which has come into existence after the order/re-assessment is passed can be made as the basis for exercise of power under Section 69 of the Act - question is answered in favour of the petitioner-assessee and against the revenue - petition allowed.

Summary

Issues:
Rectification of order under Section 69 of Karnataka Value Added Tax Act, 2003 based on subsequent clarifications issued by the Commissioner.

Analysis:
1. The primary issue in this case revolves around the permissibility of re-assessment under the head of rectification of order based on a clarification issued by the Commissioner after the original re-assessment order. The petitioner-assessee challenged the rectification order issued by the Assessing Authority based on subsequent clarifications regarding the applicable tax rates for fabrication work.

2. The court examined Section 69 of the KVAT Act, which allows rectification of mistakes apparent from the record within five years of the original order. The court emphasized that the rectification must be based on mistakes that are evident from the record at the time of the original order. The court highlighted that any material or fact that came into existence after the original order cannot be considered for rectification.

3. The court referred to a decision in Mysore Cements Limited vs. Deputy Commissioner of Commercial Taxes, emphasizing that rectification can only be made for mistakes that are glaring and obvious from the record, without the need for detailed investigation. The court also cited the decision in Deva Metal Powders Private Limited vs. Commissioner, Trade Tax, Uttar Pradesh, stating that rectification cannot be based on debatable points of law or fact.

4. The court concluded that the rectification order in this case, based on subsequent clarifications issued after the original re-assessment order, was beyond the scope of Section 69 of the Act. As the clarifications did not exist at the time of the original order, they could not form the basis for rectification. The court held that the rectification order and subsequent appeals were unsustainable, ruling in favor of the petitioner-assessee.

5. Consequently, the court set aside the orders of the Assessing Authority, first appellate authority, and the Tribunal, declaring them invalid. The petitions filed by the petitioner were allowed, and no costs were awarded in this matter.