2018 (8) TMI 1323 - HC - Service Tax

Rectification of an order of assessment - Case of petitioner is that the income from restaurant was exempt from tax - rejection of rectification application on the ground that this is not a case for exercising such powers of rectification - Held that - The Assistant Commissioner has not stated why according to him what the petitioner pointed out was not an apparent error. Secondly, we are informed that the petitioner had, by way of abandoned caution, also filed an appeal. The question of circumventing the appeal route is therefore does not arise. The Assistant Commissioner is requested to pass fresh order of rectification application of the petitioner and specifically comment on the petitioner s contention that though his income from restaurant business was exempt and so treated for part of the period under consideration, the same was added for the remaining part which was an apparent error - rectification application allowed.

Summary

Issues:
Challenge to order rejecting application for rectification of assessment order.

Analysis:
The petitioner challenged an order rejecting the rectification application concerning service tax liability for financial years 2011-12 to September 2016. The Adjudicating authority confirmed the liability, interest, and penalties. The petitioner contended that income from the restaurant was exempt from tax, which was recognized for some years but ignored for the later period, leading to an error in taxable turnover calculation.

The Adjudicating authority rejected the rectification application, citing the provision allowing rectification subject to certain conditions. He opined that rectification could only be done for apparent errors on record. The authority highlighted that invoking "mistake apparent from the record" cannot be used to reopen final assessments under section 73, as it would circumvent the law. The rejection was based on the grounds that there was no apparent error and to prevent circumventing the appeal limitation period.

The High Court set aside the impugned order, directing the Assistant Commissioner to pass a fresh order on the rectification application. The Commissioner was instructed to specifically address the petitioner's contention regarding the exemption of income from the restaurant business, which was erroneously added for the remaining period under consideration. The Court disposed of the petition with these observations, allowing direct service.