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2019 (7) TMI 1011 - HC - VAT and Sales TaxValidity of re-assessment order - Section 39(1) of the KVAT Act - power of rectification of assessment or re-assessment - HELD THAT - Section 41(1) of the KVAT Act is applicable where the order of re-assessment is found to be erroneous insofar it is prejudicial to the interest of the public revenue by the judgment or order of any Court - the re-assessment orders impugned dated 08.08.2017 at Annexure A to the writ petitions passed under Section 39(2) of the KVAT Act as well as the consequent notices of demand at Annexure-B to the writ petitions are quashed reserving liberty to the Department to initiate appropriate proceedings in accordance with law. Petition disposed off.
Issues:
Challenging re-assessment orders under Sections 39(2), 72(2), and 36(1) of the Karnataka Value Added Tax Act, 2003 and consequential notices of demand. Interpretation of Sections 39(2) and 41 of the KVAT Act. Applicability of judgments in similar cases. The petitioner, a partnership firm engaged in manufacturing and selling cement bricks and paver bricks, challenged re-assessment orders and notices of demand issued under the Karnataka Value Added Tax Act, 2003. The re-assessment under Section 39(1) of the KVAT Act levied VAT on bricks at 5%/5.5%, followed by proceedings under Section 39(2) to tax paver bricks at 14%/14.5%. The petitioner contended that no new evidence justified invoking Section 39(2) after the initial re-assessment. Citing precedents, the petitioner argued that the orders under Section 39(2) should be set aside due to the absence of further evidence post-initial assessment. The petitioner's counsel referenced judgments like M/s. Amma Construction India Pvt. Ltd. and M/s Kotak Mahindra Prime Limited to support their argument against the re-assessment orders. They highlighted the limitations on invoking Section 39(2) without new evidence and challenged the validity of the re-assessment based on the available legal provisions and court decisions. The Additional Government Advocate for the revenue defended the re-assessment proceedings, citing Section 41 of the KVAT Act, which allows rectification of assessments based on court judgments within three years. They argued that the re-assessment orders were justified to comply with the judgment of the Hon'ble Apex Court, emphasizing the authority's power to rectify assessments in such cases. The court analyzed Sections 39(2) and 41 of the KVAT Act, emphasizing the distinction between re-assessment and rectification powers. Referring to the M/s Kotak Mahindra case, the court noted that re-opening proceedings based on a judgment is impermissible unless vested with revisional authority. The court also cited the M/s. Simplex Concrete case, highlighting that subsequent legal reversals do not authorize reopening closed assessments based on previous legal positions. The court concluded that the re-assessment orders under Section 39(2) lacked legal basis and should be quashed. While acknowledging the revenue's right to initiate appropriate proceedings, the court emphasized the importance of following due process and providing opportunities for the affected party to respond to such actions. The judgment clarified the legal flaws in the impugned orders and upheld the petitioner's challenge, setting aside the re-assessment orders and notices of demand. In summary, the court's decision focused on the proper application of Sections 39(2) and 41 of the KVAT Act, considering relevant precedents and legal provisions to determine the validity of the re-assessment orders. The judgment highlighted the necessity of adhering to legal procedures and providing opportunities for affected parties to address any challenges to tax assessments.
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