2020 (1) TMI 754 - HC - VAT and Sales Tax

Doctrine of merger - Levy of Purchase Tax - transfer of right to use the goods - Section 8A of the U.P. Trade Tax Act, 1948 - applicability of Section 22 of the Act, 1948 - Contention of the revisionist is that the lease rent received by the revisionist from the lessee, was not amenable to levy of tax on the transfer of right to use the goods as per Section 3F of the Act, 1948 and therefore they were not liable for payment of any tax, as such. HELD THAT - The application under Section 22 of the Act, 1948 sought to rectify the mistake committed by the assessing authority who passed the assessment order in ignorance of the amendments made in Section 3F of the Act, 1948 by means of Amendment Act No. 11 of 2001 and therefore the said application was clearly not maintainable, inasmuch as, in exercise of power under Section 22 of the Act, 1948, only the mistake committed by the first Appellate Authority could have been rectified. The issue regarding tax on lease rent became final when the same was duly accepted by the revisionist and the revenue did not chose to reopen the same by exercising powers relating to reopening the assessment and therefore, the order of the assessing authority attained finality and was not liable to be opened in the manner the revenue has sought to reopen, i.e. by moving an application under Section 22 of the Act, 1948 - The situation would have been different had the issue regarding lease rent been considered and decided by the first appellate authority - the doctrine of merger as canvassed by the learned counsel for the revenue would not apply. The very words rectification of mistake includes due application of mind on a particular set of fact or law which are liable to be corrected under the powers conferred under Section 22 of the Act, 1948 - In the facts of the present case, where an issue was never raised before the Appellate Authority nor considered by it, it cannot be subject matter for correction of a mistake and therefore application under Section 22 of the Act, 1948, preferred by the revenue for correction of mistake in the order of Joint Commissioner (Appeals), was clearly misconceived. The application for rectification under Section 22 of the Act, 1948 was moved by the revenue for rectification of the order of the Joint Commissioner (Appeals) but in the entire application there was no mention of the mistake sought to be rectified in the said order and therefore, such an application would not be maintainable and it would be a colourable exercise that under the garb of rectification of mistake of the order of first Appellate Authority, the order of the Assessing Authority is rectified/modified and fresh assessment is made in this regard - the impugned order of the Tribunal is not sustainable and therefore the same is set aside - Revision allowed.

Summary

Issues Involved:
1. Applicability of Section 22 of the U.P. Trade Tax Act, 1948.
2. Justification of the Tribunal in upholding the order of the first appellate authority.
3. Whether the order of the assessing authority was amenable to correction after merging with the appellate order.

Issue-wise Detailed Analysis:

1. Applicability of Section 22 of the U.P. Trade Tax Act, 1948:
The revisionist argued that the application for rectification under Section 22 was not maintainable as there was no apparent mistake in the appellate authority's order. Section 22 allows rectification of mistakes apparent on the record within three years from the date of the order. The application must demonstrate an apparent mistake in the order of the concerned authority. The court found that the application by the revenue sought to rectify a mistake in the assessing authority's order, not the first appellate authority's order. Thus, the application under Section 22 was misconceived as it did not point out any error in the appellate authority's order.

2. Justification of the Tribunal in upholding the order of the first appellate authority:
The Tribunal upheld the first appellate authority's decision to rectify the mistake and levy tax on the lease rent received by the revisionist. However, the court found that the issue of taxability on lease rent was not raised before the first appellate authority. Therefore, the first appellate authority's order did not merge with the assessing authority's order on this issue. The court concluded that the application for rectification was not maintainable as it sought to correct an order that did not address the lease rent issue.

3. Whether the order of the assessing authority was amenable to correction after merging with the appellate order:
The court discussed the "doctrine of merger," which implies that the order of the assessing authority merges with the appellate authority's order, making the original order cease to exist. Since the appellate authority did not address the lease rent issue, the assessing authority's order on this matter did not merge with the appellate order. The court referenced the case of Commissioner of Central Excise, Delhi Vs. Pearl Drinks Ltd., where it was held that the doctrine of merger does not apply if the appellate authority did not examine the specific issue.

Conclusion:
The court concluded that the application under Section 22 of the Act, 1948, was not maintainable as it sought to rectify an order that did not contain any apparent mistake. The issue of taxability on lease rent was not addressed by the first appellate authority, and therefore, the assessing authority's order on this matter did not merge with the appellate order. The court set aside the Tribunal's order and allowed the revision.