Assistant Commercial Taxes Officer vs M/S Makkad Plastic Agencies

Assistant Commercial Taxes Officer .... Appellant

Versus

M/s Makkad Plastic Agencies .... Respondent

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. Leave granted.

2. This appeal is directed against the judgment and

order dated 03.05.2010 passed by the Rajasthan

High Court, Jodhpur Bench, in S.B. Civil [Sales-

Tax] Revision No. 74 of 2010, whereby the High

Court dismissed the said Revision Petition

preferred by the appellant herein and upheld the

order dated 22.01.2009 passed by the Rajasthan

Taxation Board, Ajmer, wherein the Taxation

Board interfered and modified its earlier order

dated 13.05.2008.

3. The assessment of the assessee-respondent for

the Assessment Year 2001-02 was completed by the

Assessing Officer under Section 29(7) of the

Rajasthan Sales Tax Act, 1994 [for short "the

Act of 1994"] holding that the tax on "thermo

ware" and "vacuum ware", which were the articles

sold by the assessee-respondent during the

relevant assessment year, should be levied Sales

Tax at 10 per cent instead of 8 per cent,

treating them as separate articles from plastic

goods/products. Consequently, the liability of

difference of tax at 2 per cent along with

surcharge, interest and penalty was also levied.

4. The aforesaid order of the Assessing Officer was

challenged by the assessee-respondent before the

Deputy Commissioner [Appeals], Commercial Tax

Department, Bikaner under Section 84 of the Act

of 1994, which was allowed by the Appellate

Authority by order dated 29.03.2005 by setting

aside the demand for difference of tax imposed

at 2 per cent as also the penalty and interest.

5. Aggrieved by the aforesaid order dated

29.03.2005 of the Deputy Commissioner [Appeals],

Bikaner the appellant herein preferred an appeal

before the Rajasthan Taxation Board, Ajmer,

which was heard and disposed of by the Taxation

Board by allowing the same vide its order dated

13.05.2008. The Taxation Board considered

various documents placed on record including

invoices and, thereafter, on appreciation

thereof, it was held that "plastic goods" and

"thermo ware" are two different articles as was

indicated from the invoice itself. It was also

held that the conclusion arrived at by the Tax

Assessing Officer is well-considered and

reasonable, whereas the order passed by the

Deputy Commissioner [Appeals], Bikaner is

contrary to facts and law. Having held thus, the

Taxation Board allowed the appeal and order

dated 29.03.2005 passed by the Deputy

Commissioner [Appeals], Bikaner was set aside

and order passed by the Tax Assessing Officer

was restored.

6. The assessee-respondent thereafter filed a

rectification/amendment application purportedly

under Section 37 of the Act of 1994, which was

decided by the Rajasthan Taxation Board, Ajmer

by passing an order dated 22.01.2009. By the

aforesaid order the Taxation Board modified its

earlier order to the extent of holding that as

the assessee-respondent had declared all his

sales in the books of accounts, in that

situation, in order to levy penalty, department

has to also prove additionally, that there was a

mala fide intention on the part of the assessee-

respondent for tax evasion, which is not

revealed in the present case. It was further

held that as the mala fide intention of the

assessee-respondent for tax evasion has not been

proved and since no such evidence is available

on record from which it could be established

that the assessee-respondent had the mala fide

intention behind recovering the tax at the rate

of 8 per cent, the order of levying penalty is

not justiciable. After recording the aforesaid

findings, the Taxation Board passed an order

dated 22.01.2009 to the extent of amending its

previous order dated 13.05.2008 and set aside

the order passed by the Deputy Commissioner

[Appeals], Bikaner dated 29.03.2005 on the issue

of tax evasion only, however, maintained the

finding on the issue of penalty.

7. Being aggrieved by the aforesaid order passed by

the Taxation Board a Revision Petition was

preferred by the appellant before the High Court

of Rajasthan, Jodhpur Bench under Section 86 of

the Act of 1994. The High Court, however, held

that no question of law arises out of the order

passed by the Taxation Board for consideration

and, consequently, the Revision Petition was

dismissed. The present appeal, as stated

hereinbefore, is directed against the aforesaid

two orders passed by the High Court as also by

the Taxation Board.

8. From the aforesaid narration of facts it is

crystal clear that the earlier order dated

13.05.2008 passed by the Taxation Board was

interfered with and modified by the Taxation

Board itself under its order dated 22.01.2009.

The said order dated 22.01.2009 is practically

challenged in the present case on the ground

that the said order was passed by the Taxation

Board in excess of its jurisdiction. The said

order dated 22.01.2009 was passed on the basis

of an Amendment Application filed by the

assessee-respondent under Section 37 of the Act

of 1994. In the said order dated 22.01.2009, the

Taxation Board proceeded on the ground that the

said application was in the nature of Amendment

Application praying for amendment of its

judgment and order dated 13.05.2008.

9. Contention raised on behalf of the appellant is

that the Taxation Board committed a

jurisdictional error in amending and reviewing

its earlier order dated 13.05.2008 while

exercising the power of rectification of a

mistake apparent on the face of the record.

10.It may be stated herein that despite service of

notice, none appears for the assessee-respondent

and, therefore, we proceed to dispose of this

appeal on the basis of the submissions made by

the counsel appearing for the appellant and also

on the perusal of the records placed before us.

11.In order to appreciate the aforesaid contention,

we are required to extract the relevant part of

Section 37 of the Act of 1994, which was the

power exercised by the Taxation Board for

passing the order dated 22.01.2009: -

"Section 37: Rectification of a Mistake -

(1) With a view to rectifying any mistake apparent from the record, any officer appointed or any authority constituted under the Act may rectify suo motu or otherwise any order passed by him.

Explanation: A mistake apparent from the record shall include an order which was valid when it was made and is subsequently rendered invalid by an amendment of the law having retrospective operation or by a judgment of the Supreme Court, the Rajasthan High Court or the Rajasthan Tax Board.

............................................................................................................................................................... ..............................................................................."

12.The Taxation Board by its order dated 13.05.2008

was disposing of an appeal filed against the

order dated 29.03.2005 passed by the Deputy

Commissioner [Appeals]. By the aforesaid order

dated 13.05.2008 the Taxation Board upheld and

accepted the contention of the appellant herein

that "thermo ware" is not similar to "plastic

product" and that rather they are two different

products/articles, which in fact is also proved

and established from the documents on record. It

was, therefore, held that the conclusion arrived

at by the Assessing Officer is well-considered

and reasonable. It was also held that, although,

in the appellate judgment, given by the Deputy

Commissioner [Appeals], reference was made to

the use of "plastic granules" and "powder" as

raw material for manufacturing "thermo ware" for

treating "thermo ware" as covered under the

category of plastic goods/products, but neither

any evidence nor any reasonable and justifiable

ground was given in the said order for doing the

same. After recording the aforesaid findings,

the Taxation Board set aside the judgment of the

Deputy Commissioner [Appeals] and restored the

order of the Tax Assessing Officer, who had by

his order, held that the assessee-respondent is

liable to pay tax at the rate of 10 per cent, as

the product "thermo ware" and "vacuum ware",

which are the articles sold by the assessee-

respondent, are assessable to tax at the rate of

10 per cent instead of 8 per cent to be levied

on plastic wares.

13. The aforesaid well-reasoned order came to be

interfered with by the Taxation Board itself

while exercising the purported powers under

Section 37 of the Act of 1994, which empowers

the Board only to rectify a mistake apparent on

the face of the record. The issue, therefore, is

whether, while exercising such power vested

under Section 37 of the Act of 1994, the

Taxation Board could re-appreciate the evidence

on record and review its earlier order by

holding that there was no mens rea on the part

of the assessee-respondent and, therefore, no

penalty is leviable on them. The aforesaid

exercise of power by the Taxation Board in the

present case by interfering with its earlier

order was submitted to be a jurisdictional error

and also purportedly to be an exercise of power

in excess to what is provided in the statute.

14.The scope and ambit of the power which could be

exercised under Section 37 of the Act of 1994 is

circumscribed and restricted within the ambit of

the power vested by the said Section. Such a

power is neither a power of review nor is akin

to the power of revision but is only a power to

rectify a mistake apparent on the face of the

record. Rectification implies the correction of

an error or a removal of defects or

imperfections. It implies an error, mistake or

defect which after rectification is made right.

15.In the case of Commissioner of Income Tax,

Bhopal v. Ralson Industries Ltd. reported in

(2007) 2 SCC 326 a similar situation arose for

the interpretation of this Court regarding the

scope and ambit of Section 154 of the Income Tax

Act vesting the power of rectification as

against the power vested under Section 263 of

the Income Tax Act, which is a power of

revision. While examining the scope of the power

of rectification under Section 154 as against

the power of revision vested under Section 263

of the Income Tax Act, it was held by this Court

as follows at Para 8: -

"8. The scope and ambit of a proceeding for rectification of an order under Section 154 and a proceeding for revision under Section 263 are distinct

and different. Order of rectification can be passed in certain contingencies. It does not confer a power of review. If an order of assessment is rectified by the Assessing Officer in terms of Section 154 of the Act, the same itself may be a subject matter of a proceeding under Section 263 of the Act. The power of revision under Section 263 is exercised by a higher authority. It is a special provision. The revisional jurisdiction is vested in the Commissioner. An order thereunder can be passed if it is found that the order of assessment is prejudicial to the Revenue. In such a proceeding, he may not only pass an appropriate order in exercise of the said jurisdiction but in order to enable him to do it, he may make such inquiry as he deems necessary in this behalf."

In paragraph 12 of the said judgment it was also held

that when different jurisdictions are conferred upon

different authorities, to be exercised on different

conditions, both may not be held to be overlapping

with each other. While examining the scope and

limitations of jurisdiction under Section 154 of the

Income Tax Act, it was held that such a power of

rectification could only be exercised when there is

an error apparent on the face of the record and that

it does not confer any power of review. It was

further held that an order of assessment may or may

not be rectified and if an order of rectification is

passed by the Assessing Authority, the rectified

order shall be given effect to.

16.We may also at this stage appropriately refer to

yet another decision of this Court in

Commissioner of Trade Tax, U.P. v. Upper Doab

Sugar Mills Ltd. reported in (2000) 3 SCC 676,

in which the power and scope of rectification

was considered and pitted against the scope of

review. The aforesaid decision was in the

context of Section 39(2) of the U.P. Sales Tax

(Amendment) Act, 1995 which provides the power

of review. Section 22 of the said Act provides

for rectification of mistake. In the said

decision, it was held that when two specific and

independent powers have been conferred upon the

authorities, both powers can be exercised

alternatively, but, it cannot be said that while

exercising power of rectification, the authority

can simultaneously exercise the power of review.

17.Both the aforesaid two decisions which were

rendered while considering taxation laws are

squarely applicable to the facts of the present

case. It is also now an established proposition

of law that review is a creature of the statute

and such an order of review could be passed only

when an express power of review is provided in

the statute. In the absence of any statutory

provision for review, exercise of power of

review under the garb of

clarification/modification/correction is not

permissible. In coming to the said conclusion we

are fortified by the decision of this Court in

Kalabharati Advertising v. Hemant Vimalnath

Narichania and Others reported in (2010) 9 SCC

437.

18. Section 37 of the Act of 1994 provides for a

power to rectify any mistake apparent on the

record. Such power is vested on the authority to

rectify an obvious mistake which is apparent on

the face of the records and for which a re-

appreciation of the entire records is neither

possible nor called for. When the subsequent

order dated 22.01.2009 passed by the Taxation

Board is analysed and scrutinised it would be

clear/apparent that the Taxation Board while

passing that order exceeded its jurisdiction by

re-appreciating the evidence on record and

holding that there was no mala fide intention on

the part of assessee-respondent for tax evasion.

Such re-appreciation of the evidence to come to

a contrary finding was not available under

Section 37 of the Act of 1994 while exercising

the power of rectification of error apparent on

the face of the records.

19.Thus, the orders passed by the Taxation Board on

22.01.2009 as also the impugned order and

judgment passed by the High Court upholding the

said order of the Taxation Board are hereby set

aside and quashed and the original order passed

by the Assessing Officer is restored.

20.In terms of the aforesaid observations, the

present appeal is allowed but without costs.

............................J [ Dr. Mukundakam Sharma ]

.............................J [ Anil R. Dave ] New Delhi, March 29, 2011.