Triveni Engg. Industries ... vs Commissiner Trade U.P. Lucknow
2017 Latest Caselaw 3696 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

A.F.R.
 
Reserved
 

 
Case :- SALES/TRADE TAX REVISION No. - 212 of 2006
 

 
Applicant :- Triveni Engg. Industries Limited, Naini Allahabad
 
Opposite Party :- Commissiner Trade U.P. Lucknow
 
Counsel for Applicant :- Kunwar Saksena,Nishant Misra
 
Counsel for Opposite Party :- S.C.
 

 
Hon'ble Suneet Kumar,J.

The revision pertains to assessment year 1996-97 arising from an order dated 18 January 2006 passed by the Trade Tax Tribunal in Second Appeal No. 295 of 2005 under the U.P. Trade Tax Act, 1948.

The question of law referred is as to whether the First Appellate Authority was within its jurisdiction in imposing tax upon the dealer under Section 3F in proceedings under Section 22 of the U.P. Trade Tax Act, 19481.

The revisionist-assessee is a company registered under the Companies Act, 1956, engaged in the manufacture and sale of Sugar Plant and Machinery. Pursuant to a lease agreement, the revisionist was to deliver several machinery to the sugar unit of the lessee within the State. The rental amount received by the revisionist from the lessee was not amenable to tax on transfer of the right on the goods under Section 3F, however, the Tax Authorities levied tax on the rent. Aggrieved, revisionist preferred an appeal, inter alia, contending that Section 3F has been declared ultra vires, therefore, assessee is not liable to pay tax on lease rent. The appellate authority remanded the matter to the Assessing Authority for decision afresh, both on the question of applicability of Section 3F and on certain other claims.

The Assessing Authority vide assessment order dated 29 March 2003 accepted the plea of the revisionist that tax under Section 3F was not imposeable as the provision was declared ultra vires. However, the assessee, aggrieved, on issues other than lease rent filed an appeal. The First Appellate Authority dismissed the appeal on 18 December 2003. The issue of liability of tax on lease rent was neither canvassed nor decided by the appellate authority. After decision by the appellate authority, the Assessing Authority filed an application on 17 April 2003, purportedly under Section 22 of the Act for rectification of mistake in the appellate order, contending that levy of tax under Section 3F escaped assessment, though U.P. Act 11 of 2000, notified on 30 April 2001, validated all actions and assessments made under Section 3F during 1 May 1987 to 1 March 1997.

It was set out in the application that though the validation Act was enforced, however, since the notification was not received, therefore, escaped assessment under Section 3F. It was, therefore, urged before the appellate authority that it was a mistake apparent on record. The appellate authority allowed the rectification application by order dated 25 July 2005, thereby, imposing tax on leased rent.

Aggrieved, revisionist approached the Tribunal in second appeal which was dismissed by the impugned order. The Tribunal upheld the application being maintainable under Section 22 for the reason that while passing the assessment order on 29 March 2003 and deciding the appeal on 18 December 2003 the provisions of U.P. Act 11 of 2001 duly notified on 30 April 2001 validating all actions taken under Section 3F between 1 May 1987 to 1 March 1997 escaped notice of the assessing authority, therefore, held that since assessment order merged with the appellate order, therefore, the appellate order alone could be rectified under Section 22 being a mistake apparent on the record.

Learned Counsel for the revisionist would submit: (i) assessing authority is not an "interested person" contemplated under Section 22; (ii) the issue pertaining to liability of tax on lease rent was not before the appellate authority as no tax was levied by the Assessing Authority, therefore, there was no occasion, in proceedings under Section 22, to consider the issue of taxability on lease rent under Section 3F; (iii) assessing authority, who was represented before the appellate authority did not raise any objection regarding applicability of Section 3F, therefore, under garb of Section 22 assessing authority cannot overcome the lapse on his part; (iv) the issue of taxability on lease rent was neither before the assessing authority, as well as, the appellate authority, therefore, there was no concept of merger; (v) the scope of Section 22 is limited to error apparent on record and cannot be invoked to reopen assessment which involved disputed questions of fact, enquiry and investigation.

Learned counsel for the Revenue would submit that before passing the order, revisionist was subjected to notice and upon considering the material available on record, appellate authority imposed tax on the lease rent, the order is lawful and legal, therefore, calls for no interference.

On plain reading of Section 22 of the Act makes it clear that a mistake apparent from the record is rectifiable. In order to attract the application of Section 22, the mistake must exist and the same must be apparent from the record. The power to rectify the mistake, however, does not cover cases where a revision or review of the order is intended. "Mistake" means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error, a fault, a misunderstanding, a misconception. "Apparent" means visible; capable of being seen, obvious; plain. It means "open to view, visible, evident, appears, appearing as real and true, conspicuous, manifest, obvious, seeming." A mistake which can be rectified under Section 22 is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration.

Supreme Court in Deva Metal Powders (P) Ltd. vs. Commissioner, Trade Tax, Uttar Pradesh2, observed as follows:

"In our view rectification of an order does not mean obliteration of the order originally passed and its substitution by a new order...............Section 22 does not enable an order to be reversed by revision or by review, but permits only some error which is apparent on the face of the record to be corrected. Where an error is far from self-evident, it ceases to be an apparent error. It is, no doubt, true that a mistake capable of being rectified under Section 22 is not confined to clerical or arithmetical mistake. On the other hand, it does not cover any mistake which may be discovered by a complicated process of investigation, argument or proof."

"Mistake" is an ordinary word but in taxation laws, it has a special significance. It is not an arithmetical error which, after a judicious probe into the record from which it is supposed to emanate is discerned. The word "mistake" is inherently indefinite in scope, as to what may be a mistake for one may not be one for another. It is mostly subjective and the dividing line in border areas is thin and indiscernible. It is something which a duly and judiciously instructed mind can find out from the record. In order to attract the power to rectify under Section 22, it is not sufficient if there is merely a mistake in the order sought to be rectified. The mistake to be rectified must be one apparent from the record. A decision on a debatable point of law or a disputed question of fact is not a mistake apparent from the record. The plain meaning of the word "apparent" is that it must be something which appears to be so exfacie and it is incapable of argument or debate. It, therefore, follows that a decision on a debatable point of law or fact or failure to apply the law to a set of facts which remains to be investigated cannot be corrected by way of rectifications.

Supreme Court in T.S. Balram v. M/s.Volkart Brothers3, held that a "mistake apparent from the record" cannot be something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. It has been also held that a decision on a debateable point of law cannot be a mistake apparent from the record.

In Commissioner of Central Excise, Mumbai v. Bharat Bijlee Limited4, the Supreme Court held that the Tribunal had totally failed to take into consideration something which was on record, therefore, Tribunal had committed a mistake apparent on record. In the given facts of the case, the evidence which was on record was duly appreciated by the Tribunal at the first instance but the Tribunal made an effort to re-appreciate the evidence and re-appreciation can never be considered as rectification of a mistake.

In Honda Siel Power Products Ltd. v. Commissioner of Income Tax, Delhi5, there also the Tribunal had not considered certain material which was very much on record, thereby, it committed a mistake which was subsequently rectified by considering and appreciating the evidence which had not been considered earlier.

This Court in ITO v. Ashok Textiles6, held that while rectifying a mistake, an erroneous view of law or a debatable point cannot be decided. Moreover, incorrect application of law can also not be corrected.

In CCE Belapur, Mumbai vs. RDC Concrete (India) P. Ltd7, Supreme Court in the given facts held that the evidence on the record was duly appreciated by the Tribunal in the first instance but the Tribunal made an effort to re-appreciate the evidence and re-appreciation can never be considered as rectification of a mistake. A decision on a debatable point of law cannot be a mistake apparent from record.

This Court in Commissioner Sales Tax, U.P. vs. S/s Hind Lamps Ltd. Shikohabad8 in paragraph 6 held as follows:

"6. It is not in dispute that the entry bullion and specie including old ornaments meant for melting as provided in the Notification dated 7 September 1981 was substituted retrospectively w.e.f. 7 September 1981 by Section 11 of the U.P. Ordinance No. 8 of 1987 and the qualifying words "meant for melting" was omitted. Thus all old ornaments were made liable to tax at the point of first purchase. Thus a mistake which is apparent on the record in the order of the Tribunal has crept in view of the retrospective amendment in law. It is well settled that if any amendment is made which has retrospective effect, the order passed by the authority on the basis of pre-existing law is liable to be rectified and is to be made in conformity with the law as it stands after retrospective amendment...."

The submission of the learned counsel for the assessee that the error apparent was in the order of the Assessing Authority which was not corrected and thereafter, the assessee went in appeal. During appeal, objection was not raised by the Revenue, consequently, appeal was dismissed. It is upon dismissal of the appeal, an application under Section 22 was moved by the Assessing Authority, therefore, it is, urged that the lapse on part of the Assessing Authority in not assessing the lease rent under Section 3F, cannot be rectified in an application under Section 22. Further, Section 21 provides for assessment of tax and the turnover not assessed during the year. If the Assessing Authority has reason to believe that the whole of any part of the turnover of the dealer, escaped assessment to tax or has been under assessed or has been assessed to tax lower than that at which it is assessible, the Assessing Authority may after issuing notice to the dealer and making such enquiry as it may consider necessary assess or re-assess the dealer to tax according to law. Further, Section 10B provides for revision by the Commissioner. The Commissioner or such other officer not below the rank of Deputy Commissioner may call for and examine the record relating to any order passed by any officer subordinate to him, for the purpose of satisfying himself as to the legality or propriety of such order and may pass such order with respect thereto as he thinks fit.

Reliance has been placed on Section 9 which provides for appeal. Any dealer or any other person aggrieved by an order made by the Assessing Authority, may, within 30 days from the date of service of copy of order, appeal to such authority as may be prescribed. Sub-clause (3) requires the appellate authority after calling for and examining the relevant records and after giving the appellant and Commissioner a reasonable opportunity of being heard may confirm such order.

In the backdrop of the provisions under Section 9, 10B and 21, it is sought to be urged by the learned counsel for the revisionist that under the garb of Section 22, the Assessing Authority cannot cover up its omissions or lapses which could have been corrected or taken care of under the aforementioned provisions.

I do not find any merit in the submission of the learned counsel for the revisionist. It is admitted that Section 3F was applicable on the turnover of the assessee, which escaped assessment on a bona fide belief, at the behest of the assessee, that the provision was declared ultra vires. However, subsequent Amendment Act restored Section 3F and validated all actions and assessment thereunder, which was not in the notice of the Assessing Authority. Upon noticing the apparent error an application under Section 22 was filed for rectification of mistake apparent from record.

Sub-section (1) of Section 22 provides that any Officer/Authority/Tribunal/High Court or any interested person may suo moto or on an application of the dealer or any other interested person rectify any mistake in any order passed by him or it under the Act.

Second proviso to the section requires that no such rectification having the effect of enhancing the assessment/penalty/fee or other dues shall be made unless reasonable opportunity of being heard has been given to the dealer or the other person likely to be affected.

The ambit and scope of Section 22 is distinct and different, the section does not confer power of appeal or revision as contemplated under Section 9 or 10B of the Act respectively. Nor does Section 22 confer power upon the assessing authority to assess or reassess the dealer on whole or any part of the turnover of the dealer that has escaped assessment to tax or has been under-assessed or has been assessed to tax at a lower rate or any deduction or exemption has wrongly been allowed.

Section 22 merely confers upon all the authorities under the Act to rectify any mistake that has crept into the order which is apparent on the face of the record. The rectification can be sought by a dealer or by a person interested which in my opinion would include the assessing authority. The assessing authority can rectify the mistake in its order on its own motion, but where the order is subjected to challenge in appeal and the appellate authority has disposed of the appeal, then in that event the assessing authority being the interested person is empowered to move an application for rectification. The second proviso requires providing opportunity of hearing to the affected party be it the dealer or the other person, meaning thereby that the expression "other person" would include the assessing officer. The plea of the learned counsel for the revisionist that the expression 'interested person' would not include the assessing authority is on misreading of the provision.

Thus, in my considered opinion, the mistake is apparent on the record of the order of the first appellate authority which was rightly rectified under Section 22 of the Act. The rectification and subsequent assessment to tax under Section 3F does not amount to review/revision but a rectification of mistake apparent on the record in the order of the first appellate authority in view of retrospective application of Amendment Act restoring Section 3F and validating all actions taken thereunder.

The revision being devoid of merit is, accordingly, dismissed.

Order Date :- 28.08.2017

S.Prakash