Suo motu revision requires an order that is both erroneous and prejudicial to Revenue; remand for fresh hearing is not revisable.

Suo motu revision under the Kerala General Sales Tax Act requires an order that is both erroneous and prejudicial to the Revenue. A Deputy Commissioner's remand of penalty proceedings for fresh consideration after proper hearing did not finally exonerate the assessee and was not prejudicial to the Revenue, so the Commissioner lacked jurisdiction to revise it. Penalty proceedings were also unsustainable because the assessee was not given a meaningful opportunity of hearing and the books were not properly verified before the penalty order was made. The remand order was restored and a fresh hearing before the original authority was required.

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Issues: (i) Whether the Commissioner could invoke suo motu revision under section 45A(5) read with section 37 of the Kerala General Sales Tax Act, 1963, against the Deputy Commissioner's order remanding the penalty proceedings for fresh consideration; and (ii) whether the penalty proceedings were vitiated for want of reasonable opportunity and breach of natural justice.

Issue (i): Whether the Commissioner could invoke suo motu revision under section 45A(5) read with section 37 of the Kerala General Sales Tax Act, 1963, against the Deputy Commissioner's order remanding the penalty proceedings for fresh consideration.

Analysis: Section 37 permits suo motu revision only of an order that is prejudicial to the Revenue, and the revisional power under section 45A(5) is attracted only where the impugned order answers that description. The Deputy Commissioner had not finally exonerated the assessee; he had set aside a penalty order passed without proper verification and had directed a fresh enquiry after giving the assessee an opportunity of hearing. A remand which merely restores the matter to the original authority for lawful consideration does not, by itself, cause loss of lawful revenue or create prejudice to the Revenue. Applying the well-settled principle that revision requires both error and prejudice, the remand order was neither erroneous nor prejudicial to the interests of the Revenue.

Conclusion: The Commissioner had no jurisdiction to revise the Deputy Commissioner's remand order under section 45A(5) read with section 37.

Issue (ii): Whether the penalty proceedings were vitiated for want of reasonable opportunity and breach of natural justice.

Analysis: Proceedings under section 45A are required to comply with the statutory requirement of reasonable opportunity of being heard, and the assessee must have an effective chance to explain the books and records relied upon. The material showed that the books were verified long after inspection, the notice proposing penalty was issued without proper verification by the successor officer, and the assessee was not afforded a meaningful opportunity to represent its case before the penalty was imposed. An order imposing penalty in such circumstances is unsustainable because it offends the principles of natural justice.

Conclusion: The penalty order was rightly set aside as it was passed in breach of natural justice.

Final Conclusion: The revisional notice issued by the Commissioner was unsustainable, the remand order of the Deputy Commissioner stood restored, and the assessee was entitled to a fresh hearing before the original authority.

Ratio Decidendi: Suo motu revision for being prejudicial to the Revenue can be invoked only when the challenged order is both erroneous and likely to cause lawful revenue loss; a remand for fresh adjudication after ensuring natural justice is neither prejudicial to the Revenue nor open to such revision.

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