High Court revises Sales Tax Tribunal decision, rejects retroactive effect of Supreme Court judgment

The High Court of Madras considered revisions filed by the State Government challenging orders passed by the Sales Tax Appellate Tribunal under section 55 of the Sales Tax Act. The Tribunal rectified its decision in favor of the assessees following a Supreme Court judgment affecting tax liability. The Court held that the error was not apparent at the time of the original orders and rejected the argument for retrospective effect of court judgments. Consequently, the Court allowed the revision petitions, set aside the rectified orders, and reinstated the original orders, directing the State Government to recover costs from the assessees.

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Issues involved: The interpretation of the power to rectify errors under section 55 of the Tamil Nadu General Sales Tax Act, 1959 in light of a subsequent Supreme Court judgment affecting the tax liability of hoteliers.

Summary:
The High Court of Madras considered revisions filed by the State Government challenging orders passed by the Sales Tax Appellate Tribunal under section 55 of the Sales Tax Act. The Tribunal had initially rejected hoteliers' contentions that their receipts were not subject to sales tax, but later, after a Supreme Court judgment, the Tribunal rectified its decision in favor of the assessees. The State Government argued that the Tribunal erred in considering the earlier decision a mistake under section 55 merely due to the subsequent Supreme Court ruling.

The Court held that for an error to be rectified under section 55, it must be so apparent on the face of the record that it could have been avoided by the Tribunal. The Court emphasized that the Tribunal could not have foreseen the Supreme Court's decision at the time of its initial orders, thus the error was not apparent. The assessees' counsel argued for the retrospective effect of court judgments, but the Court clarified that the Tribunal's decision was not in error ex facie as it predated the Supreme Court ruling. The Court rejected the argument that the error could become apparent within the three-year limitation period for rectification, as the limitation pertained to rectification, not the commission of the error itself.

Ultimately, the Court allowed the revision petitions, set aside the Tribunal's rectified orders, and reinstated the original orders in appeal, directing the State Government to recover costs from the assessees.

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