2018 (2) TMI 372 - HC - VAT and Sales Tax

Invalid Re-assessment Order Due to Lack of Authority: Appeals Allowed, Order Set Aside

M/s. Vaishnavi Coco Products Versus Addl. Commissioner of Commercial Taxes Zone-3,

M/s. Vaishnavi Coco Products Versus Addl. Commissioner of Commercial Taxes Zone-3, - [2018] 2 GSTL (VAT) 15 (Kar) Issues:1. Competency of Deputy Commissioner to pass re-assessment order.Analysis:The judgment addresses the issue of whether the Deputy Commissioner of Commercial Taxes (Audit - 65) DVO-6 Bangalore was competent to pass the re-assessment order dated 23.11.2010. The appellant, a dealer in desiccated coconut and its allied products, was covered under the Karnataka Value Added Tax Act, 2003. The re-assessment proceedings were initiated by the Assessing Officer under S.39(1) of the Act based on incriminating material seized during an inspection. The Assessing Authority determined suppressed turnover and tax liability on various products, leading to a demand notice issued to the appellant.The appellant filed an appeal, which was initially allowed by the Appellate Authority but later revised by the Revisional Authority, upholding the re-assessment order. The main contention raised by the appellant was that the Deputy Commissioner lacked the authority to re-assess the tax under S.2(24) of the KVAT Act, rendering the proceedings invalid. The appellant relied on relevant case law to support this argument.In response, the Revenue argued that the Deputy Commissioner was duly authorized by the Additional Commissioner to conduct the re-assessment, thereby validating the order. The Court delved into the provisions of S.39(1) of the KVAT Act, which empowers a 'Prescribed Authority' to re-assess additional tax if the correct tax liability is understated. The definition of 'Prescribed Authority' under S.2(24) specifies that the authorization must come from the Government or the Commissioner.The Court scrutinized the authorization process and found that the Commissioner's approval lacked specificity, as it did not expressly authorize any particular officer for re-assessment. Citing previous judgments, the Court emphasized that only an officer explicitly authorized by the Commissioner could conduct re-assessment, and such authorization must be clear and unambiguous. Since the authorization in this case was deemed defective and lacked specificity, the re-assessment order was deemed incompetent.Consequently, the appeals were allowed, and the impugned order was set aside. The judgment clarified that this decision did not prevent the Revenue from taking appropriate action in accordance with the law.