2018 (12) TMI 298 - HC - VAT and Sales Tax

High Court rules on Tribunal's review, emphasizes procedural integrity in tax assessments

K. SANKARAN Versus STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM

The High Court of Kerala found that the two-member Tribunal acted without judicial propriety by reviewing and overturning a previous order passed by a ... Review of Order - power of Tribunal constituted with the Chairman and one members to review an order of the Tribunal constituted of the Chairman and two members - cope of review u/s 39(7) of the Act - reopening/reassessment of an assessment after the limitation provided of four years. Held that:- We cannot but observe that the two member Bench of the Tribunal ought not to have attempted a review of an order passed by a three member Bench. Even with respect to a co-ordinate bench, Section 39(7) of the Act is the power conferred on the Tribunal to carry out a review of its own orders - Tribunal constituted of two members to have acted without judicial propriety in having considered review of an order passed by a three member Bench. The specific power granted for review to an Appellate Tribunal does not even include correction of errors apparent on the face of the record. For rectification of errors, there is a specific provision under Section 43 of the Act. The petition filed herein is under sub-section (7) of Section 39 of the Act, which allows a review only on the basis of the discovery of new and important facts, which, after the exercise of due diligence, were not within the knowledge of the review petitioner or could not be produced by him. There is no new or important facts, which were urged before the Tribunal on review - the review to be one not maintainable for reason of the ingredients under sub-section (7) of Section 39 of the Act being absent - decided against Revenue. Revision allowed. Issues:1. Judicial propriety in Tribunal's review of orders2. Permissibility of review under Section 39(7) of the Act3. Interpretation of Section 35(2A) regarding re-opening of assessmentIssue 1: Judicial propriety in Tribunal's review of ordersThe case involved a revision filed by the assessee, a dealer in petroleum products, challenging orders passed under the Kerala General Sales Tax Act, 1963. The Tribunal, constituted with two members, reviewed and overturned a previous order passed by a three-member Bench. The Court found that the two-member Tribunal acted without judicial propriety by attempting a review of an order passed by a larger Bench. The Tribunal's review was deemed improper due to the lack of judicial discipline and the absence of new and important facts as required under Section 39(7) of the Act for a valid review.Issue 2: Permissibility of review under Section 39(7) of the ActThe learned Counsel for the assessee challenged the Tribunal's order on the grounds of judicial propriety and the permissibility of the review process under Section 39(7) of the Act. Section 39(7) allows for a review based on the discovery of new and important facts not previously known or producible during the original order. The Court held that the review conducted by the Tribunal did not meet the criteria set forth in Section 39(7) as there were no new or important facts presented during the review process. Therefore, the review was deemed not maintainable under the provisions of the Act.Issue 3: Interpretation of Section 35(2A) regarding re-opening of assessmentThe case also involved an assessment re-opening under Section 35 of the Act, specifically focusing on Section 35(2A) which enables the Deputy Commissioner to re-open an assessment within one year after the conclusion of an appeal or revision. The Court interpreted the provisions of Section 35(2A) and determined that the Deputy Commissioner exceeded the limitation period for re-opening the assessment. The Court emphasized that the Deputy Commissioner's powers under Section 35(1) are restricted by time limits, and the re-opening of assessments must adhere to the statutory provisions outlined in the Act. The Court ruled in favor of the assessee on this issue, highlighting the importance of complying with the statutory limitations set forth in the Act.In conclusion, the High Court of Kerala addressed multiple legal issues concerning the Tribunal's review process, the permissibility of reviews under Section 39(7) of the Act, and the interpretation of Section 35(2A) regarding the re-opening of assessments. The Court emphasized the significance of judicial propriety, adherence to statutory provisions, and the necessity of presenting new and important facts for a valid review under the Act. The judgment favored the assessee on these issues, highlighting the importance of procedural integrity and legal compliance in tax assessments and appeals.