Forfeiture and rectification under Karnataka VAT fail where TDS was repaid and no mistake apparent from the record existed.

Forfeiture under Section 47(3) of the Karnataka VAT Act was unavailable because the amount was deducted as TDS under a mistaken understanding, deposited, and later repaid to the contractor; the statutory conditions for treating it as tax collected and for applying forfeiture were not satisfied. Rectification under Section 69(1) was also invalid because it can be used only to correct a mistake apparent from the record, not a debatable issue, and the rectification order failed to show any such patent error while the appellate authority did not cure that jurisdictional defect. The petitioner was therefore entitled to refund of the amount already determined in its favour, with interest only for delay beyond the permitted payment period.

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Issues: (i) Whether forfeiture could be directed under Section 47(3) of the Karnataka Value Added Tax Act, 2003 in respect of the amount deducted as TDS and later repaid to the contractor. (ii) Whether the rectification order under Section 69(1) of the Karnataka Value Added Tax Act, 2003 and the appellate order upholding it were sustainable.

Issue (i): Whether forfeiture could be directed under Section 47(3) of the Karnataka Value Added Tax Act, 2003 in respect of the amount deducted as TDS and later repaid to the contractor.

Analysis: Section 47 of the Karnataka Value Added Tax Act, 2003 operates where an amount is collected or purportedly collected as tax and is paid to the prescribed authority. The forfeiture consequence under Section 47(3) follows the statutory scheme, including the corresponding refund mechanism under Section 47(4). On the facts, the petitioner deducted an amount as TDS under a mistaken understanding of Section 9-A(1) of the Karnataka Value Added Tax Act, 2003, deposited it, and thereafter repaid the amount to the contractor, who had also filed returns and discharged tax liability. In these circumstances, the statutory basis for forfeiture was absent.

Conclusion: The forfeiture order was not sustainable and the issue was decided in favour of the petitioner.

Issue (ii): Whether the rectification order under Section 69(1) of the Karnataka Value Added Tax Act, 2003 and the appellate order upholding it were sustainable.

Analysis: Rectification under Section 69(1) is permissible only where there is a mistake apparent from the record. Such jurisdiction cannot be exercised on a debatable issue or by invoking a conclusion without demonstrating the jurisdictional fact of an obvious error. The rectification order did not explain how the earlier refund order suffered from an apparent mistake, and the appellate authority failed to address this jurisdictional defect before affirming the rectification. The orders therefore lacked legal sustainability.

Conclusion: The rectification order and the appellate order were unsustainable and the issue was decided in favour of the petitioner.

Final Conclusion: The petitioner was held entitled to refund of the amount already determined in its favour, with interest only for any delay beyond the period allowed for payment.

Ratio Decidendi: Forfeiture under Section 47(3) applies only when the statutory conditions in Section 47 are satisfied, and rectification under Section 69(1) is valid only for a clear mistake apparent from the record.

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