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of <h1>Delay in suo motu revision of 2011-12 VAT period u/s 64(1)/s.64(3)(c) renders revision arbitrary; order set aside</h1> Dominant issue - Whether a suo motu revision under s.64(1) KVAT Act, read with s.64(3)(c), is vitiated by inordinate and unexplained delay in initiating ... Issuance of SCN u/s 64(1) of the Karnataka Value Added Tax Act 2003 nearly ten years after the Appellate order - revision of Order passed by the First Adjudicating Authority is beyond the limitation period as prescribed under Section 64 of the KVAT Act, 2003 or not - tax period between April 2011 and March 2012 - HELD THAT:- The assessment for this period is concluded with the reassessment order dated 05.02.2015, and the order-in-appeal in favour of the appellant is on 16.05.2015. The appellant is issued with the notice under Section 64[1] of the KVAT Act on 03.01.2025. The suo motu revision is because of the rate of tax for the relevant period, the alleged erroneous allowance of input tax credit and the prejudice to the Revenue. The appellant has responded to this notice underscoring the question of limitation as also the delay. The dispute relates to the tax period between April 2011 and March 2012. The assessment for this period is concluded with the reassessment order dated 05.02.2015, and the order-in-appeal in favour of the appellant is on 16.05.2015. The appellant is issued with the notice under Section 64[1] of the KVAT Act on 03.01.2025. The suo motu revision is because of the rate of tax for the relevant period, the alleged erroneous allowance of input tax credit and the prejudice to the Revenue. The appellant has responded to this notice underscoring the question of limitation as also the delay - Revenue is unable to bring on record any circumstance that would justify the first delay i.e., the delay between the date the letter is issued calling for records and the date on which the file is received [02.01.2018 and 09.07.2021 respectively] nor the second delay between 09.07.2021 and 03.01.2025 [the date of notice under Section 64[1] of the KVAT Act]. This failure to offer an explanation, in this Court's opinion, would be material to assess whether there is a reasonable exercise of the suo motu power. This Court must opine that when the delay is considered in the light of the fact that the dispute relates to the tax period between April 2011 and March 2012, the delay assumes greater significance rendering the continuance of the proceedings with issuance of notice on 03.01.2025 unreasonable, and therefore, the interference is justified. Though the ACCT is perhaps justified in opining that the proceedings are initiated within the time contemplated under Section 64[3][c] of the KVAT Act, it is not justified in overlooking the delay in this case as it renders the entire exercise arbitrary. The impugned order set aside - appeal allowed. Issues: (i) Whether the respondent could have issued the notice dated 03.01.2025 under Section 64(1) of the Karnataka Value Added Tax Act 2003 nearly ten years after the appellate order dated 16.05.2015; (ii) Whether the order bearing CAS No.347440141 AD SMR dated 27.03.2025 revising the Order passed by the First Adjudicating Authority dated 05.05.2015 is beyond the limitation period as prescribed under Section 64 of the KVAT Act, 2003?Issue (i): Whether the notice dated 03.01.2025 under Section 64(1) could be issued nearly ten years after the appellate order dated 16.05.2015.Analysis: The record shows that files were called on 20.01.2018 but no satisfactory explanation was given for the delay in receipt of the reassessment file [02.01.2018 to 09.07.2021] nor for the further delay in issuing notice [09.07.2021 to 03.01.2025]. Given the tax period under dispute (April 2011 to March 2012), the unexplained and substantial delays were material to evaluating the exercise of the suo motu power and rendered continuation of proceedings unreasonable.Conclusion: The notice dated 03.01.2025 could not be validly issued and the contention in favour of issuance is rejected. The conclusion is in favour of the assessee.Issue (ii): Whether the revisional order dated 27.03.2025 revising the earlier adjudicatory order is beyond the limitation period prescribed under Section 64 of the KVAT Act, 2003.Analysis: The revisional authority relied on the date records were called (20.01.2018) and on Section 64(3)(c) to contend the proceedings were within the statutory timeframe. However, the unexplained institutional delays and long gap before issuing notice made the exercise arbitrary despite technical compliance with time limits under Section 64(3)(c). The issue of limitation in strict statutory terms therefore does not survive once the delay and arbitrariness are considered.Conclusion: The revisional order dated 27.03.2025 is set aside on account of unreasonable delay and arbitrariness. The conclusion is in favour of the assessee.Final Conclusion: The appeal is allowed and the revisional order dated 27.03.2025 under Section 64(1) of the KVAT Act is set aside because the unexplained and substantial delays rendered the suo motu exercise unreasonable; the question of statutory limitation does not preclude interference in these circumstances.Ratio Decidendi: Unexplained and substantial institutional delays in initiating or prosecuting suo motu revision—although the proceedings may appear within statutory time limits—can render the exercise arbitrary and justify judicial interference setting aside the revisional order.
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