By TIOL News Service

NEW DELHI, MAR 30, 2011: THE assessment of the assessee -respondent for the Assessment Year 2001-02 was completed by the Assessing Officer under Section 29(7) of the Rajasthan Sales Tax Act, 1994 holding that the tax on "thermo ware" and "vacuum ware", which were the articles sold by the assessee -respondent during the relevant assessment year, should be levied Sales Tax at 10 per cent instead of 8 per cent, treating them as separate articles from plastic goods/products. Consequently, the liability of difference of tax at 2 per cent along with surcharge, interest and penalty was also levied.

The aforesaid order of the Assessing Officer was challenged by the assessee -respondent before the Deputy Commissioner [Appeals], Commercial Tax Department, Bikaner, which was allowed by the Appellate Authority by order dated 29.03.2005 by setting aside the demand for difference of tax imposed at 2 per cent as also the penalty and interest.

Aggrieved by the above order dated 29.03.2005 of the Deputy Commissioner [Appeals], Bikaner the Department preferred an appeal before the Rajasthan Taxation Board, Ajmer, which was heard and disposed of by the Taxation Board by allowing the same vide its order dated 13.05.2008.

The assessee -respondent thereafter filed a rectification/amendment application, which was decided by the Rajasthan Taxation Board, Ajmer by passing an order dated 22.01.2009. By the aforesaid order the Taxation Board modified its earlier order to the extent of holding that as the assessee -respondent had declared all his sales in the books of accounts, in that situation, in order to levy penalty, department has to also prove additionally, that there was a mala fide intention on the part of the assessee - respondent for tax evasion, which is not revealed in the present case. It was further held that as the mala fide intention of the assessee -respondent for tax evasion has not been proved and since no such evidence is available on record from which it could be established that the assessee -respondent had the mala fide intention behind recovering the tax at the rate of 8 per cent, the order of levying penalty is not justiciable. After recording the aforesaid findings, the Taxation Board passed an order dated 22.01.2009 to the extent of amending its previous order dated 13.05.2008 and set aside the order passed by the Deputy Commissioner [Appeals], Bikaner dated 29.03.2005 on the issue of tax evasion only, however, maintained the finding on the issue of penalty.

Being aggrieved by the aforesaid order passed by the Taxation Board a Revision Petition was preferred by the appellant Department before the High Court of Rajasthan. The High Court, however, held that no question of law arises out of the order passed by the Taxation Board for consideration and, consequently, the Revision Petition was dismissed.

The present appeal, is directed against the aforesaid two orders passed by the High Court as also by the Taxation Board.

The Supreme Court observed,

"The Taxation Board by its order dated 13.05.2008 was disposing of an appeal filed against the order dated 29.03.2005 passed by the Deputy Commissioner [Appeals]. By the aforesaid order dated 13.05.2008 the Taxation Board upheld and accepted the contention of the Department that "thermo ware" is not similar to "plastic product" and that rather they are two different products/articles, which in fact is also proved and established from the documents on record. It was, therefore, held that the conclusion arrived at by the Assessing Officer is well-considered and reasonable. It was also held that, although, in the appellate judgment, given by the Deputy Commissioner [Appeals], reference was made to the use of "plastic granules" and "powder" as raw material for manufacturing "thermo ware" for treating "thermo ware" as covered under the category of plastic goods/products, but neither any evidence nor any reasonable and justifiable ground was given in the said order for doing the same. After recording the aforesaid findings, the Taxation Board set aside the judgment of the Deputy Commissioner [Appeals] and restored the order of the Tax Assessing Officer, who had by his order, held that the assessee -respondent is liable to pay tax at the rate of 10 per cent, as the product "thermo ware" and "vacuum ware", which are the articles sold by the assessee - respondent, are assessable to tax at the rate of 10 per cent instead of 8 per cent to be levied on plastic wares.

The aforesaid well-reasoned order came to be interfered with by the Taxation Board itself while exercising the purported powers under Section 37 of the Act of 1994, which empowers the Board only to rectify a mistake apparent on the face of the record.

The issue, therefore, is whether, while exercising such power vested under Section 37 of the Act of 1994, the Taxation Board could re-appreciate the evidence on record and review its earlier order by holding that there was no mens rea on the part of the assessee -respondent and, therefore, no penalty is leviable on them. The aforesaid exercise of power by the Taxation Board in the present case by interfering with its earlier order was submitted to be a jurisdictional error and also purportedly to be an exercise of power in excess to what is provided in the statute."

The Supreme Court held:

It is now an established proposition of law that review is a creature of the statute and such an order of review could be passed only when an express power of review is provided in the statute. In the absence of any statutory provision for review, exercise of power of review under the garb of clarification/modification/correction is not permissible.

Section 37 of the Act of 1994 provides for a power to rectify any mistake apparent on the record. Such power is vested on the authority to rectify an obvious mistake which is apparent on the face of the records and for which a re- appreciation of the entire records is neither possible nor called for. When the subsequent order dated 22.01.2009 passed by the Taxation Board is analysed and scrutinised it would be clear/apparent that the Taxation Board while passing that order exceeded its jurisdiction by re-appreciating the evidence on record and holding that there was no mala fide intention on the part of assessee -respondent for tax evasion. Such re-appreciation of the evidence to come to a contrary finding was not available under Section 37 of the Act of 1994 while exercising the power of rectification of error apparent on the face of the records.

Thus, the orders passed by the Taxation Board on 22.01.2009 as also the impugned order and judgment passed by the High Court upholding the said order of the Taxation Board are set aside and quashed and the original order passed by the Assessing Officer is restored.

(See 2011-TIOL-34-SC-CT  in 'Miscellaneous')