2025-VIL-1040-KER
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VAT High Court Cases

Kerala Value Added Tax Act, 2003 – Validity of exercise of suo motu revisional powers, prospective operation of clarification - Assessment for the year 2009-10 was completed by imposing tax at 12.5% on the assessee's product, against the assessee's claim of 4% tax rate. The assessee challenged this assessment before the first appellate authority, which remitted the matter back to the assessing authority for fresh consideration. The assessing authority then passed a fresh order levying 4% tax – Later, the Revenue authorities later initiated suo motu revisional proceedings under Section 56 of the KVAT, 2003 and cancelled the earlier order, remitting the matter for fresh consideration - Whether the exercise of suo motu revisional powers under Section 56 was justified in the facts and circumstances of the case - HELD - The exercise of suo motu revisional powers under Section 56 was justified, as the order dated 16.10.2015 did not effectively reconsider the issue as directed by the First Appellate authority. The Revisional authority is entitled to call for and examine the order under Section 56, as it was prejudicial to the revenue's interest - the Appellate Authority only directed a reassessment in the matter, directing the assessee to produce such other documents in support of the claim. In spite of the positive directions issued, there was no effective reconsideration of the issue at the hands of the Assessing Authority while issuing the order. The order is silent as regards the additional material, if any, produced by the assessee. When that be so, the assessee is not justified in contending that the suo motu power under Section 56 of the Act is not attracted, on account of the embargo under Section 56(2)(b) - the revisional authority was justified in exercising the suo motu power under Section 56 of the Act – The issue is answered in favour of Revenue - Classification of “heat exchange unit” - Whether the reliance placed on the clarificatory order dated 07.04.2016 issued by the authority under Section 94 of the Act to arrive at the applicable tax rate is justified - HELD - The reliance on the Section 94 clarificatory order is justified, as the assessee failed to provide details of the product's HSN code to support its claim for a lower tax rate under Entry 83 of Schedule III. The entries in the Schedules are HSN code-based, and the assessee did not establish that the product fell under the relevant HSN code in Entry 83 - Whether the clarificatory order dated 07.04.2016 can have only prospective application - HELD - The clarificatory order dated 07.04.2016 can only have prospective application, based on the provisions of Section 94(2) of the Act. The retrospective application of the clarification would prejudice the assessee's right to collect the differential tax from the customers - The orders passed by the revenue authorities under Section 56 is set aside as the clarificatory order can only have prospective application.
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