Fenesta Building Systems vs The Additional Commissioner of Commercial Taxes

Jayant M. Patel, J.—1. Admit.

Mr. Shivayogiswamy, learned Addl. Government Advocate appearing for the respondent-Revenue waives notice of admission.

All appeals are finally heard.

As in these appeals, common questions arise for our consideration, they are being considered simultaneously.

We may state that for the sake of convenience, allied matter, being STA No. 1/2016, shall be considered for the purpose of narrating the facts.

The brief facts of the case appears to be that the appellant is engaged in the business of designing, manufacturing, fabrication, installation and selling of UPVC windows/doors as per the specific requirements of the customers. It is the case of the appellant that on 29.05.2010, re-assessment order was passed by the Assessing Officer under Karnataka Value Added Tax, 2003 (hereinafter referred to as the ''KVAT Act'', for short) for the tax period of 2007-2008. The matter was carried in appeal before the First Appellate Authority and the First Appellate Authority found that since the appellant was dealing in the works contract, benefit of 25% towards labour charges should be made admissible and the order dated 06.01.2012 was passed. On 23.04.2015, notice came to be issued by the respondent under Section 64(1) of the KVAT Act, for initiating action under the revisional power. The appellant filed reply to the said notice on 04.08.2015. It appears thereafter the opportunity of hearing was given to the appellant and on 14.09.2015 the impugned order was passed by the revisional authority. Under the circumstances, the present appeals before this Court.

We have heard Mr. Harish V.S., learned Counsel appearing for the appellant and Mr. Shivayogiswamy, learned Addl. Government Advocate for the respondent.

Leaving aside the other aspects, one of the vital aspects is that the appellant in reply to the notice under Section 64(1) of the KVAT Act, raised the point of limitation at paragraph-16 of the reply. The same for ready reference is reproduced as under:

"16. Without prejudicial to the above submissions we further submit that, in our case the Assessing Authority has passed order on 29-05-2010. The issue as to whether the supply/design and installation of UPVC windows/doors, was not before the First Appellant Authority. We had preferred an appeal before the FAA disputing the disallowance of labour & other like charges at 25% on turnover of Excise Duty being part of total price. The FAA has allowed the appeal vide VAT AP No. 673 to 684/10-11 dated 06.01.2012. As the issue raised in the revision proceedings was not before the FAA, the doctrine of the merger cannot be made applicable, therefore the limitation of four years for revision starts from the date of order passed by the Assessing Authority i.e., 29-05-2010, which ends on 28-05-2014, since, proceedings initiated is barred by limitation, therefore the same should be dropped."

It further appears that the respondent while passing the impugned order has completely reproduced the reply submitted in response to the show cause notice under Section 64(1) of the Act; the relevant of which reads as under at para-4 (16) to (23) as under:

"16. Without prejudicial to the above submissions we further submit that, in our case the Assessing Authority has passed order on 29-05-2010. The issue as to whether the supply/design and installation of UPVC windows/doors, was not before the First Appellant Authority. We had preferred an appeal before the FAA disputing the disallowance of labour & other like charges at 25% on turnover of Excise Duty being part of total price. The FAA has allowed the appeal vide VAT AP No. 673 to 684/10-11 dated 06.01.2012. As the issue raised in the revision proceedings was not before the FAA, the doctrine of the merger cannot be made applicable, therefore the limitation of four years for revision starts from the date of order passed by the Assessing Authority i.e., 29-05-2010, which ends on 28-05-2014, since, proceedings initiated is barred by limitation, therefore the same should be dropped.

In support of this we rely on the Hon''ble Karnataka High Court in the case of Lingeshwar and Company v. Additional Commissioner of Commercial Taxes, (1998) 110 STC 346 (Kar) held that, "it is competent on the part of the Additional Commissioner and Commissioner to invoke the suo motu revisional jurisdiction provided - (i) the point on which the jurisdiction was sought to be exercised was not a subject-matter of appeal or revision before the Tribunal and/or the High Court, (ii) the initiation of the proceedings was before the expiry of 4 years from the passing of the first appellate order.

Sub-section (4) of Section 64 of the KVAT Act, 2003 provides that, "Notwithstanding anything contained in sub-section (3), the Additional Commissioner or the Commissioner may pass an order under sub-section (1) or (2), as the case may be, on any point which has not been raised and decided in an appeal or revision referred to in clause (b) of sub-section (3), before the expiry of a period of one year from the date of the order in such appeal or revision or before the expiry of a period of four years referred to in clause (c) of that subsection, whichever is later".

On conjoint reading of the above provision and Hon''ble High Court decision (supra) it is understood that, the doctrine of merger cannot be made applicable to the issues which were not before the FAA. In support of this we rely on the Hon''ble Andhra Pradesh High Court decision in the case of The State of Andhra Pradesh v. Sri Rama Laxmi Satyanarayana Rice Mill reported in , [1975] 35 STC 601 (AP), in the said case an assessment was made on 15-03-1965 the date of service of order was 29-03-1965. Assessees appealed before the Assistant Commissioner for rate of tax issue and allowed the appeal vide order dated 17-09-1965. Revised order was issued on 12-12-1967. Subsequently Deputy Commissioner of Commercial Taxes exercising SMR powers U/s.20(2) of the AP Act vide order dated 12-09-1969 revised the order of the Assistant Commissioner stating that tax to be levied at 1.25% U/s. 5-A of the AP Act, and not 1%. HELD that, the order of the Assistant Commissioner was in relation to an assessment but as the question of additional tax of 0.25% under Section 5-A was not raised in appeal, the doctrine of merger of assessment order with the appellate order had no application to the case. Since the Deputy Commissioner''s order was beyond four years from 29-03-1965 on which date the assessment order dated 15-03-1965, was served on the assessee, the revision order dated 12-12-1969, was barred by time".

Hon''ble Supreme Court in The State of Madras v. Madurai Mills Co., Limited reported in [1967] 19 STC 14 (SC) held that, i) that, since the question regarding the exclusion of the value of cotton purchased from outside the State of Madras was not raised before the Deputy Commissioner and the only point raised before him was regarding the inclusion of the amount of tax collected by the respondent in the taxable turnover, the subject-matter of the revision proceedings before the Board of Revenue was the revised assessment order of the Deputy Commercial Tax Officer dated November 28, 1952. (ii) that, in the circumstances of this case, it could not be said that there was a merger of the order of assessment dated November 28, 1952, made by the Deputy Commercial Tax Officer with the order in revision of the Deputy Commissioner dated August 21, 1954, because the question of exemption of the value of yarn purchased from outside the State of Madras was not the subject-matter of revision before the Deputy Commissioner. That, therefore, the revision proceeding before the Board of Revenue was barred by limitation.

In Vikram Cement v. Commissioner of Commercial Tax, Indore and others , [2010] 35 VST 362 (MP) held that REASSESSMENT-LIMITATION-DOCTRINE OF MERGER- ORDER DATED OCTOBER 26, 1994 BY ASSESSING AUTHORITY PURSUANT TO REMAND BY APPELLATE AUTHORITY TO GIVE OPPORTUNITY TO PRODUCE DECLARATION FORMS-NO MERGER OF ENTIRE ASSESSMENT ORDER DATED MARCH 19, 1991 WITH ORDER PASSED AFTER REMAND-REASSESSMENT PROCEEDINGS INITIATED ON SEPTEMBER 23, 1997 TO BRING TO TAX ITEMS NOT SUBJECT-MATTER OF APPEAL BARRED BY LIMITATION - MADHYA PRADESH GENERAL SALES TAX ACT, 1958 (2 OF 1959), S.19(1).

In Additional Commissioner of Sales Tax VAT-I, Mumbai v. Kirloskar Oil Engine Limited , [2011] 46 VST 538 (Bom) held that, dismissing the application, that the judgment delivered by the first appellate authority on June 30, 2000 was on a limited challenge by the dealer only on the award of interest and penalty by the assessing officer in the order of assessment dated March 31, 1999. The rest of the order of assessment was not in challenge before the first appellate authority and would therefore to that extent not merge with the order of the first appellate authority. The limitation for revising the order of assessment dated March 31, 1999 would therefore commence from April 21, 1999 which was the date on which the order was served on the dealer. While the notice was issued by the revisional authority within the prescribed period of three years, the order of the revisional authority which was passed on June 27, 2005 was clearly beyond the period of five years prescribed by the proviso to clause (a) of sub-section (1) of section 57. Therefore the order of the Tribunal did not suffer from any error.

Madras Glass and Plywood Depot v. Joint Commissioner II, Board of Revenue, Chepauk, Madras , [1993] 89 STC 160 (Mad) held that, DOCTRINE OF MERGER - REVISION - JOINT COMMISSIONER - LIMITATION - FIVE YEARS FROM DATE OF ORDER SOUGHT TO BE REVISED - ASSESSMENT APPEALED AGAINST BY DEALER AND APPEAL ALLOWED - DEPUTY COMMISSIONER PROPOSING TO TAX TURNOVER NOT SUBJECT OF APPEAL - NO MERGER OF ASSESSMENT WITH ORDER IN APPEAL - LIMITATION RUNS FROM DATE OF ASSESSMENT - REVISION NOTICE TIME-BARRED - TAMIL NADU GENERAL SALES TAX ACT(1 OF 1959), SEC.34.

The issue has been dealt in detail before the Assessing Authority and it is in accordance with the provision of law, therefore we request your goodself to kindly drop the SMR proceedings. We further request your goodself to kindly provide an opportunity of person hearing to plead our case, in case the above submissions are not sufficient for substantiating our view."

When the aforesaid reply submitted on behalf of the appellant is reproduced, the above referred paragraph-16 raising the point of limitation is also reproduced.

We are emphasizing on the aforesaid aspects in order to take cognizance of the fact that the respondent was fully conscious about the point of limitation taken by the appellant in response to the show cause notice. However, in the reasoning recorded by the respondent while passing the impugned order, there is no discussion whatsoever on the issue of limitation.

Learned Counsel appearing for the respondent is also unable to show any discussion dealing with the point of limitation. He only submitted that as per the principles of doctrine of merger, the limitation period should not operate as a bar to the revisional authority in exercise of the power.

Whereas learned Counsel for the appellant submitted that the date for the purpose of exercise of the revisional power should be counted from the date of reassessment made by the assessing authority and not the First Appellate Authority.

In our view, in any case, it was required for the respondent to examine and deal with the point of limitation which was expressly raised by the appellant. The aforesaid aspects of limitation, in our view, would be one of the vital aspects and it would completely change the basis of the order, in the event the point of limitation is accepted.

We do not propose to express any view on the merits on the issue of limitation, since the said aspect has not at all been examined and now may be examined after we pass the order for remand of the order to the respondent.

In view of the above, we find that the impugned order passed by the respondent deserves to be set aside with a further direction that the revision/s shall stand restored to the file of the Additional Commissioner of Commercial Taxes-respondent herein. The respondent shall consider the matter again in light of the observations made by us in the present order and after giving an opportunity of hearing to the appellant, the appropriate order shall be passed in accordance with law as early as possible, preferably within a period of three months from the date of receipt of certified copy of the order.

It is also observed that rights and contentions of both the sides before the respondent shall remain open in the aforesaid revisional proceedings.

Appeals are allowed to the aforesaid extent. Considering the facts and circumstances, there is no order as to costs.