The Supreme Court presided by Justice Ravindra Bhatt and Justice Dipankar Datta nullified or quashed the Revisional Order of the revising authority which imposed 10% on the product of Godrej.
The appeal by the appellant M/S Godrej Sara Lee Ltd. queried the authority of the Deputy Excise and Taxation Commissioner(ST)-cum-Revisional Authority (Revisional Authority) to reopen proceedings in the exertion of the suo motu revisional power granted by section 34 of the Value Added Tax Act, and to pass final orders holding that the two assessment orders, both dated February 28, 2007, passed by the ETO-cum-Assessing Authority (‘the Assessing Authority) for the assessment years 2003-04 and 2004-05 suffered from illegality and impropriety as delineated therein.
The respondent in their submission stated that the Assessing Authority erred in levying tax on mosquito repellant (a product manufactured by the appellant) @ 4% instead of 10%.
Subsequently, the Revisional Authority called for the assessment records of the appellant for the Assessment Years 2003-04 and 2004-05 for revision of the assessment on classifying the household insecticide products of the appellant as mosquito repellants and taxable at the higher rate of tax, i.e. 10%, instead of 4%.
Apart from the question as to whether mosquito repellents are goods classifiable as insecticides, pesticides, weedicides, etc., one other question which the appellant sought to raise was whether an amendment in the schedule of classification/rates of tax could have a retrospective effect.
The court observed that the appellate authority already settled the case, the revisional authority has no power to take suo moto approach.
The bench ruled that “Jet Mat” is not an insecticide and therefore not excluded in full from sales tax under Entry 98 of the Sales Tax Act. Additionally, it was noted that the Tribunal had concluded that pesticide status made mosquito repellents containing 4% “Alethrin” subject to a reduced tax rate.
The apex Court stated in paragraph 34 of its ruling that, viewed that the Revisional Authority might have been justified in using its suo motu power to change the Assessing Authority’s order had the Tribunal’s decision not been upheld or its implementation postponed by a competent court.
Likewise, the Revisional Authority had no choice but to adhere to the decision of the Tribunal without any reservations as long as it is undisputed that the Tribunal’s decision, taking into account the framework of product classification and tax liability at the time the impugned revisional orders were made, continues to remain in effect.
The division bench inclined to the view that it is not the Assessing Authority’s orders but those passed by the Revisional Authority, which suffer from a patent illegality and thus quashed the order.
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