Introduction Under fiscal laws, assessment proceedings are final, subject to an appeal, revision or rectification. In other words, normally the fiscal enactments provide for rectification as one of the remedial measures, after the order is passed.
Under Bombay Sales Tax Act (BST Act) also, there was a provision for rectification by way of section 62 of the BST Act. As usual, the section provided for correction of mistakes which are apparent from record. In almost all fiscal enactments the provisions are similar, i.e. mistakes apparent from record are rectifiable.
Scope of Mistake apparent on record
The real controversy starts as to whether mistake can be said to be apparent from record. If the mistake is categorized as apparent on record, only then it will be rectifiable. There are number of judicial pronouncements under both, direct and indirect taxes, deliberating upon the scope of rectification.
Recent judgment of the Hon. Bombay High Court
Recently, the Hon. Bombay High Court had an occasion to decide such an issue. Reference is to the judgment in case of D. S. Solanki vs. The Maharashtra Sales Tax Tribunal & Ors. (W. P. No. 2779 of 2014 dt.28.4.2015). The facts in the above case, as noted by the Hon. Bombay High Court, are as under:
“3. In the present case, we are concerned with the assessment for the years 1993-94, 1994-95 and 1995-96. It is the contention of the petitioner that in the year 1999, the Revenue Authorities had initiated reassessment proceedings in respect of resale claim in respect of purchases from the vendors of the petitioner. Vide order dated 30.3.1999, re-sale claim allowed in respect of purchases from vendors was disallowed.
Similarly, vide orders dated 31.3.1999 and 29.11.1999, re-sale claim in respect of the assessment period 1994- 95 and 1995-96 was also disallowed.
Being aggrieved by the said orders, three appeals were preferred. Vide order dated 9.3.2001, the Appellate Authority dismissed the appeals and confirmed the orders passed by the first Appellate Authority. Being aggrieved thereby, three appeals were preferred before the learned Appellate Tribunal. The learned Tribunal vide order dated 29.1.2005, allowed the appeals and set aside the order passed by the Original Authority as well as the first Appellate Authority. The Revenue thereafter preferred the rectification applications, as aforesaid, which were allowed by the impugned order. Being aggrieved by the order, the present petition was filed”.
By allowing the rectification, the Tribunal recalled the original orders for fresh hearing.
Based on the zabove facts and the contentions of the parties, the Hon. Bombay High Court made observations about scope of rectification citing the judgment of the Hon. Supreme Court. The said observations are as under:
“6. Their Lordships of the Apex Court in the case of Deva Metal Powders Pvt. Ltd. (10 VST 751) (SC) (cited supra) had an occasion to consider a pari material provisions in U.P. Trade Tax Act. The Apex Court while considering the said provisions has observed thus :-
“This Court in M/s. Thungabhadra Industries Ltd. (in all the Appeals) vs. The Government of Andhra Pradesh represented by the Deputy Commissioner of Commercial Taxes, Anantapur, [AIR 1964 SC 1372] held as follows:
“There is a distinction which is real, though it might not always be capable of exposition, between a mere erroneous decision and a decision which could be characterized as vitiated by” error apparent”. A review is by no means an appeal in disguise whereby an erroneous decision is reheard and corrected, but lies only for patent error.
Where without any elaborate argument one could point to the error and say here is a substantial point of law which states one in the face and there could reasonably be no two opinions entertained about it, a clear case of error apparent on the face of the record would be made out.”
An error apparent on the face of the record for acquiring jurisdiction to effect rectification must be such an error which may strike one on a mere looking at the record and would not require any long drawn process of reasoning. The following observations in connection with an error apparent on the face of the record in the case of Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tiruymale [ AIR 1960 SC 137] need to be noted:
“An error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions can hardly be said to be an error apparent on the face of the record. Where an alleged error is far from self-evident and if it can be established, it has to be established, by lengthy and complicated arguments, such an error cannot be cured by a writ of certiorari according to the rule governing the powers of the superior Court to issue such a writ.”
“A bare look at Section 22 of the Act makes it clear that a mistake apparent from the record is rectifiable. In order to attract the application of Section 22, the mistake must exist and the same must be apparent from the record. The power to rectify the mistake, however, does not cover cases where a revision or review of the order is intended. “Mistake” means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error, a fault, a misunderstanding, a misconception. “Apparent” means visible; capable of being seen, obvious; plain. It means “open to view, visible, evident, appears, appearing as real and true, conspicuous, manifest, obvious, seeming.” A mistake which can be rectified under Section 22 is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration. In our view rectification of an order does not mean obliteration of the order originally passed and its substitution by a new order.
What the Revenue intends to do in the present case is precisely the substitution of the order which according to us is not permissible under the provisions of Section 22 and, therefore, the High Court was not justified in holding that there was mistake apparent on the face of the record. In order to bring an application under Section 22, the mistake must be “apparent” from the record. Section 22 does not enable an order to be reversed by revision or by review, but permits only some error which is apparent on the face of the record to be corrected. Where an error is far from self-evident, it ceases to be an apparent error. It is, no doubt, true that a mistake capable of being rectified under Section 22 is not confined to clerical or arithmetical mistake. On the other hand, it does not cover any mistake which may be discovered by a complicated process of investigation, argument or proof. As observed by this Court in Master Construction Co. (P) Ltd. v. State of Orissa [1966] 17 STC 360, an error which is apparent from record should be one which is not an error which depends for its discovery on elaborate arguments on questions of fact or law.
“Mistake” is an ordinary word but in taxation laws, it has a special significance. It is not an arithmetical error which, after a judicious probe into the record from which it is supposed to emanate is discerned. The word “mistake” is inherently indefinite in scope, as to what may be a mistake for one may not be one for another. It is mostly subjective and the dividing line in border areas is thin and indiscernible. It is something which a duly and judiciously instructed mind can find out from the record. In order to attract the power to rectify under Section 22, it is not sufficient if there is merely a mistake in the order sought to be rectified. The mistake to be rectified must be one apparent from the record. A decision on a debatable point of law or a disputed question of fact is not a mistake apparent from the record. The plain meaning of the word “apparent” is that it must be something which appears to be so ex facie and it is incapable of argument or debate. It, therefore, follows that a decision on a debatable point of law or fact or failure to apply the law to a set of facts which remains to be investigated cannot be corrected by way of rectifications.”
“In the said case, initially, the assessee was assessed for the aluminum powder treating the same as a metal and as such holding him liable to pay tax at 2.2 %. In the rectification proceedings, it was held that the relevant entry would not include aluminum powder and as such the same was assessed treating the same to be an unclassified item. In this background, the aforesaid observation is made by the Apex Court. It has been held by the Hon’ble Apex Court that in order to attract the provisions of the Act, the mistake must exist and the same must be apparent from the record. It has been held that “Mistake” “means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error, a fault, a misunderstanding, a misconception; to make an error in interpreting. It has been further held that a mistake which can be rectified u/s. 22 is one which is patent, obvious and whose discovery is not dependent on argument or elaboration. However, the Apex Court itself has held that the power u/s. 22 of the said Act is not confined to clerical or arithmetical mistake. It is further held that it does not cover any mistake which may be discovered by a complicated process of investigation, argument or proof. The Apex Court thus held that there cannot be hard and fast rule as to whether mistake is apparent or not and the same would be mostly subjective and the dividing line in border areas is thin and indiscernible. It has been further held that a decision on debatable point of law or fact or failure to apply the law to a set of facts which remain to be investigated, cannot be corrected by way of rectifications.”
After analysing the scope of rectification as above, the Hon. Bombay High Court in the case of the Petitioner observed as under :
“8. It would thus be seen that the learned Tribunal while deciding the Second Appeal proceeds on a footing that the assessment in question was made u/s. 33(3) of the said Act. However, the assessments were made in fact u/s. 33(2) of the said Act. It could further be seen that even the lawyer who was representing the petitioner before the learned Tribunal in the rectification application, himself admitted that the original assessments were made u/s. 33(2) and not u/s. 33(3) of the said Act. The learned counsel further admitted that the period for 1995-96 does not involve reassessment and the said matter had arisen from the assessment itself. The learned counsel fairly stated that the inaccuracies have crept in the order passed by the learned Tribunal, since the inaccuracies are in the first appeal itself. It could thus be seen that in the facts of the present case, though the assessments were made u/s. 33(2) and not u/s. 33(3), the Second Appeals were decided on an assumption that the assessments were done u/s. 33(3). It can thus be seen that the error which has been committed is on an erroneous assumption of fact. It is further to be noted that it is not even disputed by any of the parties that the error committed by the learned Tribunal is on an erroneous assumption of fact. These errors are such which can be seen with a naked eye. The errors are not of such a nature which would require detailed arguments to be advanced or a complicated process of investigation to be gone into, so as to unearth them. Any person with some understanding of law, can easily make out these errors. Not only that, but the learned counsel appearing on behalf of the assesesee in the rectification proceedings has also admitted that these errors have occurred in the order of which rectification is sought. In that view of the matter, we find that it cannot be said that the jurisdiction exercised by the learned Tribunal was exercised beyond the scope available to it u/s. 62.”
Thus, the Hon. High Court has confirmed that the mistakes which are of fact and the judgment is based on such mistaken facts then the judgment can be recalled for fresh decision.
Conclusion
There are a number of judgments about the above issue. Each case depends upon its own facts. However, the guidelines available are that if the issue is debatable, then rectification will not be permissible. If the mistake is clear as seen, then the rectification is possible and the effect can be either to modify the order or even recall the same.
