Pranav B Prem

In a significant ruling, the Kerala High Court has held that the Joint Commissioner possesses jurisdiction to initiate proceedings under Section 56 of the Kerala Value Added Tax Act, 2003 (KVAT Act) against an assessment order passed pursuant to a remand by the First Appellate Authority. The Division Bench of Justices A.K. Jayasankaran Nambiar and Easwaran S. observed that when a fresh assessment order is passed following a remand, the original assessment order ceases to exist in law. Consequently, the only assessment order that remains valid for the purpose of revision under Section 56 is the one subsequently passed by the Assessing Authority.

Background of the Case

The petitioner, Sajeer A., proprietor of M/s. Diya Foods, is engaged in the manufacture of unbranded food products. The controversy arose when a penalty was imposed on the petitioner under Section 67 of the KVAT Act following an inspection by the Intelligence Squad of the State GST Department. The petitioner challenged the penalty order before the First Appellate Authority, which modified the penalty, leading to the Assessing Authority issuing a consequential order reducing the penalty. The petitioner subsequently appealed against the assessment order before the First Appellate Authority, which allowed the appeal, set aside the assessment order, and directed the Assessing Authority to pass a fresh order after verifying the relevant records. Pursuant to this remand, the Assessing Authority passed a fresh assessment order on November 3, 2020, substantially reducing the petitioner’s tax liability.

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Issuance of Section 56 Notice

The Joint Commissioner found the fresh assessment order to be erroneous and prejudicial to the interests of the Revenue. Consequently, a notice under Section 56(1) of the KVAT Act was issued to the petitioner, requiring him to show cause why the assessment order should not be revised. Despite replying to the notice, the petitioner did not appear before the Joint Commissioner during the revision proceedings. As a result, the Joint Commissioner confirmed the proposals in the notice and enhanced the tax demand.

Challenging this order, the petitioner approached the Commissioner of State Goods and Service Tax. The Commissioner, through an order dated July 22, 2023, upheld the revision initiated by the Joint Commissioner. This led to the present OT Revision before the High Court.

Contentions of the Petitioner

The petitioner argued that the Joint Commissioner could not invoke Section 56 to revise an assessment order that was passed pursuant to a remand without separately challenging the First Appellate Authority's remand order. It was contended that the fresh assessment order was merely an implementation of the First Appellate Authority’s directive and, therefore, not independently subject to revision under Section 56.

Court's Observations

The Division Bench rejected the petitioner's argument regarding the lack of jurisdiction. The court noted that the First Appellate Authority had set aside the original assessment order and directed the Assessing Authority to pass a fresh order, which was a de novo proceeding. Since the original order ceased to exist, only the subsequent order could be subjected to revision under Section 56.

The court specifically highlighted the findings of the Commissioner, which stated: “The modified order was one which was issued by the State Tax Officer after examining the books of accounts produced by the Petitioner and after verifying the purchase ledger and it assumes independent status and existence even though it was issued consequent on the order of the appellate authority.”

The Commissioner further observed: “The appellate authority has not directed to delete the purchases treated as unaccounted in the original order of assessment. Instead, it was directed to re-examine the books of accounts of the Petitioner and to redo the assessment. The modified order is thus a de novo order and has not been made the subject matter of any appeal.”  Additionally, the court noted that the petitioner was given ample opportunities to present his case during the revision proceedings. However, he failed to avail himself of those opportunities, leading to the confirmation of the revision order.

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Verdict

Dismissing the petition, the Kerala High Court ruled in favor of the Revenue, holding that the Joint Commissioner rightfully exercised jurisdiction under Section 56 to revise the fresh assessment order passed pursuant to the remand. The court emphasized:  “When the fresh assessment order was passed consequence to the remand, the original assessment order ceased to exist in law and thereafter the only assessment order that survived for the purposes of exercise of the power of revisions under Section 56 was the subsequent order passed by the Assessing Authority.”

Advocates Representing the Parties:

Counsel for Petitioner/ Assessee: Meera V. Menon, R.Sreejith, K.Krishna, Parvathy Menon

Counsel for Respondent/ Department: SR GP. VK Shamsudheen

Cause Title: Sajeer A v. State of Kerala

Case No: OT.REV NO. 3 OF 2024

Neutral Citation: 2025:KER:20728

Bench: Justice A.K. Jayasankaran Nambiar, Justice Easwaran S

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