Whether, as provided under Rule 62, the appellate
authority is bound to give hearing to a third party – which is likely to
be affected by the outcome of its judgment?
Whether such mistake amounts to apparent mistake from
the record and falls within the scope of rectification of mistake u/s 62
and can be applied for rectification by a third party also?
Whether the scope of rectification u/s 62 covers not
only of just amending the order but also of recalling the entire order and
eliminate the error?
Held: The order of the Tribunal allowing the third
party application for rectification of mistake u/s 62 was set aside and
the matter was restored to the file of the Commissioner (instead of the
Tribunal) for disposal after hearing the main party (the applicant of the
DDQ application) as well as the third party (who was aggrieved by the said
DDQ).
The moot point raised by the Commissioner of Sales Tax
in this petition was whether on a rectification application filed under
section 62 of the Bombay Sales Tax Act, 1959 ("BST Act") by a third party
who is not directly affected by the adjudication, whether, the Tribunal
can recall its order passed under section 55 of the BST Act and rehear the
matter on merits?
There were two petitions filed out of common
transaction and common proceedings and, therefore, heard and disposed of
together by a common judgment.
The facts in Writ Petition No. 2599 of 2002 were that
the Bharat Petroleum Corporation Ltd. ("BPCL") – the respondent No. 2 in
the said application was engaged in the business of refining Petroleum
Products – mainly what is commonly known as kerosene (Linear Alkyl
Benezene Feed Stock) and selling the same to various parties. The said
kerosene manufactured by the BPCL contained N-Paraffin. The Reliance
Industries Ltd. ("RIL"), which has got a Petro Chemical plant at
Patalganga wherein Petro Chemical Products are manufactured. RIL requires
N-Paraffin for use in its plant.
As per the agreement entered into by and between BPCL
and RIL, BPCL was to supply kerosene containing N-Paraffin through a
pipeline from BPCL’s refinery at Mahur to the plant of RIL at Patalganga.
RIL extracted
N-Paraffin from the said kerosene and returned the balance kerosene to
BPCL in the return stream. RIL retained 5% of the kerosene in the form of
N-Paraffin and residual kerosene of 95% was returned by the RIL to the
BPCL.
The RIL and the BPCL in turn claimed purchase return
and sales return u/s. 2(35) and (36) respectively. The issue arose, here,
was whether the kerosene returned by RIL after extracting N-Paraffin could
be considered as "goods returned" within the meaning of Rule 4 of the BST
Rules 1959. According to the BPCL, kerosene with N-Paraffin supplied by it
to the RIL as well as kerosene without N-Paraffin returned by RIL to it
were falling within the category of ‘kerosene’ under B.I.S. Specification.
At the relevant time Kerosene was covered under Schedule Entry C-I-26(i)
of the BST Act and it was wholly exempt from the tax under Notification
Entry No. 160, issued under section 41 of the BST Act.
According to the BPCL the three transactions, viz., 1)
sale of kerosene with N-Paraffin by the BPCL to RIL 2) return of kerosene
without N-Parrafin by the RIL to the BPCL and 3) sale of returned kerosene
by the BPCL to third parties were exempt from payment of tax in view of
the aforesaid Notification.
With a view to obtain determination on the above
disputed questions the BPCL on 21-4-1992 made an application before the
Commissioner of Sales Tax under section 52 of the BST Act seeking
adjudication on the following issues:
-
Whether the sale of Kerosene by BPCL is liable to
tax?
-
Whether the return of kerosene by RIL to BPCL would
be legally allowable as sales return or whether that return will amount
to purchase of kerosene by BPCL from RIL?
-
Whether subsequent sale of kerosene affected by BPCL
to third parties is liable to tax?
The Commissioner of Sales Tax, wide his order dtd.
14-3-1996, determined the questions referred to him as under:
-
Sale of kerosene by BPCL to RIL being covered by
Entry No. C-I-26 read with Notification under section 41 of the BST Act,
was exempt from tax.
-
That, return of kerosene after extracting N-Paraffin
by RIL to BPCL would not be legally allowable as ‘sales return’ but no
tax is payable in view of the aforesaid exemption Notification.
-
Sale of kerosene (without N-Paraffin) by BPCL to
third parties is also not liable to tax as per the aforesaid exemption
Notification.
Being aggrieved by the above adjudication order of the
Commissioner pertaining to question No. 2, BPCL filed an appeal before the
Tribunal under section 55 of the BST Act. It did not file appeal as regard
to the question Nos. 1 and 3.
The Tribunal vide its order dtd. 21-4-2001 confirmed
the order of the Commissioner.
The BPCL then filed a Reference Application No. 95 of
2001 against the said order of the Tribunal.
In the meantime RIL, the respondent No. 3 in the
present Writ Petition No. 2599 of 2002, filed a Rectification Application
No. 30 of 2001, seeking rectification of the order of the Tribunal dated
21-4-2001, on the ground that the said order directly affected RIL, who is
the opposite party to the transaction between BPCL and RIL. The Tribunal's
order was violative of principles of natural justice and the provisions of
Rule 62 of the BST Rules, 1959.
The Tribunal by its order dtd. 16-4-2002 allowed the
rectification application of RIL and held that the mistake of not hearing
RIL before passing the order under section 55 was an error apparent on the
face of the record and recalled its order dtd. 21-4-2001 so as to pass
fresh order on merits after hearing RIL.
In view of the above the Reference Application No. 95
of 2001 filed by the BPCL was dismissed as infructuous by the
Tribunal.
Challenging the said order of the Tribunal dtd.
16-4-2002 wherein the Rectification Application of RIL was allowed, the
Commissioner of Sales Tax then filed the aforesaid Writ Petition No. 2599
of 2002. Whereas the BPCL also filed Writ Petition No. 3198 of 2002,
challenging the said order of the Tribunal wherein the Reference
Application No. 95 of 2001, filed by it had been dismissed as
infructuous.
The learned counsel for the Commissioner argued that if
the provision of section 62 is construed widely, so as to permit the
Tribunal to recall its own order and pass fresh order on merit after
hearing the parties, then it will open the flood gate and large number of
applications would be filed by third parties and would frustrate the very
object and purpose of section 62. He stated that the scope of section is
limited to correction of an error apparent on the face of the record. The
Tribunal has got no power to withdraw the order in original.
The High Court the referred to various provisions of
the BST Act and Rules and particularly the provisions of sections 55 and
62 and Rule 62.
The High Court ruled that it was obligatory on the part
of the Tribunal under Rule 62 to give hearing to a person who is likely to
be affected adversely by its decision to be given u/s 55. The word ‘any
person’ in Rule 62 is restricted to the person with whom the appellant
before the Tribunal has entered into a transaction.
The High Court also ruled that by not affording the
hearing to the affecting party as provided under Rule 62 it is a mistake,
which is apparent from the record and falls within the scope of
rectification u/s 62.
Relying on the judgment in the case of Blue Star
Engineering Co. (Bombay) Pvt. Ltd. (73 ITR 283) it was held that
rectification does not mean only amending the order but it may go right up
to eliminating the error and might go to the root of the order and its
elimination may result in the whole order falling to the ground.
The High Court also observed that the wording ‘amend
any order’ which was there in section 154 of the I.T. Act is not there in
section 62 of the BST Act. This broadens the scope of rectification under
the BST Act.
The High Court also distinguished judgment of Madras
High Court, on the facts, in the case of India Tyre & Rubber Co.
(India) Pvt. Ltd. There was provision similar to the provision of Rule
62 of the BST Act in the Tamilnadu General Sales Tax Act, 1959.
However, the High court, accepting the argument of the
Commissioner, held that when the question is to be decided by permitting
the parties to lead evidence, then, it could be well led before the first
authority; i.e., the Commissioner of Sales Tax.
In view of the above the High Court without deciding on
the issues as to whether the RIL was a directly affected party or not and
whether there was an error apparent on the face of the record or not,
accepted the alternate argument of the Commissioner and allowed the
Commissioner, instead of the Tribunal, to decide the question No. 2 afresh
after hearing both the parties; i.e., BPCL and RIL.
In the end the High Court set aside both the orders of
the Tribunal dtd.
21-4-2001 as well as the order dtd. 16-4-2002 and restored the matter to
file of the Commissioner qua the disputed question.
[Commissioner of Sales Tax vs. Maharashtra Sales Tax
TrIbunal, Writ Petition No. 2599 of 2002 and BPCL Ltd. vs. State of
Maharashtra Writ Petition No. 3198 of 2002. Both are unreported judgments
on the date of publication of this column]
