The authority must establish both an error in the original order and that it is prejudicial to revenue for invoking revisionary powers under Section 74A of the Delhi Value Added Tax Act.

JUDGMENT

Rajiv Shakdher, J. (Oral)

Preface:

1. This writ petition is directed against the show-cause notice dated 15.11.2018, issued by the Commissioner, Value Added Tax, issued under Section 74A (2) of the Delhi Value Added Tax Act 2004 [hereafter referred to as "Act".]

1.1. The said notice required the petitioner's authorized representative to make an appearance on the date stipulated i.e., 20.11.2018.

2. Besides this, the petitioner has also sought a direction for a refund of Rs.2 crores which was made over as a pre-deposit for the purposes of having its objection heard by the Special Commissioner-I, Department of Trade and Taxes, GNCTD.

2.1. In addition, thereto, mandamus is also sought for grant of interest on the delayed release of above-mentioned pre-deposit i.e., Rs.2 crores.

3. We may indicate at the very outset that insofar as prayer clauses (b) and (c) of the writ petition are concerned, they concededly stand satisfied during the pendency of the proceedings. Rs.2 crores was refunded to the petitioner, pursuant to the order dated 08.01.2020 passed by this Court.

3.1. We are informed that the said sum was refunded to the petitioner, along with interest.

4. It is important to note that the impugned notice dated 15.11.2018 seeks to revise the order dated 22.03.2017 passed by the Special Commissioner-II i.e., the Objection Hearing Authority [hereafter referred to as "OHA"] and the consequent order dated 26.02.2018 passed by the Assessing Officer [hereafter referred to as "AO"].

5. The respondent seeks to revise the aforementioned orders passed by the OHA and the assessment order, by taking recourse to the powers conferred on the said authority under 74A of the Act.

6. Before we proceed further, it is relevant to have a brief overview of the facts obtaining in the instant case, which have led to the institution of the present petition.

6.1. The petitioner, which is in the business of importing and trading laptops, mobile phones and streaming devices, while paying tax, had classified one of the devices, which is known as `Apple Watch', under the residual entry.

6.2. Consequently, the tax, which was offered by the petitioner, with respect to the abovementioned device, was calculated at rate of 12.5%.

7. Insofar as the A.O. was concerned, he was of view that the said product i.e., Apple Watch, ought to have been classified as `Watch' under Entry No. 12 of the Fourth Schedule of the Act, and therefore, the petitioner ought to have paid tax at the rate of 20%.

7.1. The A.O., thus, repelled the contention of the petitioner that Apple Watch could be classified under the residuary entry. Accordingly, by an order dated 17.02.2016, the assessment order was framed under Section 32 of the Act and a demand amounting to Rs.7,32,83,675/- was raised qua the petitioner.

7.2. The demand included tax amounting to Rs.7,25,08,922/- and interest pegged at Rs.7,74,753/-.

7.3. It is this assessment, which led to the petitioner filing its objection with the OHA under Section 74 of the Act. As indicated above, the petitioner made a pre-deposit of Rs.2 crores, to have its objections heard.

7.4. The OHA, after hearing the authorized representative of the petitioner as well as the respondent, via order dated 22.03.2017, reversed the view taken by the A.O.

7.5. In brief, the OHA concluded that Apple Watches were not just watches but transmission devices and, therefore, had to be assessed under the residuary entry. In effect, the stand taken by the petitioner that the tax qua the said devices would get attracted at the rate of 12.5%, was accepted by the OHA.