Under Section 25-A(1) of the Karnataka Sales Tax Act, 1957, a rectification application not rejected within 60 days is deemed allowed by operation of law, conferring an accrued right to interest on delayed refunds that cannot be nullified by subsequent jurisdictional errors in assessment proceedings.

C.A.V. ORDER

(PER: HON'BLE MR. JUSTICE K. V. ARAVIND)

Heard Sri. M. Thirumalesh, learned counsel for the petitioner-Assessee and Sri. Aditya Vikram Bhat, learned Additional Government Advocate for respondent Nos.1 to 4-Revenue.

2. This Sales Tax Revision Petition is filed under Section 23(1) of the Karnataka Sales Tax Act, 1957 (for short, “the KST Act”), by the dealer, calling in question the order passed by the Karnataka Appellate Tribunal, Bengaluru (for short “the Tribunal”), in ST Rectification Application Nos.05 to 07/2018 (in STA Nos.304 to 306/ 2016), dated 24.06.2019.

3. The facts, in brief, are that the petitioner is a dealer registered under the Karnataka Sales Tax Act, 1957 (for short, “the KST Act”), and is engaged in the business of edible coconut oil and coconut hair oil under the brand names “Parachute”, “Oil of Malabar”, “Parachute Jasmine” and “Hair and Care”. The assessment orders for the assessment years 2002–03, 2003–04 and 2004–05 were passed levying tax on the sale of coconut oil sold under brand names by applying Sl. No.17-A of Part ‘C’ of the Second Schedule at the rate of 20%.

3.1 The said Entry 17-A was challenged by the petitioner in Writ Petition No.28125/2002, contending that it was discriminatory and violative of Articles 14 and 16 of the Constitution of India. The writ petition was allowed and the amendment was struck down. However, the orders of assessment were not set aside in the said writ proceedings.

3.2 The order passed in the writ petition was challenged in Writ Appeal No.649/2006. The Division Bench, by order dated 15.12.2009, reported in 2011 (70) KLJ 93, set aside the order of the learned Single Judge and upheld the validity of the amendment. The Division Bench, however, directed the Revenue to consider the case of the assessee having regard to the distinction between sale of coconut oil as pure coconut oil and as hair oil.

3.3 Pursuant thereto, the petitioner filed an application dated 18.01.2010 seeking rectification of the assessment order in conformity with the judgment of the Division Bench. The said application was not rejected within a period of 60 days and, therefore, it is the case of the petitioner that the same stood deemed to have been allowed in terms of the proviso to Section 25-A(1) of the KST Act.

3.4 According to the petitioner, the refund ought to have been granted within 90 days from the deemed date. The deemed date is stated to be 22.03.2010 and the expiry of 90 days under Section 13-A of the KST Act is stated to be 22.06.2010. However, the adjudicating authority passed an order of rectification on 08.04.2010.

3.5 The said order of rectification was set aside by the Joint Commissioner of Commercial Taxes in exercise of powers under Section 21(2) of the KST Act, by order dated 14.01.2011, and the Assessing Authority was directed to pass fresh orders in the light of the judgment of the Division Bench of this Court. Pursuant thereto, the Assessing Authority passed a fresh order on 16.08.2011. It is stated that a refund notice was issued on 20.08.2011.

3.6 The fresh assessment order dated 16.08.2011, along with the refund order, was challenged before the Joint Commissioner of Commercial Taxes (Appeals), and the appeal came to be dismissed on 17.12.2011. Thereafter, a pay order was issued on 09.01.2012. It is further stated that the request for grant of interest was rejected on 17.07.2012. The said order rejecting the claim for interest was challenged before the Tribunal in STA Nos. 304, 305 and 306/2016. The Tribunal,