Rectification under VAT

Rectification under VAT
By N.T.Nirale, M.A. M.Com. LL.B. D.M.S. Advocate

RECTIFICATION
In the earlier article, we have seen the assessment provisions under VAT Act. When the assessment is over, the next step is concerned with the corrections to be made in the assessment order. From the view point of the dealer, two important corrective measures are Rectification and the other Appeal. Section 24 provides for Rectification and section 26 provides for Appeals.

RECTIFICATION OF APPARENT MISTAKE -
The mistake is apparent when it is very clear and glaring. That means to expose the mistake, long drawn arguments are not necessary. Time limit – Rectification provisions u/s 24 of VAT Act are almost similar to old section 62 of the BST Act. Section 24[1] fixes the time limit of 2 years from the end of a financial year in which the order is passed. Who can apply – Any person can bring to the notice of the commissioner any mistake. Similarly the commissioner can suomoto rectify the mistake.

Procedure – If the rectification is resulting in demand then it is compulsory of the Commissioner to give reasonable opportunity of hearing to the dealer. Even if the application of rectification is to be rejected if there is no mistake, the hearing is necessary.

Stay of recovery – Provision is also made for stay of recovery if the application for rectification is pending. But later on, if the dues are confirmed then there will be interest. The stay order will be in form 308.

Forms – As per Rule 27 the Commissioner has to give notice in Form 306 before passing the rectification order. As per Rule 28, the dealer has to make application for rectification in form 307. There is no Court Fess for rectification application.
There is form 311 for application requesting Stay order in appeal proceedings but there is no form of application for stay in rectification proceedings. The stay order for rectification is in Form 308.

RECTIFICATION OF MISTAKE WHICH IS NOT APPARENT -
New provision was made from 1-7-2004 in BST Act for the mistake, which was not apparent. Similar provision is incorporated in section 24[2]. If the dealer has claimed any deduction for sales against declarations or certificates and he has not received the same till the time of assessment, then even if that claim is disallowed and the tax is levied on the same, the dealer can apply, with in 2 years from the end of the financial year in which that assessment order was received, for rectification if
receives those declarations or certificates. If the dealer wants to take advantage of this type of rectification, then he should not have filed the appeal. This suggests that if he had filed the appeal and at the time of hearing of appeal, he had not received the declarations, then he cannot go for rectification if he receives the missing declarations within two years.
For such rectification, the Commissioner has to give hearing and verify the forms and allow the same.

The dealer can take advantage of this type of rectification only one time for one assessment order. So it is advisable to wait for 23 months and then file the application for rectification on account of receipt of missing forms.

RECTIFICATION BY APPELLATE AUTHORITIES:
Provision is made in section 24[3] for rectification of the mistakes made by appellate authorities. The provisions of rectification applicable to assessing authority are also applicable to mistakes to be rectified by appeal authorities.
However the proviso to section 24[3] is very threatening. It empowers the appellate authority to rectify any mistake though that particular point was not challenged in the appeal. This means any point, which is not raised in appeal, can also be rectified by the appellate authority. This proviso was not in the old section 62 BST Act and is introduced for the first
time. This proviso to section 24[3] overrides the entire VAT Act. Does this mean that the time limit of two years will not apply to the actions of rectification under proviso to section 24[3] is question which is not easy to answer. Perhaps this will be another example of unfettered powers of the Monarch as pointed out in my earlier article on assessment provisions. It is to be seen whether the dealer can, on application, take the benefit of this proviso to section 24[3]. Thank the Creator that he has made the provision in section 24[4] for refund of the amount found to be paid in excess.

Written by ntnirale on June 13th, 2009 with comments disabled.
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