Joint Commissioner of Commercial Taxes (Appeals)1 Vs Mapei Construction Products India Pvt. Ltd. (Karnataka High Court)
Summary: The Karnataka High Court dismissed Sales Tax Revision Petition No. 66 of 2025 filed by the Joint Commissioner of Commercial Taxes (Appeals)1 and the Deputy Commissioner of Commercial Taxes (Audit)1.1 against M/s Mapei Construction Products India Pvt. Ltd. The petition arose from the judgment dated 16.04.2025 of the Karnataka Appellate Tribunal in STA No. 70/2022, which had allowed the assessee’s appeal, set aside the order dated 29.03.2022 in VAT.AP. 17/2020-21 passed by the Joint Commissioner of Commercial Taxes (Appeals-1), Bengaluru, and upheld the rectification order dated 21.03.2020 passed by the Deputy Commissioner of Commercial Taxes (Audit)1.1, DGSTO-I, Bengaluru, for the tax period 2015-16.
The principal issue before the High Court was whether an assessee could claim a refund beyond the period of six months contemplated under Section 35(4)(b) of the Karnataka Value Added Tax Act, 2003. The Court recorded that the issue was no more res integra and considered the decision of the Co-ordinate Bench in State of Karnataka and others vs. Tractor and Farm Equipment Limited in STRP No. 26/2023 and connected matter, decided on 03.03.2025.
Before the Co-ordinate Bench, the State had contended that the duty to rectify a mistake arose only when rectification operated to the advantage of the State Exchequer. It was also contended, with reference to Section 39(2)(e) of the Act, that the longer period available for rectification reflected legislative wisdom and that the six-month period available to an assessee under Section 35 should be treated differently. The State had argued for a literal interpretation of the provisions.
The Co-ordinate Bench rejected that approach. It held that where the Assessing Authority, during reassessment, discovers deductions or exemptions that were wrongly allowed, the authority has to rectify the same even where the result benefits the dealer. The duty becomes more onerous where the dealer itself makes a representation. The Bench further held that where deductions and exemptions are required to be worked out on the basis of statutory notifications having the character of subordinate legislation, there is no escape from that duty. It rejected a sectarian interpretation based on the proposition that amounts otherwise due to the dealer remain with the State for public use, holding that such an object, though laudable, is legally impermissible.
Applying that reasoning, the High Court held that the State could not deprive a citizen/assessee of the legitimate right to recover money that had mistakenly gone out of the assessee’s hands. Although Section 35 provided six months for an assessee to reclaim money excessively paid to or retained by the State Exchequer, a larger period of five years was available to the State to regain funds legitimately belonging to the State Exchequer. The Court nevertheless agreed that, during assessment or reassessment, where the Assessing Authority discovers that the assessee has sought a lesser deduction than what is legitimately available, it is the authority’s duty to pay the assessee the rightful dues.
The Bench expressly agreed with the Co-ordinate Bench decision. The parties informed the Court that the Co-ordinate Bench decision had been confirmed by the Supreme Court in Special Leave Petition (Civil) Dairy No(s). 47212/2025 dated 23.02.2026. Finding no merit in the Revenue’s appeal, the High Court dismissed the appeal. It further directed that the appellant-State and its authorities refund the amounts due to the respondent as expeditiously as possible and, in any event, within three months from receipt of a copy of the order.
Cases Discussed
- State of Karnataka and others vs. Tractor and Farm Equipment Limited — STRP No. 26/2023 and connected matter, decided on 03.03.2025.
FULL TEXT OF THE JUDGMENT/ORDER OF HIGH COURT OF KARNATAKA
The issue brought before this Court is no more res integra. Simply put, the question is whether refund could be claimed by an assessee beyond the period of six months as contemplated in Section 35(4) (b) of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as ‘the Act’, for short)?
2. For that purpose, learned counsel for the respondent has placed reliance on a decision of the Co-ordinate Bench in the case of the State of Karnataka and others vs. Tractor and Farm Equipment Limited in STRP No.26/2023 and connected matter decided on 03.03.2025.
3. Learned counsel for the respondent submitted that the Co-Ordinate Bench has taken into consideration the contention put forth on behalf of the appellant – State that the duty to rectify mistake arises only when it proves advantages to the State Exchequer. Similar to the present case, learned AGA appearing for the appellant – State therein contented having regard to Section 39(2)(e) of the Act, that a larger period of time granted for rectification is in the wisdom of the legislature that an order that would take away the benefit legitimately provided to the State Exchequer is not the same as the benefit given to an assessee in the form of six months in Section 35 of the Act.
4. It was argued by the learned AGA that literal interpretation is required to be given to such provisions. However, the Co-ordinate Bench held that if the Assessing Authority while undertaking the re-assessment, discovers deductions or exemptions that are wrongly allowed, he has to rectify the same even if it enures to the benefit of the dealer. Such a duty becomes more onerous when a representation is given by the dealer. It was held that there is no escape from this duty when deductions and exemptions have to be worked out on the basis of statutory notifications that have the character of subordinate legislation. A sectarian interpretation cannot be placed on a provision like this on the ground that whatever amount otherwise is due to the dealer, lying at the hands of the State would be used for the public at large. The Co-Ordinate Bench held that such an argument would be a laudable object, but legally impermissible.
5. As could be seen from the decision of the Co-ordinate Bench, the Co-ordinate Bench has rightly held that the State cannot deprive a citizen of this country, the legitimate right to get back the money that has mistakenly gone out of the hands of a citizen/assessee. Although Section 35 of the Act provides a period of six months for such an assessee to reclaim the money excessively paid to the State Exchequer or retained by the State Exchequer and at the same time, a larger period of five years is provided to the State in order to regain such lost funds which are legitimately belong to the State Exchequer. Nevertheless, the Co-ordinate Bench rightly held that at the time of assessment or reassessment, if the Assessing Authority discovers that the assessee has wrongly sought for lesser deduction than what is legitimately available to the assessee, then it will be the duty of the Assessing Authority to pay back the assessee his rightful dues.
6. We respectively agree with the decision of the Co-ordinate Bench. At this juncture, learned AGA appearing for the appellant and learned counsel for the respondent submit that the decision of the Co-ordinate Bench has been confirmed at the hands of the Hon’ble Supreme Court in Special Leave Petition (Civil) Dairy No(s).47212/2025 dated 23.02.2026.
7. In that view of the matter, we do not find any merits in the appeal. Accordingly, the appeal stands dismissed. Needless to observe that the appellant – State and its authorities are required to refund the amounts due to the respondent as expeditiously as possible and at any rate within a period of three months from the date of receipt of copy of this order.
