By Advs.sri.harisankar v. Menonsmt.meera V.menon

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON FRIDAY ,THE 26TH DAY OF OCTOBER 2018 / 4TH KARTHIKA, 1940 WP(C).No. 12392 of 2017 PETITIONER/S: K.P. SURESH M/S.KNP STORES,MUTHUVARA,THRISSUR DISTRICT. BY ADVS.SRI.HARISANKAR V. MENONSMT.MEERA V.MENON RESPONDENT/S: 1THE AGRL. INCOME TAX & COMMERCIAL TAX OFFICERTHRISSUR-680001. 2THE INTELLIGENCE OFFICERINVESTIGATION BRANCHDEPARTMENT OF COMMERCIAL TAXES,THRISSUR-680001.DEPARTMENT OF COMMERCIAL TAXES,THRISSUR-680001. BY ADV. GOVERNMENT PLEADER OTHER PRESENT: SRI C E UNNIKRISHNAN SPL GP THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 26.10.2018,ALONG WITH WP(C)NOS.12381/2017, 12384/2017,12391/2017, 12394/2017, 12397/2017,12401/2017 &18350/2017 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P(C)Nos.12381/2017, 12384/2017, 12391/2017,12392/2017, 12394/2017, 12397/2017,12401/2017 & 18350/2017 J U D G M E N T Vinod Chandran, J The petitioners in the above writ petitionschallenge, the proceedings initiated under Section 67of the Kerala Value Added Tax Act, 2003 (for short“KVAT Act” only) on the ground of the orders passedbeing vitiated on the ground of period of limitationhaving expired. The writ petitions were referred to aDivision Bench since the question of limitation underSection 67 was pending before us in W.A No.344/2017which we have decided today. 2. We have noticed in W.A No.344/2017; The Intelligence Officer vs. Mohammed Sameerthat underSection 67 initially, at the inception of the KVAT Act,there was a limitation provided of one year which wasenhanced to three yeas in 2009 and then later removedfrom the statute in the assessment year 2014-15. Wehave also held that even if no limitation isspecifically provided in the statute the proceedings should be finalised within a reasonable period. As toreasonable time for completion of proceedings underSection 67, it was found that it should be five yearsas provided under Section 25 for re-assessment. On thecommencement of such period of limitation we havefollowed a Division Bench judgment in W.A No.385/2009dated 18.02.2009 [M/s. Acme Furniture and InteriorsVs.CTO]; which held the commencement to be ondetention of offence. We noticed the observation inW.A 385 of 2009 that there is no time provided fordetection of offence, which we held should be within aproximate period from the date of inspection and anydelay caused will have to be satisfactorily explained;except in cases where the proceedings are finalisedwithin the period of limitation. On these broadprinciples laid down by us as also the other DivisionBench decision, we proceed to consider the question oflimitation as urged in these writ petitions. 3. A dealer in tobacco one A.P Kakku'spremises were inspected by the intelligence wing of theCommercial Taxes Department. Allegations were raised of unaccounted sales to various dealers in and aroundThrissur. Summons were issued to the said Kakku asalso the purchasing dealers to produce their books ofaccounts. It is submitted that the summons to thepurchasing dealers were issued in December of 2012. 4. The learned Counsel appearing for thepetitioners submit that the petitioners herein, whowere the alleged purchasers, had produced their booksof accounts immediately on receipt of summons. TheIntelligence Officer sat over it and first issued anotice of penalty against the said Kakku on 30.09.2014.The penalty proceedings against Kakku were concludedby order dated 30.12.2016. Subsequently notices to thealleged purchasers were issued on 23.01.2017, longafter the period of limitation that existed at the timeof inspection as also the production of books ofaccounts. 4. The learned Counsel appearing for thepetitioners submit that the petitioners herein, whowere the alleged purchasers, had produced their booksof accounts immediately on receipt of summons. TheIntelligence Officer sat over it and first issued anotice of penalty against the said Kakku on 30.09.2014.The penalty proceedings against Kakku were concludedby order dated 30.12.2016. Subsequently notices to thealleged purchasers were issued on 23.01.2017, longafter the period of limitation that existed at the timeof inspection as also the production of books ofaccounts. 5. The learned Counsel for the petitionersspecifically refer to the declaration in W.A 385/2009that though the limitation commences only from the dateof detection of offence; it should be detected within a reasonable period from the date of verification ofrecords. Especially since the provision did notprovide for a specific time within which a noticealleging an offence had to be issued; which is a suresign of detection of offence. When the records weresubmitted in the year 2012, there was no reason forwaiting till 2017 to finalise the proceedings. As on2012 there was a limitation period of three yearsprovided under Section 67 of the KVAT Act and there isno reason why the intelligence Officer delayed theverification and intimation of the specific allegationagainst the purchasing dealers. This extended beyondthe period of limitation of three years, argues learnedCounsel. The subsequent amendment would not come to theaid of the Department since the limitation period ofthree years expired even before the notice against thepresent petitioners were issued. 6. The learned Special Government Pleaderappearing for the respondent State however wouldsubmit that the proceedings required verification of anumber of records of different assessees and that was why there was time taken to issue a notice. It is argued that at first, the proceedings against theselling dealer had to be concluded and it was afterthat the purchasing dealers were proceeded with. Bythe time, the selling dealer was issued with a notice,there was no limitation under the KVAT Act and if atall, the detection of offence has to be related to thedate on which the notice was issued against the sellingorder. 7. We take note of the order issued against the selling dealer produced as Ext.P7 in W.P(C)No.12381/2017 which runs to 126 pages. A number oftransactions are dealt with in the said order. The saidtransaction were also with respect to various dealersin and around Thrissur. We also see from the documentsread in the order that the summons to the purchasedealers were issued in the year 2012 and 2013, spreadover the months December and January to March. Even ifthe records were produced immediately, considering thevolume of records of the various purchasing dealers asalso the selling dealer, required to be verified before a specific allegation could be raised, we are of theopinion that there could be no ground of limitationurged in the above cases. The detection of offenceagainst the selling dealer could be the date on whichthe petitioners could at best plead for the limitationto commence. The records having been verified theselling dealer was issued with a notice on 30.09.2014making specific allegation of offence having committedby him of suppression of sales. The said offencedefinitely was found on a verification of the recordsof the purchasing dealers too. 8. There is no satisfactory explanation as to a specific allegation could be raised, we are of theopinion that there could be no ground of limitationurged in the above cases. The detection of offenceagainst the selling dealer could be the date on whichthe petitioners could at best plead for the limitationto commence. The records having been verified theselling dealer was issued with a notice on 30.09.2014making specific allegation of offence having committedby him of suppression of sales. The said offencedefinitely was found on a verification of the recordsof the purchasing dealers too. 8. There is no satisfactory explanation as to why notices were not issued in the name of thepetitioners, the purchasing dealers on 23.09.2014. But,even then, the conclusion of proceedings is within fiveyears from the date of detection. As we found in W.ANo.344/2017; if the finalisation is carried out withinthe limitation period there can be no allegation raisedof the notice of penalty, the sure sign of detection ofoffence, being not proximate to the inspection orverification of accounts. In the present cases, as we found, against the purchasing dealers the date ofdetection of offences should relate back to 30.09.2014.The order now issued against the purchasing dealersimpugned in the writ petitions are dated 18.03.2017;within the limitation period. It is within the fiveyear reasonable time decalred by us, if the statutedoes not provide for a specific period of limitation tooperate. The summons issued in 2012-13 to a number ofdealers, and verification of the records produced byall of them culminated in the detection of offence on30.09.2014. The delay in detection by issuance ofnotice, to the selling dealer has been explained whichwe have found to be satisfactory. The period of threeyears hence commences from the date of issuance ofnotice to the selling dealer. The order against thepurchasing dealers is passed within the period providedof limitation. The argument that notices to thepurchasing dealers were delayed and was not proximateto the verification of their records, has no legs tostand since the proceedings were finalised within threeyears from 30.09.2014. 9. In such circumstances, we are of the opinion that the petitioners would have to be relegatedto the statutory remedy. The petitioners would beentitled to file appeals under the statute within 30days from the date of receipt of a certified copy ofthis judgment. If such appeals are filed, within thedate specified by us, the same would be considered asfiled within time and decided on merit since thepetitioners had immediately on issuance of the impugnedorders, approached this Court under Article 226. 10.Considering the fact that the matters werepending here for more than an year, if appeals arefiled within the time stipulated by us, recovery shouldbe kept in abeyance for a further period of fourmonths, within which time the stay applications filedwould be considered. Writ petitions are disposed of. No costs. Sd/-K. Vinod Chandran, Judge Sd/-Ashok Menon, Judge APPENDIX in WPC No.12392/2017 PETITIONER'S/S EXHIBITS: EXHIBIT P1COPY OF NOTICE ISSUED BY THE 2ND RESPONDENT EXHIBIT P2COPY OF LETTER ISSUED BY M/S.A.P.KAKKU ASSOCIATES,THRISSUR TO THE PETITIONER EXHIBIT P3COPY OF LETTER SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENTPETITIONER BEFORE THE 2ND RESPONDENT EXHIBIT P4COPY OF DEPOSITION OF THE PETITIONEREXHIBIT P5COPY OF LETTER SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT EXHIBIT P6COPY OF ORDER ISSUED BY THE 2ND RESPONDENTRESPONDENT EXHIBIT P7 COPY OF LETTER SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT.