1982 (2) TMI 271 - HC - VAT and Sales Tax

Issues Involved:
1. Competency of the Intelligence Officer to exercise powers under Section 45A.
2. Applicability of Section 45A to assessment proceedings.
3. Distinction between Section 28(8) and Section 45A.
4. Retrospective application of Section 45A.
5. Constitutionality of Sections 28 and 45A under Articles 14 and 19(1)(g) of the Constitution.

Detailed Analysis:

1. Competency of the Intelligence Officer to Exercise Powers under Section 45A:
The primary issue was whether the Intelligence Officer could exercise powers under Section 45A of the Kerala General Sales Tax Act. The petitioner argued that the Intelligence Officer is not "the assessing authority" under Section 45A, and therefore, cannot exercise such powers. Explanation II to Section 45A, introduced by Act 19 of 1980, specifies that the officer exercising powers under this section should be an officer not below the rank of a Sales Tax Officer specified by a notification. The court found that no such notification had been issued to authorize the Intelligence Officer to act under Section 45A. Hence, the Intelligence Officer did not meet the requirements of Explanation II and was not competent to invoke Section 45A.

2. Applicability of Section 45A to Assessment Proceedings:
The petitioner contended that Section 45A could only be applied in the course of assessment proceedings. However, the court referred to the Division Bench ruling in Intelligence Officer, Central Intelligence Squad, Agricultural Income-tax and Sales Tax, Ernakulam v. Hotel Ambassador [1980] 45 STC 425, which concluded that Section 45A is a separate and independent section. It can be invoked irrespective of whether the assessment has been completed or not, provided the conditions for action are satisfied. Therefore, the court held that action under Section 45A is permissible de hors assessment proceedings.

3. Distinction between Section 28(8) and Section 45A:
The petitioner argued that the only provision enabling the first respondent to impose a penalty is Section 28(8) and that Section 45A is an independent section dealing with a different situation. The court noted that Section 45A, as amended by Act 19 of 1980, authorizes any officer not below the rank of a Sales Tax Officer to initiate proceedings under the said section. The court held that the action under Section 45A could be taken by an officer other than "the assessing authority," provided Explanation II to Section 45A is satisfied.

4. Retrospective Application of Section 45A:
The petitioner argued that the inspection took place on 30th August 1980, and the offence was alleged to have been committed either on that day or prior. Since Act 19 of 1980, which introduced Explanation II, came into force only on 12th September 1980, the first respondent was not competent to invoke Section 45A for an offence that took place before this date. The court agreed with this argument, stating that Explanation II could not relate back to the year of the notification, and no officer mentioned in the notification could exercise powers under Section 45A for offences committed before the enactment of Explanation II.

5. Constitutionality of Sections 28 and 45A under Articles 14 and 19(1)(g) of the Constitution:
The petitioner claimed that the powers of inspection, search, and seizure under Sections 28 and 45A offend Article 14 of the Constitution since it allows Intelligence Officers to selectively target assessees without providing a right of appeal or second appeal. The court did not delve deeply into this constitutional argument, as it found in favor of the petitioner on other grounds. However, it noted that the petitioner has approached the court without exhausting his statutory remedies, which weakens the constitutional challenge.

Conclusion:
The court allowed the petition, quashing exhibits P3 and P5, and directed that no proceedings against the petitioner shall be taken pursuant to these orders. The court concluded that the Intelligence Officer was not competent to invoke Section 45A due to the lack of a necessary notification under Explanation II and the retrospective application of the section. As a result, the petitioner succeeded in his challenge, and the court did not find it necessary to decide on the other questions raised.

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