1999 (11) TMI 839 - HC - VAT and Sales Tax

Issues Involved:
1. Delay in completion of assessments under the Kerala General Sales Tax Act.
2. Constitutionality and impact of Section 17(6) and its second proviso of the Kerala General Sales Tax Act.
3. Applicability of Rule 32(21) of the Kerala General Sales Tax Rules regarding the preservation of accounts.
4. Validity of best judgment assessments due to non-production of documents.
5. Retrospective application of legislative amendments.

Detailed Analysis:

1. Delay in Completion of Assessments:
The petitioner, a proprietory concern, challenged the delay in completing assessments for the periods from 1974-75 to 1989-90. The firm had filed returns but they had not been finalized. The petitioner argued that the assessments should be completed within a reasonable time, as supported by various judicial decisions. The court observed that there was a significant delay on the part of the assessing authority, with no justification provided for the delay. The court emphasized that statutory powers should be exercised within a reasonable time, and the long delay rendered the assessments stale and irrational.

2. Constitutionality and Impact of Section 17(6) and Its Second Proviso:
The petitioner contended that the second proviso to Section 17(6) of the Act, which allowed pending assessments to be completed within four years from the commencement of the Finance Act, 1993, was unconstitutional and void. The court examined whether the proviso could save the assessments that had already become invalid due to the long delay. The court held that the second proviso could only apply to assessment proceedings pending for a reasonable time. Assessments pending for an unreasonably long time would not be saved by the amendment.

3. Applicability of Rule 32(21) of the Kerala General Sales Tax Rules:
The petitioner argued that under Rule 32(21), accounts need to be preserved for only four years after the close of the year they relate to. The court noted that this rule could not come to the rescue of the assessee in this case, as the assessments were pending for an unreasonably long time, and the delay was not justified by the assessing authority.

4. Validity of Best Judgment Assessments Due to Non-Production of Documents:
The petitioner received notices directing the production of accounts and documents for finalization of assessments. The petitioner replied that the documents were with the Income-tax Department due to a search and seizure. The court found that there was no delay on the part of the petitioner in producing the documents, and the long delay by the assessing authority in completing the assessments rendered the best judgment assessments invalid.

5. Retrospective Application of Legislative Amendments:
The court discussed the principles of statutory interpretation regarding the retrospective application of legislative amendments. It held that unless expressly provided, amendments affecting substantive rights are presumed to be prospective. The second proviso to Section 17(6) did not have retrospective effect to revive assessments that had already become invalid due to the long delay. The court cited various judicial decisions supporting this principle, emphasizing that retrospective application should not create new obligations or impose new duties regarding past events.

Conclusion:
The court quashed the notices and best judgment assessments related to the periods from 1974-75 to 1976-77 due to the unreasonably long delay in completing the assessments. The original petition was allowed, and the second proviso to Section 17(6) was held not to save the stale proceedings. The court reinforced the principle that statutory powers must be exercised within a reasonable time to ensure fairness and reasonableness in administrative actions.

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