2009 (10) TMI 876 - HC - VAT and Sales Tax

Constitutional validity of section 17D of the Kerala General Sales Tax Act, 1963 challenged - Held that - We are of the view that the provision under sub-section (5) of section 17D providing for remittance of full assessed tax for filing appeal is perfectly tenable. We see no merit in the challenge against the validity of section 17D of the Act, which as already held by us is beneficial provision. Therefore, we uphold the constitutional validity of section 17D. Since in all these cases assessments are completed by issuing pre-assessment notice by individual officers, we feel that the procedure contemplated and stated by us above is not strictly followed and so much so, orders passed cannot be sustained under the provisions of section 17D. We, therefore, allow the writ appeals and writ petitions in part by vacating the impugned assessment orders, but with direction to the assessment team to complete the assessment afresh under section 17D within a period of three months from date of receipt of copy of this judgment, after issuing notice to all parties and after hearing their objections

Issues Involved:
1. Constitutional validity of Section 17D of the Kerala General Sales Tax Act, 1963.
2. Discrimination between dealers based on assessment dates and procedures.
3. Requirement of full tax payment for appeal under Section 17D(5).
4. Validity of impugned assessment orders issued under Section 17D.

Detailed Analysis:

1. Constitutional Validity of Section 17D:
The primary challenge raised in the writ appeals and petitions is against the constitutional validity of Section 17D of the Kerala General Sales Tax Act, 1963. The court examined the purpose of Section 17D, which was introduced to expedite the finalization of pending assessments through a summary procedure. The court noted that the section includes several incentives for dealers and restrictions for assessing officers, such as limiting additions to turnover and offering concessions on interest. The court concluded that Section 17D is not merely a procedural provision but a substantive law aimed at benefiting dealers and facilitating the completion of pending assessments. The court upheld the constitutional validity of Section 17D, emphasizing that invalidating the provision would disrupt the assessments of many dealers who have accepted the summary assessments as beneficial.

2. Discrimination Between Dealers:
The appellants/petitioners argued that Section 17D discriminates between dealers whose assessments were completed by March 31, 2007, and those whose assessments were pending as of April 1, 2007. They also contended that the section allows for arbitrary discretion by assessing officers in choosing between regular assessments and summary assessments under Section 17D. The court rejected these arguments, stating that the two groups of dealers do not belong to the same class and that the purpose of Section 17D is to complete pending assessments expeditiously. The court found no evidence of discrimination in the application of Section 17D and noted that the provision aims to handle exceptional cases that require protracted procedures.

3. Requirement of Full Tax Payment for Appeal:
The appellants/petitioners challenged the requirement in Section 17D(5) for dealers to pay the full assessed tax before appealing to the Sales Tax Appellate Tribunal. The court referred to several Supreme Court decisions, which established that the right of appeal is a statutory right and can be conditional. The court held that the provision for full tax payment before appeal is constitutionally valid, emphasizing that the validity of a statutory provision should not be judged based on the potential for misuse. The court noted that the summary assessments under Section 17D are generally intended to be beneficial to dealers and that the Legislature's decision to limit appeals to the Tribunal after full tax payment is reasonable.

4. Validity of Impugned Assessment Orders:
Despite upholding the constitutional validity of Section 17D, the court found that the impugned assessment orders did not follow the procedure outlined in Section 17D. Specifically, the court noted that the assessments were not conducted by a team of officers as required, and the mandatory procedures for public hearings and unanimous decisions were not followed. Consequently, the court vacated the impugned assessment orders and directed the assessment team to complete the assessments afresh in accordance with Section 17D within three months. The court also left open the challenge against other statutory provisions and penalty orders, allowing parties to raise these issues after the completion of the reassessments.

In conclusion, the court upheld the constitutional validity of Section 17D, rejected claims of discrimination, validated the requirement for full tax payment before appeal, and vacated the impugned assessment orders due to procedural non-compliance, directing fresh assessments to be conducted.

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