2014 (8) TMI 443 - HC - VAT and Sales Tax

Release of gold seized - Combined proceedings under Income Tax and KVAT - Seizure of 6280 grams of gold from the business premises during seizure Order for penalty proceedings passed u/s 67(1) of Kerala Value Added Tax Act, 2003 Limitation - Held that - The Income Tax Department having no subsisting claim, what would arise for consideration is the sustainability of the final order, passed by the Commercial Taxes Department - Commissioner of Income Tax, the 4th respondent to release the gold immediately to the petitioner, without fail and within two weeks from the date of production of the certified copy of this judgment. Penalty proceedings under KVAT but no proceeding for non registration - Held that - The penalty proceedings was commenced on 19.01.2010, immediately after the seizure was effected - the limitation period was one year for the disposal of the penalty proceedings and it should be made within the time stipulated, from the date of detection of the offence and that the order passed beyond the period of limitation would be illegal revenue being aware of the seizure of gold in the year 2010, and having initiated proceedings for penalty, chose not to take any proceedings against the petitioner for assessment or for failure to take out registration - The penalty proceedings too have been set at naught for reason of the same being barred by limitation - Even otherwise, the income tax authorities having found no sale of gold, being effected by the petitioner, it is a moot question as to whether the commercial tax authorities could ferret out a sale from the facts disclosed - there is absolutely no reason to take any proceedings at this point of time, under the Kerala Value Added Tax Act, 2003 Decided in favour of Assessee.

Summary

Issues:
1. Seizure of gold by authorities for assessment under Income Tax Act and Kerala Value Added Tax Act.
2. Ownership of the seized gold and its purpose.
3. Proceedings initiated by Income Tax Department and Commercial Taxes Department.
4. Release of the gold and cash seized.
5. Assessment and penalty proceedings by authorities.
6. Compliance with procedural and legal requirements.
7. Limitation period for penalty proceedings under the Kerala Value Added Tax Act.
8. Resolution of ownership and release of seized gold.

Analysis:
1. The petitioner, a gold recycling unit owner in Kerala, had 6280 grams of gold seized by the Kochi City Police's Shadow Unit. The Income Tax Department and Commercial Taxes Department initiated proceedings for assessment under relevant tax laws due to suspicion of illegal possession for sale within the state.

2. The petitioner claimed the seized gold did not belong to them but was for purification purposes. The gold was handed over to the Income Tax Department, and the petitioner provided vouchers from dealers confirming ownership and purpose of the gold. The Income Tax Department found the petitioner's claim valid and that the gold belonged to third-party dealers.

3. The Income Tax Department concluded assessments for various years without pursuing income assessment from the gold seized. The petitioner sought the release of the gold, which was retained pending penalty proceedings by the Commercial Taxes Department. The petitioner challenged the proceedings as lacking legal sanction.

4. The Court granted interim release of the gold subject to a bank guarantee, which the petitioner couldn't provide due to financial constraints. The Income Tax Department retained the gold until assessments were completed. The petitioner sought unconditional release of the gold and return of the cash seized with interest.

5. The Income Tax Department confirmed the gold's ownership by third-party dealers and had no further interest in the seized gold. The Commercial Taxes Department initiated penalty proceedings, which were challenged on grounds of limitation under the Kerala Value Added Tax Act.

6. The Court found the penalty order beyond the limitation period and set it aside, leading to no subsisting claim on the gold by the State. The Court directed the immediate release of the gold to the petitioner and declared no claim by either tax department over the seized gold.

7. The Court emphasized adherence to the limitation period for penalty proceedings, setting aside the order due to non-compliance. The Commercial Taxes Department's actions were deemed void, removing any claim on the gold by the State authorities.

8. The Court allowed the writ petitions, directing the Income Tax Commissioner to release the gold to the petitioner promptly. It dismissed any further proceedings under the Kerala Value Added Tax Act due to lack of evidence of sales by the petitioner.

In conclusion, the judgment resolved the ownership and release of seized gold, highlighting the importance of procedural compliance and adherence to statutory limitations in tax penalty proceedings.