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2016 (10) TMI 814 - HC - VAT and Sales TaxLevy of Penalty - Best judgment assessment - Period of limitation - Whether the initiation of proceedings and completion of assessment is within 5 years from last date of the return period or that there is an automatic extension of time as per the third proviso inserted from time to time - Held that - Section 25(1) has to be taken only after issuing a notice on the dealer which apparently has to be done within five years from the last date of the year to which the return relates. The first proviso relates to a dealer being heard before making assessment under Section 25(1). The third proviso which was subsequently incorporated provides extended time for completion of assessments. It could only mean that time is extended only for completing assessment which have already been initiated after issuing notice under Section 25(1) within five years from the last date of the year to which the return relates - When a procedure under Section 25(1) is invoked, it has to be within the period of limitation and no exclusion can be claimed by the department merely for the reason that the assessee had opted for compounding and a procedure under Section 22(10) is being followed - Assessment proceedings are barred by limitation. Every dealer, either registered or liable to be registered under the Act, is bound to file a return under Section 20 of the KVAT Act. The VAT regime had contemplated a self assessment which indicates that once the return had been submitted under Section 20(1) in the prescribed manner and accompanied by the prescribed documents, the assessment relating to the return period is deemed to have been completed on receipt of such return subject of course to the provisions of Sections 22, 24 and 25 - In view of the non obstante clause under section 25B, the Deputy Commissioner has the power to extend the time for taking steps under Section 25(1) in an instance where an investigation or enquiry is pending under the KVAT Act or any other law, or in instances where the assessment cannot be completed It is clear from the statutory provisions aforestated that the penalty proceedings had to be completed within a specified time, i.e., within one year under Section 67 from the date of detection of offence mentioned under this section except where the extension of time is granted by the Deputy Commissioner. One year period aforementioned has been amended as three years with effect from 1/04/2005 - Held that - But no materials are produced to support the stand that even after 25/4/2008, there was difficulty in taking penalty proceedings against the petitioners. When a specific contention is raised regarding limitation, it is for the respondents to justify the same by producing all necessary materials. In the absence of any material other than Ext.P7, it has to be assumed that the department was aware of the alleged offence as early as on 25/4/2008 - Petition allowed in favor of the assessee.
Issues Involved:
1. Period of limitation for invoking Section 25(1) or 25A of the Kerala Value Added Tax Act, 2003. 2. Power exercised by the Deputy Commissioner under section 25B of the Act to extend the time for completing the assessment. 3. Whether penalty proceedings could be taken against an assessee beyond the period specified under section 67(1) read with section 25(1) of the Act, or under section 45A read with section 19(1) of the Kerala General Sales Tax Act, 1963. Detailed Analysis: Group-A: Limitation for Assessment under Section 25(1) - The petitioners contended that notices for assessment or assessment orders passed under section 25(1) were barred by limitation. - The court held that Section 25(1) permits the assessing authority to determine escaped turnover within five years from the last date of the year to which the return relates. The issuance of notice under Section 25(1) must occur within this period. - The third proviso to Section 25(1) extends the period for completing assessments but does not extend the period for issuing notices. Hence, notices issued beyond the five-year period are barred by limitation. - The court quashed the impugned assessment orders in all Group-A cases as they were issued beyond the statutory limitation period. Group-B: Extension of Time by Deputy Commissioner under Section 25B - Petitioners challenged notices and assessment orders issued under Section 25(1) based on orders by the Deputy Commissioner under Section 25B. - Section 25B allows the Deputy Commissioner to extend the period for completing assessments for good and sufficient reasons, but it does not extend the period for initiating proceedings under Section 25(1). - The court found that the Deputy Commissioner’s orders extending the time for assessment were issued beyond the period specified under Section 25(1) and lacked specific reasons. - Consequently, the court set aside the assessment orders in Group-B cases. Group-C: Orders under Section 25B - Petitioners challenged the orders passed by the Deputy Commissioner under Section 25B, contending that the power under Section 25B cannot be exercised beyond the period of limitation. - The court reiterated that the Deputy Commissioner’s orders extending time for completing assessments beyond the five-year period specified under Section 25(1) are invalid if no proceedings were initiated within the limitation period. - The court allowed the petitions, quashing the impugned orders issued under Section 25B. Group-D: Penalty Orders - Petitioners challenged penalty orders issued under Section 45A of the KGST Act and Section 67(1) of the KVAT Act, contending they were barred by limitation. - The court noted that Section 67(1) prescribes a definite outer time limit for finalizing penalty proceedings, which was initially one year and later extended to three years. - The court held that penalty proceedings must be completed within the statutory period from the date of detection of the offence. In this case, the penalty orders were issued beyond the period of limitation. - The court quashed the penalty orders in Group-D cases. Group-E: Orders under Section 25A - Petitioners challenged orders passed under Section 25A of the Act, contending they were beyond the period prescribed under Section 25(1). - Section 25A pertains to assessments based on audit objections and requires an audit report from the Comptroller and Auditor General. - The court found that the notices were issued under Section 25(1) and were beyond the time specified. - The court quashed the impugned orders in Group-E cases. Conclusion: - The court emphasized that the statutory periods of limitation must be strictly adhered to, and any extension of time for completing assessments or penalty proceedings must be within the framework of the law. - The court quashed the impugned orders in all the groups, providing relief to the petitioners.
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