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2018 (7) TMI 1766 - HC - VAT and Sales TaxTime Limitation - escapement of turnover - whether notices could be issued after the five year period as stipulated in Section 25 of the KVAT Act? - Held that - Section 25(1) of the KVAT Act specifically speaks of a limitation of five years for proceeding to determine to the best of judgment the turnover, when the contingencies as enumerated under the provision occur. When there is no limitation prescribed for completion, there could only be the principles of reasonableness applied, on facts of individual cases, if a challenge is made with regard to that - We cannot presume the legislature having done it purposefully, especially when the limitation prescribed for was not for the final determination, but to 'proceed to determine', which definitely indicates initiation of proceedings for determination. The legislature also was aware of Section 19 of the KGST Act, which was in pari materia with Section 25 of the KVAT Act. The petition allowed, setting aside the notices issued beyond the limitation period as provided under Section 25(1) of the KVAT Act - appeal allowed.
Issues Involved:
1. Whether notices under Section 25(1) of the Kerala Value Added Tax Act, 2003 (KVAT Act) can be issued after the stipulated five-year period. 2. Interpretation of the term "proceed to determine" in Section 25(1) of the KVAT Act. 3. Impact of subsequent amendments extending the period for completion of assessment. 4. Application of Heydon's Rule in statutory interpretation. Issue-wise Detailed Analysis: 1. Whether notices under Section 25(1) of the KVAT Act can be issued after the stipulated five-year period: The core issue in the writ appeal was whether notices issued under Section 25(1) of the KVAT Act for the assessment years 2005-06 and 2006-07, dated 21.1.2013 and 22.1.2013 respectively, were valid given that they were issued beyond the five-year limitation period. The court noted that the five-year period for the assessment years in question would have ended on 31.3.2011 and 31.3.2012 respectively. The learned Single Judge had earlier refused to exercise discretion under Article 226 of the Constitution of India and relegated the petitioner to the appellate remedy. However, the Division Bench and subsequently the Full Bench upheld that the limitation period prescribed in Section 25(1) was for the initiation of proceedings and not for the completion of assessment. Consequently, the notices issued after the five-year period were deemed invalid. 2. Interpretation of the term "proceed to determine" in Section 25(1) of the KVAT Act: The court delved into the interpretation of the term "proceed to determine" as used in Section 25(1) of the KVAT Act. A Division Bench in the case of Tirur Medical Stores v. State of Kerala had previously interpreted similar language in the KGST Act to mean the initiation of proceedings rather than their completion. The Full Bench upheld this interpretation, confirming that the term "proceed to determine" referred to the initiation of proceedings, i.e., the issuance of a notice, within the five-year period. This interpretation was critical in determining the validity of the notices issued in the present case. 3. Impact of subsequent amendments extending the period for completion of assessment: The judgment also addressed the amendments made to the KVAT Act, which extended the period for the completion of assessment for specific years. These amendments, introduced in 2010, 2011, and 2012, extended the period for completion of assessment for the years up to 2007-2008. The court noted that these amendments did not alter the interpretation that the limitation period under Section 25(1) was for the initiation of proceedings. The Full Bench observed that the legislature's amendments extending the period for completion of assessment did not affect the established interpretation that the five-year period was for initiating proceedings. 4. Application of Heydon's Rule in statutory interpretation: The learned Special Government Pleader argued for the application of Heydon's Rule, which is used to interpret statutes by considering the mischief the statute was intended to remedy. The court referenced the Supreme Court's decision in Indian Performing Rights Society Ltd. v. Sanjay Dalia, which clarified that Heydon's Rule applies only when the statutory language is ambiguous and capable of multiple interpretations. In the present case, the court found that the language of Section 25(1) of the KVAT Act was clear and unambiguous, thus negating the need to apply Heydon's Rule. The court emphasized that the plain and natural meaning of the words "proceed to determine" should be adhered to, which indicated the initiation of proceedings. Conclusion: The High Court concluded that the limitation period under Section 25(1) of the KVAT Act was for the initiation of proceedings and not for the completion of assessment. The notices issued beyond the five-year period were invalid. The court set aside the judgment of the learned Single Judge and allowed the writ petition, thereby invalidating the notices issued after the stipulated period. The writ appeal was allowed, and no costs were awarded.
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