2018 (11) TMI 1269 - HC - VAT and Sales Tax

Limitation under Section 67 - proceedings initiated u/s 67 of the KVAT Act, 2003 challenged on the ground of the proceedings initiated by notice dated 28.01.2016 pursuant to an inspection conducted on 18.05.2010; being vitiated on the ground of period of limitation having expired - Held that - In the case of M/s Acme Furniture and Interiors v. CTO 2009 (2) TMI 886 - KERALA HIGH COURT , a Division Bench of this Court had found that there is no time stipulated in the Statute for detection of offence, though there is a limitation provided for finalisation of proceedings. Their Lordships found that the limitation provided in Section 67 is for completion of proceedings, which period has to be computed from the date of detection of offence. In such circumstances, it was also held that detection of offence should be within a reasonable time from the date of inspection or the date of verification of books of accounts. The proceedings cannot be sustained - petition allowed.

Summary

Issues:
Challenge to proceedings under Section 67 of the Kerala Value Added Tax Act, 2003 based on expiration of limitation period.

Analysis:
The petitioner challenged the proceedings initiated under Section 67 of the Kerala Value Added Tax Act, 2003, citing the expiration of the limitation period. The Division Bench previously decided that even without a specific limitation period in the statute, proceedings should be finalized within a reasonable time. It was determined that a reasonable time for completion of proceedings under Section 67 should be five years, as specified for reassessment under Section 25. The commencement of the limitation period was established to be from the detection of the offense, as per a Division Bench judgment. The court emphasized that detection of the offense should occur within a proximate period from the date of inspection, and any delays must be satisfactorily explained unless the proceedings are finalized within the limitation period or a reasonable timeframe from the inspection date.

In the specific case under consideration, the assessment year was 2010-11, with the inspection conducted on 18.05.2010. Subsequently, books of accounts were requested on 28.08.2010 and verified, followed by another summons for book production on 23.11.2015. The court noted that a change in the officer handling the case resulted in the issuance of a further summons without sufficient explanation on the inadequacy of the previous verification.

The court referred to a previous Division Bench decision that highlighted the absence of a stipulated time for offense detection in the statute, emphasizing that the limitation under Section 67 is for completing proceedings, starting from the date of offense detection. It was reiterated that the detection of the offense should occur within a reasonable time from the inspection or book verification date.

Moreover, the court held that the issuance of summons for book production and penalty notice, indicative of offense detection, should be done within a reasonable time close to the inspection or book examination date. Repeated summons without timely finalization of proceedings would not excuse the department from concluding the process within a reasonable timeframe from the inspection date. Consequently, the court declared the proceedings unsustainable and set aside the order passed by the respondent, allowing the writ petition without imposing costs.