2018 (11) TMI 1271 - 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 on grounds of limitation.

Analysis:
The judgment in question involves a challenge to proceedings initiated under Section 67 of the Kerala Value Added Tax Act, 2003, based on the expiration of the period of limitation. The petitioner contended that the order passed on 13.02.2017 following an inspection on 28.10.2011 was vitiated due to the limitation having expired. The court noted that the limitation under Section 67 was initially one year, extended to three years in 2009, and removed in the assessment year 2014-15. It was established that proceedings should be finalized within a reasonable period even if no specific limitation is provided by the statute. The court determined that a reasonable time for completion of proceedings under Section 67 should be five years, following the principles laid down in relevant Division Bench judgments.

The facts presented revealed that an inspection took place on 28.10.2011, and a notice for production of books of accounts was issued on 31.10.2011. The petitioner claimed that the books were produced and verified, with the Intelligence Officer concluding no offense had occurred. However, a second summons was issued on 09.10.2016, after a lapse of five years, allegedly to avoid limitation issues. The court observed that if books were not produced, further notices could have been issued, and proceedings finalized based on the non-compliance, imposing penalties as necessary.

The court emphasized that there is no specific time limit for the detection of an offense, but the period for finalizing proceedings should commence from the date of detection, which should occur within a reasonable time from the inspection or verification of accounts. Despite contentions about the non-production of books, the delay until 2016 for issuing a subsequent summons was deemed unjustified. The court highlighted the importance of acting promptly, especially considering the three-year limitation in force in 2011 for concluding proceedings.

Ultimately, the court found that the proceedings in question were time-barred due to the delay in taking action and the absence of a satisfactory explanation for the prolonged duration between the inspection and subsequent actions. The court set aside the impugned order and allowed the writ petition, emphasizing the necessity for timely and efficient handling of tax proceedings within the stipulated limitations.