2018 (11) TMI 1270 - 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 - The petitioners would have to be relegated to the statutory remedy. The petitioners would be entitled to file appeals under the statute within 30 days from the date of receipt of a certified copy of this judgment - petition disposed off.

Summary

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

Analysis:
The judgment dealt with the challenge to proceedings initiated under Section 67 of the Kerala Value Added Tax Act, 2003, based on the expiration of the limitation period. The court referred to a previous case where it was established that even in the absence of a specific limitation period in the statute, proceedings should be finalized within a reasonable time, set at five years. The limitation period was found to commence from the date of detection of the offense, which should be within a proximate period from the date of inspection. The court emphasized the need for timely finalization of proceedings and explained the principles guiding the determination of the limitation period.

The case involved an inspection of a tobacco dealer's premises, with allegations of unaccounted sales. The petitioners, alleged purchasers, promptly produced their books of accounts upon receiving summons. However, the Intelligence Officer delayed issuing notices to the alleged purchasers, leading to a challenge on grounds of exceeding the limitation period. The court considered the timeline of events, including the issuance of notices, and the necessity for timely detection of offenses to determine the commencement of the limitation period.

The respondent argued that the proceedings required verification of multiple records, justifying the delay in issuing notices to the alleged purchasers. It was contended that the limitation period should be related to the date on which the notice was issued against the selling dealer. The court examined the order against the selling dealer, the volume of transactions involved, and the verification process to assess the validity of the limitation argument raised by the petitioners.

Ultimately, the court found that the proceedings against the purchasing dealers were concluded within a reasonable time frame, falling within the five-year period set by the court as a guideline for finalization of such cases. The judgment emphasized the importance of timely detection and finalization of offenses, dismissing the challenge on limitation grounds. The petitioners were directed to avail of the statutory remedy by filing appeals within the specified timeline, ensuring due consideration on merit. Additionally, a provision was made to keep recovery in abeyance for a further period to accommodate stay applications, considering the time elapsed during the legal proceedings.