2018 (11) TMI 1438 - HC - VAT and Sales Tax

Time limitation - Section 67 of the KVAT Act, 2003 - proceedings initiated u/s 67 of the KVAT Act, 2003 challenged on the ground of the orders passed being vitiated on the ground of period of limitation having expired. Held that - In the present case, the inspection was conducted in June, 2010. The first summons was issued on 06.12.2011 within the limitation period of three years as the provision stood from 2009 onwards. There was absolutely no reason why the Officer did not finalise the proceedings on the basis of the materials recovered without waiting for the assessee to produce the books for almost five years. Even now the Officer has finalised the proceedings in 2016 without any books of accounts being produced by the assessee. The mere non-cooperation of the assessee did not at all hamper the Department from finalising the proceedings, since they could have deemed the non-co-operation to be a cause for assuming that there is no maintenance of proper books of accounts. The repeated summons a mere ruse to save limitation. The proceedings were initiated and the first summons issued when there was a period of limitation stipulated. Even if we take the date of summons, to be the date, from which the detection of offence had to be made, on a reasonably proximate day; the time expires by 2014. We do not think that the proceedings can be sustained and we set aside Ext.P1. Petition allowed.

Summary

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

Analysis:
The judgment pertains to a writ petition challenging proceedings initiated under Section 67 of the Kerala Value Added Tax Act, 2003 based on limitation grounds. The court highlighted that the limitation period for such proceedings should be reasonable even if not explicitly provided in the statute. It was noted that the limitation was initially one year, extended to three years in 2009, and then removed in the assessment year 2014-15. The court emphasized that proceedings should be finalized within a reasonable period, with a reference to a five-year limit for re-assessment under Section 25. The judgment also discussed the commencement of the limitation period based on the detection of the offense, following a Division Bench decision. The court stressed that detection of the offense should occur within a proximate period from the date of inspection, and any delay must be satisfactorily explained unless proceedings are finalized within the limitation or a reasonable period from the inspection date.

The facts of the case revealed that an inspection was conducted in the petitioner's branches in 2010, with subsequent summons issued after a significant delay. The petitioner argued that the proceedings suffered from gross delay. The Special Government Pleader contended that the delay was due to the petitioner's non-cooperation in producing books of accounts despite multiple summons. Permission was sought to retain seized records beyond the stipulated period under Section 44 of the Act, and a notice was issued in 2016, after the limitation provision was removed in 2014.

The court referred to a previous Division Bench decision that highlighted the absence of a specific time frame for the detection of the offense, emphasizing that the limitation under Section 67 is for completing proceedings computed from the offense's detection. It was reiterated that detection of the offense should occur within a reasonable time from the inspection or book verification date. The court emphasized that summons for book production and penalty notice should be issued reasonably close to the inspection date, failing which the department must finalize proceedings promptly.

In the present case, the court found that the first summons was issued within the three-year limitation period, but there was no justification for delaying proceedings for almost five years without the assessee producing books of accounts. The court rejected the department's contentions, deeming repeated summons as an attempt to circumvent the limitation. Consequently, the court set aside the proceedings initiated under Section 67, ruling in favor of the petitioner and allowing the parties to bear their respective costs.