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2020 (11) TMI 25 - HC - VAT and Sales TaxRecovery of arrears of Sales Tax - inter-State sales turnover against 'C' Forms - time limitation - principles of natural justice - HELD THAT - The recovery notices are of October 2014. The time limit prescribed vide amendment was, from five years, extended to six years as per the amendment brought in 2017. On account of a retrospective operation of newly introduced provision, assessee would not be in a position to adduce material to defend against an allegation of suppressed / escaped turnover. No doubt, retrospective operation of Section 42(3) would entail into reopening of assessments completed years back and assessee would not have relevant books of accounts and other records to defend the case against alleged escaped turnover. As per Rule 58(20) of KVAT Rules, assessee is required to maintain the books for a period of five years from the end of assessment year in question or two years from the date of disposal of the appeal or revision arising out of such assessment or from the date of completion of any other provisions under the Act connected with such assessment appeal or revision, whichever is later. Fixing of a reasonable period would have to be read in determining what reasonable should be. The oral scheme of KVAT Act in the interest of ensuring certainty in tax matters and also the necessity to interpret the provisions in the manner is to avoid unconstitutional results such as unreasonablness, unfairness and arbitrariness of statutory provisions. The time limits specified in Rule 58(20) of KVAT Rules offer a safe guarding factor to define the limits of power under Section 42(3) of the Act. Meaning thereby, it would not be proper to re-open assessments to bring the tax escaped turnover, which cannot be exercised in a manner that prejudicially affect an assessee, who would not be in a position to meet the charge against him for want of books of accounts and other relevant material - petition allowed.
Issues:
Challenge to assessment orders and recovery notices under Kerala Value Added Tax Act and Central Sales Tax Act. Analysis: The petitioner, a Private Ltd. Company, challenged assessment orders and recovery notices issued by the first and second respondents. The petitioner contended that the assessment orders were issued without providing an opportunity for a hearing or serving any notice. The petitioner argued that the assessment orders were void ab initio as they were hopelessly barred by limitation, citing the judgment of the Hon'ble Supreme Court in a relevant case. The Government Pleader argued that the case was not a simple assessment under Section 25(1) of the 2003 Act. Referring to Section 42(3) of the Act, it was contended that failure to file certain documents could keep the assessment pending, and the time limit mentioned would not be applicable in such cases. The Government Pleader relied on previous court judgments to support this argument and urged the court to dismiss the writ petition. After hearing both parties and reviewing the documents, the court noted that the assessment orders and recovery notices were issued without compliance with the principles of natural justice. The court also considered the amendment that extended the time limit for assessment from five to six years. However, it was held that the amendment was prospective in nature, and assessment proceedings initiated after the expiry of five years were beyond limitation. The court examined whether the retrospective effect of the amendment to Section 42 would apply and concluded that the assessment orders were not sustainable due to the retrospective operation of the newly introduced provision. The court discussed the implications of the retrospective operation of Section 42(3) on reopening assessments completed years back, highlighting the challenges faced by the assessee in defending against allegations of suppressed turnover. It emphasized the importance of maintaining books for a reasonable period and interpreted the provisions to avoid unconstitutional results. The court concluded that the assessment orders were not sustainable and set them aside, allowing the writ petition.
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