2024 (6) TMI 575 - HC - VAT and Sales Tax

Validity of assessment order - applicability of time limitation period u/s 25(1) of KVAT Act - HELD THAT - The assessing authority appears to have ignored the said contention on limitation apparently, because the assessment order was passed pursuant to an audit objection raised in terms of Section 25A of the KVAT Act. At any rate, since the issue of applicability of the limitation provision under Section 25 (1) on the facts of the instant case is under consideration before this Court, the appellant herein had established a prima facie case for the grant of a stay pending disposal of the writ petition. This is more so because the express provisions of Section 25 (1) of the KVAT Act clearly indicate that the limitation period for completion of assessment is six years from the end of the relevant assessment year. It is not in dispute that Ext. P2 order was passed beyond the said period since the assessment year in question is 2016-17. It is deemed appropriate to allow this writ appeal by setting aside that part of the impugned order of the learned Single Judge that directs the appellant to deposit 25% of the dues of tax assessed within a period of two weeks as a condition for grant of stay of recovery of balance tax, interest and penalty pending disposal of the writ petition. Petition allowed.

Summary

Issues involved:
The legality of assessment order u/s KVAT Act, applicability of limitation period u/s 25(1) of KVAT Act.

Judgment Summary:

Issue 1: Legality of assessment order under KVAT Act
The Writ Appeal was filed against an interim order directing the appellant to deposit 25% of the tax dues assessed under Ext. P2 order. The appellant failed to make the deposit within the given time, resulting in the vacation of the stay. The issue raised in the writ petition concerned the legality of Ext. P2 assessment order, contending that it was passed beyond the prescribed limitation period under the KVAT Act. The assessing authority had passed the order based on an audit objection under Section 25A of the KVAT Act, which raised questions about overriding the limitation period under Section 25(1) of the Act. The Court acknowledged that the issue of limitation was pending consideration before another Single Judge. Given that the assessment order was passed beyond the limitation period of six years from the relevant assessment year, the appellant established a prima facie case for a stay pending disposal of the writ petition.

Issue 2: Applicability of limitation period under Section 25(1) of KVAT Act
The Court found that the express provisions of Section 25(1) of the KVAT Act clearly state that the limitation period for assessment completion is six years from the end of the relevant assessment year. Since Ext. P2 order was passed beyond this period for the 2016-17 assessment year, the appellant was granted relief by setting aside the direction to deposit 25% of the tax dues. The writ petition was remitted back for further consideration on merits, with recovery proceedings against the appellant kept in abeyance until the disposal of the petition.

Conclusion:
The Writ Appeal was allowed, and the impugned order directing the deposit of 25% of tax dues was set aside. Pending recovery proceedings against the appellant were stayed until the disposal of the writ petition, allowing for further consideration on the legality of the assessment order and the applicability of the limitation period under the KVAT Act.