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TMI Blog2009 (10) TMI 876X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt of copy of this judgment, after issuing notice to all parties and after hearing their objections - Writ Appeal Nos. 127,1714,1829,1907 of 2009 - - - Dated:- 8-10-2009 - RAMACHANDRAN NAIR C.N. AND MOHANAN V.K. , JJ. The judgment of the court was delivered by C.N. RAMACHANDRAN NAIR J. The challenge raised in the writ appeals and the writ petitions is against the constitutional validity of section 17D of the Kerala General Sales Tax Act, 1963 (hereinafter called, the Act ). The value added tax regime came into force in Kerala by the introduction of the Kerala Value Added Tax Act, 2003 with effect from April 1, 2005. The KGST Act has ceased to be operational since the commencement of the VAT Act except in regard to the trade in petrol, diesel and alcoholic products. In other words, from 2005-06 onwards the KGST Act has become redundant for most of the dealers who are governed by the VAT Act. However, the Government noticed that thousands of assessments under the KGST Act were pending even after two years of the commencement of the VAT regime and as a measure for early finalisation of pending assessments, the Finance Act, 2007 introduced a summary procedure for comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, limiting the tax effect on such addition to a maximum of three times of the compounding fee paid or tax effect of suppression detected, whichever is higher, and in case where a pattern of suppression has not been established, to an amount equal to the suppression detected. (ii) in case where tax evaded cannot be quantified, the assessment may be completed on an addition equal to five per cent of the taxable turnover conceded by the dealer as per his returns or accounts, subject to tax effect of a minimum of five thousand rupees and a maximum of one lakh rupees. (iii) in case where statutory forms and/or declarations in support of a claim of concessional rate of tax or exemption have not been filed or are partially filed, or where the forms have been misused, the assessment may be completed by disallowing such claims, to the extent of the defect in such forms, assessing it under this Act. (iv) in case of contracts where option for compounding under the provision contained in section 7 of this Act, as it then existed have been filed, and where returns and tax deduction certificate issued by the awarder have been produced, assessment may be completed accepting the awar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 17D in toto and held that those who are aggrieved by the assessments impugned in the W.P. (C)s. should challenge the said orders in appeal before the Sales Tax Appellate Tribunal after remittance of assessed tax. Even though the appellants/petitioners contended before the learned single judge that the impugned assessments were completed without following the procedure contemplated under section 17D, the court did not consider the same, but probably left that also to be raised in appeal before the Tribunal. It is in this context the appellants have filed these writ appeals challenging the judgment of the learned single judge on both grounds, i.e., against the finding upholding the constitutional validity of section 17D and in not considering their challenge against the assessment orders as not completed in accordance with the statutory provisions. We have to, therefore, consider the challenge against both constitutional validity of section 17D and against assessment orders. At first, we proceed to decide the constitutional validity of section 17D of the KGST Act. The common ground raised by all the parties is that the provisions of section 17D are arbitrary, discriminatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional circumstances pending assessments are taken up by individual officers. Before proceeding to examine the challenge against the validity of the statutory provision, we have to necessarily examine the scope and ambit of the section. In the first place, it is clear from the Finance Minister's speech that the purpose of introduction of section 17D is finalisation of pending assessments in a summary manner. Further, the Special Government Pleader furnished statistics before us stating that when the section came into force, as many as 8,000 cases were pending and the team constituted under section 17D has disposed of 1,574 cases and the balance pendency is around 6,500 cases. He also pointed out that out of 1,574 cases completed, only around 15 dealers have approached this court challenging the validity of the statutory provision under which assessments are completed. In other words, according to him, the summary assessments were found beneficial and acceptable to most of the dealers and the appellants/petitioners are only exceptions. Based on the statistics the contention canvassed on behalf of the State is that there is general acceptability of the scheme of assessment und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of this position, we doubt whether the appellants'/petitioners' prayer for declaration of the statutory provision as invalid can be considered because if we do so, the assessments of thousands of dealers, who have accepted the assessments completed under section 17D as beneficial to them and who have remitted the tax, will automatically become invalid. In any case we are bound to keep this in mind while considering the challenge against statutory provision and the consequential relief, if any, to be granted. The appellants/petitioners and respondents have cited large number of decisions of the Supreme Court and that of the High Courts. We find that the decisions are generally on article 14 of the Constitution of India. However, none of the decisions cited is directly applicable to the facts of the cases here. Therefore, we will only refer to the more appropriate decisions which have relevance for the purpose of deciding these cases. The discrimination alleged by the appellants/petitioners, in our view, to a large extent does not exist. The discrimination drawn between the dealers whose assessments are completed as on March 31, 2007 and the case of dealers who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n some cases the assessing officers who do not form part of the team constituted for assessment under section 17D are also taking up regular assessments. We do not think the existence of exceptional situations justifying regular assessments can constitute a valid ground for interference with a statutory provision of general application on ground of discrimination. We, therefore, reject this contention. The major grievance raised by all the appellants/petitioners is against the mandatory provision contained in section 17D(5) under which appeal against assessment completed under section 17D is maintainable before the Tribunal only if the dealer remits the assessed tax amount in full. In this connection, the learned single judge has relied on several decisions which are again cited before us by the Special Government Pleader. The Supreme Court has in Gujarat Agro Industries Co. Ltd. v. Municipal Corporation of the City of Ahmedabad [1999] 4 SCC 468 held that: Right of appeal is the creature of a statute and it is for the Legislature to decide whether the right of appeal should be unconditionally given to an aggrieved party or it should be conditionally given. Right of appeal wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute has to be determined on the basis of its provisions and on the ambit of its operation as reasonably construed and if, so judged, it does not pass the test of constitutionality it cannot be pronounced valid merely because it is administered in a manner which might not conflict with the constitutional requirements. . . In our view, the reverse proposition would be that if the provision challenged is otherwise constitutionally valid, it cannot be declared unconstitutional merely because there is likelihood of it being misused by statutory authority by issuing arbitrary orders. The appellants/petitioners have pointed out that the provisions upheld by the Supreme Court pertaining to pre-deposit of assessed tax for filing appeal are mainly cases against Municipal Corporations where the tax involved is low, whereas in the case of appellants/petitioners, the assessed tax is so huge and many of them will not be able to deposit the same for filing appeal. If the exorbitant demand of tax is as a result of arbitrary orders issued, which according to the appellants/petitioners are issued in violation of natural justice and without following the mandatory procedure provided in secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost cases the orders will be beneficial to the assessee. Therefore, in our view, the Legislature rightly chose to provide only one appeal to a higher body, namely, the Tribunal. When assessments contemplated under section 17D are generally summary assessments, consent assessments and orders intended to be beneficial to the assessee, the Legislature visualised very limited scope of further challenge against such orders. There is nothing wrong in the Legislature assuming that the tax assessed by the team in accordance with the procedure and guidelines provided under section 17D will be more or less the tax payable by the dealer. Therefore, we are of the view that the provision under sub-section (5) of section 17D providing for remittance of full assessed tax for filing appeal is perfectly tenable. As already stated, if arbitrary orders are issued, which in our view should be treated only as exceptional cases, the parties' remedy is to file writ petition before this court under article 226, if they don't have the resource to deposit assessed tax and file appeal before the Tribunal. However, we see no merit in the challenge against the validity of section 17D of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsenting deliberately. Since in all these cases assessments are completed by issuing pre-assessment notice by individual officers, we feel that the procedure contemplated and stated by us above is not strictly followed and so much so, orders passed cannot be sustained under the provisions of section 17D. We, therefore, allow the writ appeals and writ petitions in part by vacating the impugned assessment orders, but with direction to the assessment team to complete the assessment afresh under section 17D within a period of three months from date of receipt of copy of this judgment, after issuing notice to all parties and after hearing their objections. We make it clear that each and every objection raised by the parties in the reply to pre-assessment notice should be considered and unanimous decision should be taken by the team members. We do not want to examine the other issues raised in some of the cases like challenge against other statutory provisions, challenge against penalty orders, etc. These issues are left open. We leave freedom to the parties to challenge the penalty orders before statutory authorities because those are not issued under section 17D. So far as challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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