A. Venkitachalam Tobacco Merchant, Market, Aluva, Ernakulam District v. Commercial Tax Officer, Aluva; Intelligence Officer, Squad No. I, Department of Commercial Taxes, Edappally; Deputy Commissioner, Intelligence Department of Commercial Taxes, Edappally; Commissioner of Commercial Taxes, Tax Towers, Killippalam, Thiruvananthapuram

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **TUESDAY, THE 15TH DAY OF OCTOBER 2019 / 23RD ASWINA, 1941** ## **WP(C).No.8140 OF 2014(N)** ## **PETITIONERS:** **A. VENKITACHALAM TOBACCO MERCHANT, MARKET, ALUVA, ERNAKULAM DISTRICT.** **BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SRI.MAHESH V.MENON** ## **RESPONDENTS:** **1 COMMERCIAL TAX OFFICER ALUVA 683121. 2 INTELLIGENCE OFFICER SQUARD NO.I, DEPARTMENT OF COMMERCIAL TAXES, EDAPPALLY, KOCHI - 682 024.** **R1-2 BY SMT.M.M.JASMINE, GOVERNMENT PLEADER** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15-10-2019 ALONG WITH W.P(C).NO.27270/2014(G), THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **TUESDAY, THE 15TH DAY OF OCTOBER 2019/23RD ASWINA, 1941** ## **W.P(C).No.27270 OF 2014** ## **PETITIONER:** **A.VENKITACHALAM TOBACCO MERCHANT, MARKET, ALUVA, ERNAKULAM DISTRICT** **BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SRI.MAHESH V.MENON** ## **RESPONDENTS:** - **1 COMMERCIAL TAX OFFICER ALUVA 683121** - **2 INTELLIGENCE OFFICER SQUAD NO I, DEPARTMENT OF COMMERCIAL TAXES, EDAPPALLY, KOCHI - 24** - **3 DEPUTY COMMISSIONER INTELLIGENCE DEPARTMENT OF COMMERCIAL TAXES, EDAPPALLY, ERNAKULAM 682024** - **4 THE COMMISSIONER OF COMMERCIAL TAXES TAX TOWERS, KILLIPPALAM, THIRUVANANTHAPURAM 695001 BY SMT.M.M.JASMINE, GOVT. PLEADER** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15-10-2019 ALONG WITH WP(C).8140/2014(N), THE COURT ON THE SAME DELIVERED THE FOLLOWING:** **W.P.(C).No.8140/2014 & : 3 : W.P.(C).No.27270/2014** ## **J U D G M E N T** The petitioner is an assessee under the Kerala Value Added Tax Act [hereinafter referred to as the 'KVAT Act']. In W.P. (C).No.8140/2014, he is aggrieved by Ext.P7 order of penalty that was passed against him by the 2[nd] respondent for the assessment year 2008-09. The challenge against Ext.P7 order in the writ petition is premised primarily on the ground of limitation, in that, the proceedings under Section 67 of the KVAT Act were initiated against the petitioner through a notice dated 7.9.2009, and Ext.P7 order has been passed only on 7.3.2014, much after the expiry of the period of three years that was mandated under the proviso to Section 67(1) of the KVAT Act, as it stood during the relevant time. 2. Along with a memo filed by the respondents in the said writ petition, pursuant to the directions issued from this Court, they had produced three orders dated 19.12.2011, 19.12.2012 and 18.12.2013 respectively, stated to have been passed in exercise of the powers conferred on the Deputy Commissioner (Intelligence) under Section **W.P.(C).No.8140/2014 & : 4 : W.P.(C).No.27270/2014** 67(1) of the KVAT Act, extending the time for disposal of the case for further periods of one year from the date of expiry of the three year period contemplated in the said Section. Although the petitioner has preferred a reply affidavit objecting to the said orders, stated to have been passed by the Deputy Commissioner, by way of abundant caution he has also impugned the said orders separately in W.P. (C).No.27270/2014. The prayer in the last mentioned writ petition is for quashing the said orders purportedly passed by the Deputy Commissioner. 3. In the counter affidavit filed on behalf of the respondents, the stand taken is essentially that Ext.P7 order of penalty is one that was passed in 2014, pursuant to the proceedings that were initiated on 7.9.2009. The delay in adjudicating the penalty proceedings is attributed to the delay in obtaining a report from the Intelligence Officer, Squad No.1, Mattancherry on various aspects that were brought to the notice of the adjudicating authority, and it is stated that on receipt of the report from the Intelligence Officer, Squad No.1, Mattancherry, and based on fresh evidence obtained, the penalty order was passed as against the petitioner. **W.P.(C).No.8140/2014 & : 5 : W.P.(C).No.27270/2014** 4. I have heard the learned counsel for the petitioner as also the learned Government Pleader for the respondents. 5. On a consideration of the facts and circumstances of the case as also the submissions made across the bar, I find from a perusal of the order sheet in these writ petitions that, by an order dated 20.10.2014, taking note of the submission of the learned counsel for the petitioner that the orders dated 19.12.2011, 19.12.2012 and 18.12.2013, impugned in W.P.(C).No.27270/2014 were fabricated by the Intelligence Officer, Squad No.1, this Court had directed the Commissioner of Commercial Taxes, Thiruvananthapuram, to file a report before this Court as to the factual position, after verifying the files of the officers concerned. A report was later filed by the Commissioner of Commercial Taxes, wherein, he refers to the said orders as also the application under the Right to Information [RTI] Act filed by Sri.P.Abdul Latheef, M/s.Herhin Enterprises, who was the seller of the goods alleged to have been purchased by the petitioner, and which gave rise to the penalty proceedings as against the petitioner. It is stated that the application by the said seller of goods sought for the files pertaining to the penalty proceedings initiated against the petitioner herein, and the documents furnished to the said **W.P.(C).No.8140/2014 & : 6 : W.P.(C).No.27270/2014** seller pursuant to his RTI query did not include the orders impugned in W.P.(C).No.27270/2014 solely because the applicant had not specifically requested to hand over copies of the said orders in his request under the RTI Act. However, I find from a perusal of Ext.P7 order, that is impugned in W.P.(C).No.8140/2014, that although the petitioner had specifically raised a contention with regard to limitation, relying on Section 67(1) of the KVAT Act as it then stood, the adjudicating authority had only stated that the revised notice based on fresh evidence as also the information received from the Intelligence Officer, Squad No.1, Mattanchery, had been issued only on 19.2.2014, and the penalty order was passed on 7.3.2014, and hence the order was well within the period of three years contemplated under Section 67(1) of the KVAT Act, as it then stood. It is significant to note, however, that while Ext.P7 order refers to as many as 17 documents that were exchanged between the Department and the assessee, the orders impugned in W.P.(C).No.27270/2014 do not find mention in the said order. In my view, when it was the specific case of the petitioner that the penalty proceedings continued against him were barred by limitation, after expiry of the period of three years from 7.9.2009, the date on which the first notice under Section 67 of the KVAT Act was issued to the petitioner, it was incumbent upon the adjudicating ## **W.P.(C).No.8140/2014 & : 7 : W.P.(C).No.27270/2014** authority to have referred to the orders if any issued by the Deputy Commissioner under Section 67 for extending the time limit for completing the penalty proceedings against the petitioner. This not having been done, and more so, there being no material on record to show that the said orders purportedly passed under Section 67(1) of the KVAT Act were communicated to the petitioner or that the petitioner was afforded an opportunity of hearing before extending the time limit for completing the penalty proceedings against him, the impugned order [Ext.P7] cannot be legally sustained. In finding so, I also place reliance on the decision of a Division Bench of this Court in **Commercial Tax Officer, Anchal and Others v. S. Najeem and Another – [2018 (4) KHC 666 (DB)]** , where, in the context of a similar power granted to the Deputy Commissioner for enhancing the period of limitation for completing assessments under the KVAT Act [Section 25B], it was held that any attempt to enlarge the time provided by the Statute to initiate proceedings to determine escapement of income had to comply with the principles of natural justice, which, without the pre-decisional hearing, would otherwise be vitiated. The principles of natural justice had therefore to be read into the provisions of Section 25B, and it was held that there was a requirement to hear the assessee, who could be visited with civil **W.P.(C).No.8140/2014 & : 8 : W.P.(C).No.27270/2014** consequences pursuant to a reassessment and fixation of liability to tax, before passing any order within the extended time permitted under the Statute. In my view, the said ratio would apply even to penalty proceedings, and to cases covered by the proviso to Section 67(1) of the KVAT Act as it then stood, to read into the provision a mandatory requirement of hearing an assessee before extending the period of limitation for competing penalty proceedings against him. I therefore allow W.P.(C).No.8140/2014, by quashing Ext.P7 order of penalty as one that is without jurisdiction inasmuch as the adjudicating authority concerned did not have the power to continue with the penalty proceedings after the expiry of three years from the date of the initial notice issued to the petitioner on 7.9.2009. For the reasons already stated above, I also allow W.P.(C).No.27270/2014, by quashing the orders impugned therein, inasmuch as there is no material on record to suggest that the said orders were passed after hearing the petitioner or that the orders were in fact passed during the relevant period in exercise of the powers conferred on a Deputy Commissioner under Section 67(1) of the KVAT Act. Although there is enough material in these cases to draw an inference with regard to fabrication of the orders impugned in W.P.(C).No.27270/2014 by the **W.P.(C).No.8140/2014 W.P.(C).No.27270/2014** **& : 9 :** Intelligence Officers concerned, I refrain from making any observation regarding the same, leaving it to the Department to ensure that such actions are not repeated by the Officers of the Department, who cannot be seen as overzealous in their attempt to penalise assessees under Fiscal Statutes. The writ petitions are allowed as above. **Sd/-** **A.K.JAYASANKARAN NAMBIAR JUDGE** **prp/16/10/19** **W.P.(C).No.8140/2014** **& : 10 :** **W.P.(C).No.27270/2014** ## APPENDIX OF W.P(C).NO.8140/2014 ## PETITIONER'S EXHIBITS: EXT.P1: COPY OF NOTICE ISSUED BY THE 2ND RESPONDENT. EXT.P2: COPY OF REPLY FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXT.P3: COPY OF NOTICE ISSUED BY THE 2ND RESPONDENT. EXT.P4: COPY OF OBJECTION FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXT.P5: COPY OF NOTICE ISSUED BY THE 2ND RESPONDENT. EXT.P6: COPY OF REPLY FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXT.P7: COPY OF ORDER ISSUED BY THE 2ND RESPONDENT. ## RESPONDENTS EXHIBITS: NIL. //TRUE COPY// P.S. TO JUDGE **W.P.(C).No.8140/2014** **& : 11 :** **W.P.(C).No.27270/2014** ## APPENDIX OF W.P(C).NO.27270/2014 ## PETITIONER'S EXHIBITS: EXT.P1: COPY OF ORDER ISSUED BY THE 2ND RESPONDENT. EXT.P2: COPY OF ORDER ISSUED BY THE 3RD RESPONDENT. EXT.P2(A): COPY OF ORDER ISSUED BY THE 3RD RESPONDENT. EXT.P2(B): COPY OF ORDER ISSUED BY THE 3RD RESPONDENT. EXT.P3: COPY OF REPRESENTATION SUBMITTED BY THE PETITIONER BEFORE THE 4TH RESPONDENT. ## RESPONDENTS EXHIBITS: NIL. //TRUE COPY// P.S. TO JUDGE