Femin Rajappan Simon v. Intelligence Officer, Investigation Branch-I, Commercial Taxes, Thiruvananthapuram

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **MONDAY, THE 30TH DAY OF MAY 2016/9TH JYAISHTA, 1938** **WP(C).No. 14726 of 2016 (M) ---------------------------** **PETITIONER(S):** **-------------** **FEMIN RAJAPPAN SIMON, PROPRIETOR, SHALOM ENTERPRISERS, T.C. XII/C, NEAR SANTHWANA HOSPITAL, NCC ROAD, AMBALAMUKKU, THIRUVANANTHAPURAM.** **BY ADVS.SRI.K.M.FIROZ SMT.M.SHAJNA SRI.S.KANNAN SMT.UMMUL FIDA** **RESPONDENT(S):** **--------------** **INTELLIGENCE OFFICER,** **(INVESTIGATION BRANCH-I), COMMERCIAL TAXES, 5TH FLOOR, TAX TOWERS, KARAMANA P.O., THIRUVANANTHAPURAM - 695 001.** **BY GOVERNMENT PLEADER SMT.LILLY K.T.** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 26-05-2016 THE COURT ON 30-05-2016, DELIVERED THE FOLLOWING:** **msv/** ## **WP(C).No. 14726 of 2016 (M) ---------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS** **-----------------------** **EXT.P1: TRUE COPY OF THE CERTIFICATE OF REGISTRATION DATED 13.03.2014 ISSUED BY THE COMMERCIAL TAX OFFICER, FIRST CIRCLE, KARAMANA, THIRUVANANTHAPURAM UNDER KVAT ACT.** **EXT.P1(A): A TRUE COPY OF THE SIR DATED 30.4.2014 ISSUED BY THE RESPONDENT TO THE PETITIONER.** **EXT.P2: A TRUE COPY OF THE NOTICE UNDER SECTION 67(1) OF THE KVAT ACT DATED 31.7.2014 ISSUED BY THE RESPONDENT TO THE PETITIONER** **EXT.P3: A TRUE COPY OF THE REQUEST DATED 16.10.2015 SEEKING FURTHER TIME SUBMITTED BY THE PETITIONER EXT.P4: A TRUE COPY OF THE NOTICE DATED 27.11.2015 ISSUED BY THE RESPONDENT IN RESPONSE TO EXT.P3 REQUEST** **EXT.P5: A TRUE COPY OF THE AUTHORIZATION DATED 1.12.2015 SUBMITTED BY THE PETITIONER TO THE RESPONDENT AUTHORIZING SRI.G.UDAYABHANU TO RECEIVE RECOVERED DOCUMENTS.** **EXT.P6: A TRUE COPY OF THE REQUEST LETTER DATED 2.12.2015 TO GRANT 30 DAYS TIME FOR FILING THE REPLY ON RECEIPT OF RECORDS SUBMITTED BY THE PETITIONER.** **EXT.P7: A TRUE COPY OF THE NOTICE DATE 3.12.2015 ISSUED BY THE RESPONDENT WITH AN OPPORTUNITY TO FILE A FRESH REQUEST FOR GIVING COPIES OF THE RECOVERED DOCUMENTS WITHIN 7 DAYS OF THE RECEIPT OF THE NOTICE.** **EXT.P8: A TRUE COPY OF THE REQUEST DATED 7.12.2015 SUBMITTED BY THE PETITIONER BEFORE THE RESPONDENT** **EXT.P9: A TRUE COPY OF THE REQUEST LETTER DATED 14.12.2015 SUBMITTED BY THE PETITIONER FOR ANOTHER DATE OF APPEARA NCE** **EXT.P10: A TRUE COPY OF THE NOTICE DATED 31.12.2015 ISSUED BY THE RESPONDENT TO THE PETITIONER TO APPEAR ON 8.1.2016 AND TO OBTAIN THE COPIES OF THE RECOVERED DOCUMENTS.** **msv/** **-2-** **-2-** ## **WP(C).No. 14726 of 2016 (M) ---------------------------** **EXT.P11: A TRUE COPY OF THE LETTER DATED 14.12.2015 SUBMITTED BY THE PETITIONER.** **EXT.P12: A TRUE COPY OF NOTICE DATED 8.1.2016 ISSUED BY THE RESPONDENT TO THE PETITIONER** **EXT.P13: A TRUE COPY OF REQUEST DATED 14.1.2016 ISSUED BY THE PETITIONER BEFORE THE RESPONDENT** **EXT.P14: A TRUE COPY OF THE PENALTY ORDER DATED 30.1.2016 FOR THE ASSESSMENT YEAR 2011-12 PASSED BY THE RESPONDENT** **EXT.P14(A): A TRUE COPY OF THE PENALTY ORDER DATED 30.1.2016 FOR THE ASSESSMENT YEAR 2012-13 PASSED BY THE RESPONDENT** **EXT.P14(B): A TRUE COPY OF THE PENALTY ORDER DATED 30.1.2016 FOR THE ASSESSMENT YEAR 2013-14 PASSED BY THE RESPONDENT. EXT.P15: TRUE COPY OF THE JUDGMENT OF HIGH COURT OF KERALA AS REPORTED IN (2014) 69 VST 76 (KER).** **EXT.P16: A TRUE COPY OF THE JUDGMENT OF HIGH COURT OF KERALA AS REPORTED IN (2016) 24 KTR 66 (KER).** **RESPONDENT(S)' EXHIBITS:** **------------------------** ## **NIL** **//TRUE COPY//** **P.S.TO JUDGE** **Msv/** ## **A.M. SHAFFIQUE, J.** ## ============= W.P. (C) No. 14726 of 2016 =================== Dated this, the 30[th] day of May, 2016 ## **J U D G M E N T** Petitioner, a registered dealer under the Kerala Value Added Tax Act, 2003, challenges penalty orders passed by the respondent for the assessment years 2011-12, 2012-13 and 2013-14. The main contention urged by the petitioner is that the documents recovered from the petitioner were not returned within the specified time as a result of which petitioner could not submit reply and consequently, when penalty orders had been passed, the same is in violation of the principles of natural justice. Petitioner relies upon Section 44(6) of the KVAT Act, which indicates that the documents seized under Section 44(5) shall not be retained by the officer seizing them beyond a period of 180 days unless there is permission from the next higher authority and unless the documents were required for any prosecution under the Act. It is submitted that no such eventuality had occurred and, therefore, the penalty orders are liable to be quashed. The petitioner further sought for a direction to the ## W.P(C) No.14726/16 ## -:2:- respondent to return the documents. 2. Learned Government Pleader on instructions submits that opportunity had been granted to the petitioner to take copies of the documents which facility was not availed by the petitioner and therefore, the respondent was justified in passing penalty orders for want of reply and explanation regarding the impugned evasions. 3. Learned senior counsel for the petitioner however relied upon a few judgments of this Court to substantiate his contention. (i) First judgment relied upon is _**M.C.Jacob v. Intelligence Officer, Agricultural Income-Tax and Sales**_ _**Tax, Ernakulam**_ ([1976] 37 S.T.C. 14), wherein this Court was considering the provisions of Section 28 of Kerala General Sales Tax Act, 1963, especially the scope of the term “ _required for a prosecution_ ” in sub section (3)(a). The Division Bench of this Court held that the decision to prosecute has to be taken before the expiry of the period of 30 days and prosecution has to be taken within a reasonable period. (ii) Another case relied upon is _**P.K.Ramanujam v.**_ W.P(C) No.14726/16 -:3:- ## _**Intelligence Officer, Squad No.II, Agricultural Income-Tax**_ _**and Sales Tax, Thrissur and another**_ ([1996] 100 S.T.C. 414). This case was decided by a learned Single Judge of this Court with reference to Section 45A of the KGST Act which requires a duty on the party of the authority concerned to afford an opportunity of being heard to the party before levying penalty. It was held that the petitioner in that case was entitled to get back the records after 30 days and no such opportunity had been granted to file an effective reply after perusal of the documents seized from his possession. Therefore the order imposing penalty was quashed. The facts of the case would disclose that the documents were seized from the business premises of the petitioner on 1/10/1994. Proceedings were initiated by the 1[st] respondent under Section 28 (5) of the Act by issuing notice dated 23/1/1995 proposing to levy penalty. Petitioner filed reply on 30[th] January, 1995 and penalty order was passed on 23/2/1995 rejecting the contentions urged. Though it was contended on the side of the revenue that an opportunity was given to peruse the documents and to take copies, it was held that still the order is vitiated for the sole reason that an effective opportunity had been denied to the W.P(C) No.14726/16 ## -:4:- petitioner. (iii) Learned senior counsel also places reliance on another judgment in _**G.Muraleedharan v. Intelligence Officer**_ [(2000) 8 KTR 469 (Ker)]. That was a case in which documents were seized after inspection on 11/9/1991. Petitioner was asked to produce his account books for stock verification. He made repeated demands for return of the seized books for preparing the accounts and for presentation. Further inspections were conducted and certain other documents were also seized on 31/3/1993 and 24/9/1993. Petitioner sought for keeping in abeyance the assessment proceedings and also seeking to return the books of accounts. During hearing, learned counsel only sought for relief to direct return of the documents seized. Taking into consideration the statutory provisions under Sec.28(6) of the KGST Act, direction was issued to return the documents. (iv) Yet another judgment relied upon is _**Sheen Golden Jewels (India) Private Ltd. v. Intelligence Officer Squad No.1, Commercial Taxes, Pathanamthitta and others**_ {[2014] 69 VST 76}. That was a case in which the question considered was, how long can the accounts, registers, records or W.P(C) No.14726/16 -:5:- other documents seized under the provisions of the KVAT Act be retained by the officer seizing them. That was a case in which the petitioner sought only for return of the documents. It was held that the Intelligence Officer is liable to be directed to return the documents seized as there was no material to indicate that the documents were required for prosecution proceedings. (v) Another judgment relied upon is _**Prasad K.R. v. Commercial Tax Officer**_ {(2016) 24 KTR 66 (Ker)}. That was a case in which challenge was made to the assessment orders passed under the KVAT Act on the ground that some of the records which were seized from the petitioner during the course of inspection in his business place were not returned. The records were seized on 18/9/2014 and was retained beyond the period of 180 days from the date of seizure. When notice was received under Section 25(1) of the KVAT Act, he requested for return of the documents as per letter dated 18/8/2015 which was served on 20/8/2015. However, orders of assessment were passed on 20/8/2015 itself on best judgment basis. In the said facts of the case, learned Single Judge held that further opportunity should be granted to the petitioner to file reply after providing the W.P(C) No.14726/16 -:6:- documents and direction was issued to provide the documents to the petitioner. 4. Before proceeding further to analyse the aforesaid judgments, it will be useful to refer to the facts of the present case to understand whether these judgments could be applied to the fact situation. The petitioner's business premises was inspected by the respondent on 30/4/2014. Ext.P1(a) is the shop inspection report. Ext.P2 dated 31/7/2014 has been issued to the petitioner proposing to impose penalty on the petitioner and calling upon him to file objections within 14 days. It seems that no such objection was filed. According to the petitioner, letter dated 16/10/2015 was issued requesting for return of all the documents seized. In the said letter, it is stated that he had requested for the recovered records. He had appeared on 2/6/2014 pursuant to summons dated 23/5/2014 and had requested for copies of the records to enable him to explain the transactions. Further he submits that “ _even though you have promised to furnish the copies of all the records recovered without serving any copies an ex parte notice dated 31/7/2014 was served on me. After receipt of the above notice I met you personally on several occasions for_ W.P(C) No.14726/16 ## -:7:- _copies of the recovered records as they were essential for filing objections to the penalty notice. The recovered records include records relating to work which were not executed, the works of which were started years later. Without copies of these records, I will not be in a position to submit any written reply to your penalty notice_ .” By Ext.P4 notice dated 27/11/2015, the respondent had informed the petitioner that taking into consideration his request, he is permitted to obtain copies of the recoveries within 7 days. By Ext.P5 dated 1/12/2015, he again requested for the original records. This was followed by another letter dated 2/12/2015 (Ext.P6). However, by notice dated Ext.P7, a further opportunity was granted to the petitioner to obtain copies of the recovered documents and the matter was adjourned to 14/12/2015, to which letter, petitioner sent reply dated 7/12/2015 again requesting for the original records. By Ext.P10 notice dated 31/12/2015 he was again afforded an opportunity to appear on 8/1/2016 and obtain photocopies of the documents. Petitioner sent a reply dated Ext.P11 calling upon the authorities to return the originals contending that the same are required for adjudication. A further notice Ext.P12 has been issued on W.P(C) No.14726/16 ## -:8:- 8/1/2016 again providing a personal opportunity to the petitioner, to obtain photocopies of the recoveries at his cost and to file necessary objections. Petitioner sent a further letter asking for documents wherein he has contended that “ _you have not bothered to return the records even after my promise to bear expenses for taking photocopies to be kept with you. Since the records were not returned I am not in a position to offer any specific objections to the notice issued_ .” Exts.P14, P14(a) and P14(b) are the penalty orders. 5. The facts aforementioned clearly indicates that after conducting the inspection and seizing the documents on 30/4/2014, summons was issued on 23/5/2014 to verify the documents recovered. Accounts were produced on 12/6/2014 and notice under Section 67(1) was issued on 31/7/2014. It is apparent that at the relevant time, the period of 180 days had not expired. Therefore, there was no obligation on the part of the respondent authorities to have returned the documents to the petitioner. For the first time, a letter is issued only on 16/10/2015 seeking for records wherein he admits the fact that when he requested for documents, the respondent promised to furnish W.P(C) No.14726/16 ## -:9:- copies of all records. However, further it is stated that no such records were furnished. But it is evident that there was an offer to provide copies of the records at the cost of the petitioner and even within the time provided for return of documents. Therefore, this is not a case where there was a genuine need for the original records for the purpose of filing a reply. This is a case in which the respondent had offered to give copies of the documents. But after the 180 days period, the petitioner started asking for return of the original records. Even then, substantial time was granted to the petitioner to obtain photocopies of the records which he did not avail of. Under such circumstances, it is clear that this is not a case in which any prejudice has been caused to the petitioner which can result in violation of principles of natural justice. This is an instance where he deliberately did not file any objection or rather he did not choose to obtain photocopies of the documents in order to file a proper reply to the notice under Section 67(1) of the KVAT Act. In such circumstances, I do not think that petitioner can depend upon the principles laid down in the aforesaid judgments and seek for quashing the penalty orders. 6. In fact, in the judgments aforesaid and relied upon, W.P(C) No.14726/16 ## -:10:- the principle in respect of the Department keeping the records beyond the time stipulated under the Act, of course can be deprecated, unless, as provided under the Act they intend to proceed for prosecution or there is a direction by a higher authority for retaining the documents. But the question is, whether by not returning the documents within the specified time, it will cause any prejudice to the petitioner to file reply to the proposal to impose penalty issued under Section 67(1) of the Act. In _**P.K.Ramanujam**_ (supra), a learned Single Judge of this Court held that the contention of the Government Pleader that an opportunity was given to peruse the documents and take copies will not suffice. But that was a case in which the documents were seized on 1[st] October, 1994 and the period prescribed for return of documents was 30 days. The penalty notice was issued only on 23/2/1995 beyond the period prescribed for retention of records. The said judgment can have no application to the facts of the present case. In _**Prasad K.R.**_ (supra), learned Single Judge quashed the assessment orders on the ground that the documents were not given as requested by the petitioner. But, the facts in that case would indicate that the records ought to W.P(C) No.14726/16 ## -:11:- have been returned within six months from 18/9/2014 which was not done. Thereafter, the petitioner was served with notice under Section 25(1) of the KVAT Act. Petitioner sent a letter on 18/8/2015 requesting for the records, which was received by the respondent on 20/8/2015. However, the assessment order was passed on 20/8/2015 itself. _**Prasad K.R.**_ (supra) also has been decided in an instance where notice under Section 25(1) had been issued after 180 days from the date of return of seized records. Therefore, this judgment also has no application to the facts of the case. 7. In the case on hand, as already indicated, the petitioner was permitted to verify the records and to obtain copies well within the 180 days' period. Having not filed any objection, it is always open for the Intelligence Officer to pass final orders. However, substantial time had been granted to the petitioner to file his objections after taking necessary copies, if required. He did not avail of the said opportunity and insisted for the original records. 8. Though there would be justification in contending that the records have to be returned after six months, in a case where W.P(C) No.14726/16 ## -:12:- penalty notice had been issued within the said period and he was called upon to file his objection within the period of 180 days and he was given an opportunity to verify the documents and to take copies and since he failed to do so, I do not think that this Court can interfere in the penalty orders by invoking Art.226 of the Constitution of India. The facts do not disclose any prejudice caused to the petitioner whereas the facts disclose a deliberate attempt on the petitioner to delay the matter. Hence, I do not find any ground to interfere with the penalty orders at this stage of the proceedings. 9. The writ petition is, hence, dismissed reserving right of the petitioner to seek alternate remedy in accordance with law. Petitioner is granted three weeks' time to file a revision before the revisional authority. Until such time, recovery proceedings pursuant to the demand notice shall be kept in abeyance. Sd/- ## **A.M. SHAFFIQUE, JUDGE** Rp //True Copy// P.S to Judge