Joy Alukkas India (P) Ltd. Thrissur v. State Tax Officer, SGST Department, Poothoole, Thrissur & State of Kerala

**WP(C).No.17983 OF 2020(W)** **1** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE AMIT RAWAL** **FRIDAY, THE 18TH DAY OF DECEMBER 2020 / 27TH AGRAHAYANA, 1942** ## **WP(C).No.17983 OF 2020(W)** ## **PETITIONER/S:** **JOY ALUKKAS INDIA (P) LTD. THRISSUR - 680 005 REPRESENTED BY ITS DGM FINANCE AND TAXATION, MR.TOM JOSE.** **BY ADVS. SRI.A.KUMAR SRI.P.J.ANILKUMAR SMTG.MINI(1748) SRI.P.S.SREE PRASAD SHRI.JOB ABRAHAM SRI.AJAY V.ANAND** ## **RESPONDENT/S:** **1 STATE TAX OFFICER SQUAD I, SGST DEPARTMENT, POOTHOLE, THRISSUR - 680 004. 2 STATE OF KERALA REPRESENTED BY SECRETARY, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM - 695 001.** **R1 BY GOVERNMENT PLEADER** ## **OTHER PRESENT:** **GP SMT JASMINE M M** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 0312-2020, THE COURT ON 18-12-2020 DELIVERED THE FOLLOWING:** ## **JUDGMENT** ## **Dated this the 18th day of December 2020** The challenge in the present writ petition has been laid to Ext.P1 show cause notice dated 5.10.2019 and Ext.P3 Penalty Order for the assessment year 2014-15 dated 23.3.2020 issued under the provisions of KVAT Act, being barred by limitation which should have been taken into consideration as mandated under Section 25 (1) and Rule 58 (2) of KVAT Rules. 2. The petitioner, a private limited company incorporated under the Companies Act is engaged in Gold, Diamond and Jewellery and other articles of precious stones. It is a registered dealer under the Kerala Value Added Tax Act and CST Act and has its branches in various places within the State, also outside namely in the States of Tamil Nadu, Haryana, Maharashtra, Andhra Pradesh, Delhi, Karnataka, Pondichery and Gujarat. It has local and inter-state sale of gold articles, fancy goods precious stones, silver articles and export sales of various kinds of jewellery. 3. On 9.3.2018 the Income Tax Department conducted a search at the premises of the petitioner company at Thrissur and at the residential premises of its Managing Director. The first respondent proceeded to issue a composite notice dated 5.9.2019 under Section 67 (1) for the KVAT Act for assessment years 2011-12 **WP(C).No.17983 OF 2020(W)** **3** to 2017-18 proposing to levy penalty. Ext.P1 was duly replied by common reply evident from Ext.P2. The 1[st] respondent however proceeded to continue adjudication and passed orders raising demands for penalty. 4. Sri.A.Kumar, learned Counsel appearing for the petitioner in support of the prayer has raised the following submissions. a) Limitation of three years from the deduction of goods as per the provisions of Section 67 was deleted with effect from 1.4.2014 under the Kerala Finance Act, 2014 and the Proviso added was a minimum penalty of Rs.1,000/-. b) The detection and completion of proceedings must have a bearing on time frame. Reasonableness in law demands penalty and avoidance of perpetual unrest and the time period for assessment year 2013-14, expired way back in 2019, however, notice in the instant case was served on 15.9.2019. c). In **T.M.Steels and Cements Ltd.** Vs. **Intelligence Officer** in W.P.(C)No.8446/2017 decided on 26.10.2018, questions were raised laying challenge to penalty proceedings under Section 67 action should be finalised within a reasonable period, when there is no time line prescribed. Since the Proviso to Section 67 was deleted with effect from 1.4.2014, the authorities were expected to **WP(C).No.17983 OF 2020(W)** **4** imitate the penalty proceedings within a reasonable period and not beyond 5 years. The Legislature has fixed the time line for initiation of proceedings of best judgment under Section 25 (1) as five years, extendable to six years from July 2017. d). There has to be a proximate time from the time of inspection and delay caused will have to satisfactory be explained. Whether the detection on the basis of the information submitted by the income tax department would be construed as reckoning date for the purpose of calculation period in the absence of any period of limitation. e). In writ appeal No.344/2017 decided on 26.10.2017, though the Division Bench of this Court held taken a specific date of detection as reckoning date for adjudication upon the penalty proceedings, depending upon the facts of the case and not in the instant case where the returns were duly filed within a reasonable time prescribed and with no action taken under the KVAT Act except on detection of goods on the basis of the information by the income tax authorities. But even in that judgment it was observed that same time line has to be taken into consideration while exercising the power. The time line prescribed under Section 25 (1) and 42 (3) is to be taken into consideration while taking penalty proceedings. **WP(C).No.17983 OF 2020(W)** **5** 5. On the other hand, learned Government Pleader Sri.Govind submitted that the search was conducted on 9.3.2018 at the premises of the petitioner by the Income Tax Authorities under Section 132 of the Income Tax Act. Income Tax authorities on verification noted that the petitioner company effected huge suppression in the income disclosed to the tune of 1253.5 Crores and thereafter issued notice for the production of details regarding the undisclosed income within 7 months from the date of detection of offence. The limitation prescribed under Section 25 of the Act have no application for the penalty proceedings. It is a fact that as per the Finance Act 2014, the limitation prescribed under Section 67(1) has been deleted and hence there is no limitation for the completion of proceedings initiated under Section 67. But the penalty order was passed within a span of five months from the date of the show cause notice. This Court cannot assume the role of an appellate court and examine the merits of the matter as it would be in the domain of the competent authority. 6. I have heard learned Counsel for the parties and appraised the paper books. 7. In **TMT Steel' case** (Supra) order was passed on 13.2.2017 pursuant to the inspection conducted on 28.10.2011 being vitiated on the ground of period of limitation having expired. **WP(C).No.17983 OF 2020(W)** **6** The Division Bench noticing the fact that at the relevant point of time when the inspection in 2011 was done, the Proviso providing limitation of three years was in existence. Noticing all the facts, the proceedings initiated under Section 67 (1) was held to be barred by limitation. 8. In **Mohmed Sameer Case** (W.A.No.344/17 dated 26.10.2018) on the same line, assessment order under Section 67 was detected, the Division Bench held that specific date of detection would be an aspect to be adjudicated after looking into the nature of inspection, the materials recovered and inventory carried out much less the data of production of books. It was a case where the DRI in the year 2006 detected certain defalcations and the Commissioner waited for the final result, which was concluded in the year 2011. Noticing all these facts the Division Bench set aside the judgment of the learned Single Judge and relegated the matter to avail the remedy of appeal. 9. **Shrimati Tarulata Shyam Vs.CIT, WB [1977 3 SCC 305]** pertained to matters where while interpreting the taxing statues, question of hardship was pressed in to service, which in my view, would not be applicable in the present case. It is the matter of record that no doubt the assessment year in the present case pertains to 2014, but it is only on the information provided by **WP(C).No.17983 OF 2020(W)** **7** the Income Tax authorities on the basis of information issued show cause notice dated 5.9.2019 was issued resulting into penalty proceedings. The penalty proceedings have been completed within a period of five months. 10. I am of the view, these facts cannot be adjudicated while exercising the power under Article 226 of the Constitution of India. Petitioner cannot be permitted to take the objections of limitation, on 1.3.2014, till the issuance of show cause. I would be failing in my duty in not extracting the Proviso to Section 67 whereby prior to deletion by Finance Act, 2009, the limitation was three years thereafter, there is no such limitation. These proceedings cannot be held to be barred by limitation, in view of the ratio culled in the judgment reported in **Intelligence Officer vs. Mohammed Sameer** ( W.A.344/17). The relevant paragraphs of the same read thus: “9. Obviously here, the notice was first issued long after the defalcation alleged by the DRI, was brought to the notice of the CTD. But the proceedings initiated by the DRI was pending and the CTD waited for the final result. If the notice has been delayed, as in the present case, where the proceedings were initiated by the DRI in 2006 and the same was concluded only in the year 2011 after which the CTD took out proceedings under Section 45A of the KGST Act and Section 67 of the KVAT Act, then necessarily it would have to be decided as to whether the offence alleged by the CTD was one dependent only on the proceedings initiated by the DRI or also on the order of the Commissioner of Customs. This essentially is a factual **WP(C).No.17983 OF 2020(W)** **8** adjudication, which we would not enter into in a proceeding under Article 226 of the Constitution. If the offence detected by the CTD, as evident from the notice issued, is one which is relatable to and dependent on the order of the Commissioner of Customs, then we have to say that there is no question of limitation arising, since the proceedings were completed within three years from the date of the order of the Commissioner of Customs itself, the notice having been issued in the year 2012, which is for reason of the receipt of the order of 2011, being in 2012. 10. This necessarily calls for a factual adjudication and arguments have been addressed from both sides as to the penalty proceedings being related and totally alien, to the proceedings as initiated by the DRI. We would not refer to these arguments lest we pre-empt a proper consideration by the first appellate authority. We are of the opinion that the facts as seen from the various orders and the proceedings noticed in the said orders do not commend invocation of the extraordinary jurisdiction under Article 226 of the Constitution to find limitation, which, it is trite, is a mixed question of law and fact. It would have to be agitated by the respondent-assessee first before the statutory authorities. We would, hence, set aside the judgment of the learned Single Judge impugned in the appeal to the extent it deals with W.P.(C) No.12066 of 2015. We permit the respondent-assessee to file an appeal from the impugned orders within a period of thirty days from the date of receipt of a certified copy of this judgment. An appeal so filed would be considered to be within time and decided on merits by the first appellate authority keeping in mind the observations made by us on the question of limitation in the aforesaid judgment. The appeal would stand allowed in part. Parties are left to suffer their respective costs.” 11. Thus I do not find any force in the argument of Sri.A.Kumar. The writ petition is dismissed. The petitioner if so advised, is relegated to avail the remedy of appeal and is granted **WP(C).No.17983 OF 2020(W)** **9** 45 days. In case such appeal is preferred, the period spent on this petition would not be taken. ## **Sd/** **AMIT RAWAL** **JUDGE** **Jm/** **WP(C).No.17983 OF 2020(W)** **10** ## **APPENDIX** **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE SHOW CAUSE NOTICE DATED 05/09/2019.** **EXHIBIT P2 TRUE COPY OF THE REPLY DATED 29/11/2019. EXHIBIT P3 TRUE COPY OF THE PENALTY ORDER FOR AY 201314 DATED 23/03/2020.** **EXHIBIT P4 TRUE COPY OF INTERIM ORDER IN WPC NO.15436 OF 2020.** **EXHIBIT P5 TRUE COPY OF JUDGMENT DATED 18/08/2020 IN WPC NO.13744 OF 2020.**