M/S Baywatch Properties and Developers v State of Kerala and others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** ## **THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON** **FRIDAY, THE 4TH DAY OF JANUARY 2013/14TH POUSHA 1934** ## **WP(C).No. 23377 of 2012 (V) ---------------------------** **PETITIONER(S): -----------------------** **M/S.BAYWATCH PROPERTIES AND DEVELOPERS, SHARAVANA,IST FLOOR,MANIKKATH CROSS ROAD, RAVIPURAM,KOCHI -682 016, REPRESENTED BY ITS MANAGING PARTNER, MR.K.R. VASUDEVAN NAMBOOTHIRIPAD, FLAT NO. L-6B (LAVENDER),ROYAL GARDENS, OPP. MILMA DAIRY,REFINERY ROAD,S.N. JUNCTION, THRIPUNITHURA -682 301.** **BY ADVS.SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATH MENON SRI.P.BENNY THOMAS SRI.K.JOHN MATHAI SRI.KURYAN THOMAS** ## **RESPONDENT(S):** **--------------------------** **1. THE STATE OF KERALA, REPRESENTED BY THE SECRETARY (TAXES), GOVERNMENT OF KERALA,SECRETARIAT, THIRUVANANTHAPURAM -695 001.** ## **2. ASSISTANT COMMISSIONER,** - **(WORKS CONTRACT), OFFICE OF THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES, CLAS TOWER,OLD RAILWAY STATION ROAD,** - **KOCHI - 682 018.** **3. DEPUTY TAHSLDAR, (REVENUE RECOVERY),TALUK OFFICE, MUVATTUPUZHA - 686 661.** **4. TAHSILDAR (REVENUE RECOVERY), KANAYANNUR TALUK,ERNAKULAM,KOCHI -682 011.** **R1 TO R4 BY GOVERNMENT PLEADER SRI.,T.K.SHAIJ RAJ** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 04-01-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **Kss** ## **WPC.NO.23377/2012 V** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT-P1-TRUE COPY OF THE ASSESSMENT ORDER DATED 26/02/2012 ISSUED TO THE PETITIONER BY THE 2ND RESPONDENT FOR THE YEAR 2009-2010.** **EXHIBIT-P2-TRUE COPY OF THE ASSESSMENT ORDER DATED 26/02/2012 ISSUED TO THE PETITIONER BY THE 2ND RESPONDENT FOR THE YEAR 2010-2011.** **EXHIBIT-P3-TRUE COPY OF THE ANNUAL RETURN FOR THE YEAR 2009-2010 FILED BEFORE THE 2ND RESPONDENT.** **EXHIBIT-P4-TRUE COPY OF THE LETTER DATED 13/09/2012 SUBMITTED BY THE PETITIONER BY THE PETITIONER TO THE 2ND RESPONDENT ALONG WITH THE HARD COPIES OF RETURNS AND OTHER DOCUMENTS FOR THE YEAR 2009-2010.** **EXHIBIT-P5-TRUE COPY OF THE ANNUAL RETURN FOR THE YEAR 2010-2011 FILED BEFORE THE 2ND RESPONDENT.** **EXHIBIT-P6-TRUE COPY OF THE LETTER DATED 13/09/2012 SUBMITTED BY THE PETITIONER TO THE 2ND RESPONDENT ALONG WITH THE HARD COPIES OF RETURNS AND OTHER DOCUMENTS FOR THE YEAR 2010-2011.** **EXHIBIT-P7-TRUE COPY OF THE LETTER DATED 24/09/2012 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT.** **EXHIBIT-P8-TRUE COPY OF THE LETTER DATED 26/09/2012 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT.** **EXHIBIT-P9-TRUE COPIES OF THE REVENUE RECOVERY NOTICES ISSUED TO ONE OF THE PARTNERS OF THE PETITIONER BY THE 3RD RESPONDENT DATED 04/08/2012.** **EXHIBIT-P10-TRUE COPY OF THE REVENUE RECOVERY NOTICES ISSUED TO THE MANAGING PARTNER OF THE PETITIONER BY THE 4TH RESPONDENT DATED 06/09/2012.** **RESPONDENTS' EXHIBITS:** **R2(A): COPY OF THE ACKNOWLEDGEMENT CARD.** **/TRUE COPY/** ## **P.S.TO JUDGE** **Kss** ## **P.R. RAMACHANDRA MENON, J.** ## **---------------------------------------** ## **W.P.(C). No. 23377 of 2012 ---------------------------------------Dated this the 4[th] day of January, 2013** ## **JUDGMENT** Exts. P1 and P2 assessment orders passed by the second respondent in respect of the assessment years 2009-2010 and 2010-2011 under Section 25 of the Kerala Value Added Tax Act are under challenge . It is specifically contended that, though there is an alternative remedy by way of appeal, the issue involved herein is already covered by the law declared by a Full Bench of this Court and hence they are sought to be challenged by way of this writ petition. 2. The petitioner firm was an assessee on the rolls of the second respondent and was engaged in the construction and sale of residential flats, which was started in the year 2008. By virtue of some unforeseen circumstances, the petitioner could not continue the business any further and the same was closed down. In connection with the loan procured from the financier/Bank, because of the default , they proceeded with steps under the SARFAESI Act and this led to S.A. No.717/2007 before the DRT, W.P.C. No. 23377 of 2012 -2- Ernakulam and finally, during the pendency of the proceedings before the DRT, some settlement was reached between the parties, the liability was cleared and the matter was closed. By virtue of the financial constraints and poor plight of the petitioner, the only office which was functioning at a rented building was also closed down and the premise was vacated as demanded by the landlord. It was while so, that the petitioner was served with Exts. P1 and P2, stated as passed under Section 25(1) of the KVAT Act, imposing a huge liability to an extent of Rs.46,34,296/- and 10,67,848/- in respect of the two assessment years vide Exts. P1 and P2, which made the petitioner to approach this Court . 3. The case of the petitioner is that, the only reason for having passed Exts.P1 and P2, invoking the power and procedure under Section 25 of the KVAT Act, was because of non-filing of the return; for which no proceedings under Section 25(1) ought not to have been pursued . The learned Counsel for the petitioner submits that, when a specific provision in respect of the course to be pursued for 'non-filing of the return' is provided under Section 22 of the KVAT Act, it was never open for the W.P.C. No. 23377 of 2012 -3- departmental authorities to have resorted to the general provision in respect of escaped assessment, under Section 25. The learned Counsel relies on the decision reported in 2006(2) KLT 484 (FB) _**( State of Kerala vs Shahid).**_ There is also a case for the petitioner, that no pre-assessment notice was ever served to the petitioner and no opportunity of hearing was afforded before passing Exts.P1 and P2. 4. The respondents have filed a counter affidavit pointing out that the course and events have been pursued strictly in conformity with the relevant provisions of law and that Exts.P1 and P2 are not assailable under any circumstance. It is stated that the proceedings have been finalised in tune with the law declared by this Court in **1998 (1) KLT SN4(P.7).** It is also the case of the respondents that the pre-assessment notice was sent to the petitioner by registered post in the address of the business premises and that the acknowledgment card was returned saying that the same was accepted by one Kunjumon. 5. The petitioner has filed a reply affidavit pointing out that, the business was closed down and the premise was vacated as early as in July 2007; whereas the pre-assessment notice was W.P.C. No. 23377 of 2012 -4- stated as issued only on 7.12.2011 and that the petitioner, or any other person concerned in connection with the affairs of the establishment, does know the person by name 'Kunjumon', to whom the notice is stated as served. It is also stated that the registered postal article, if not addressed to Kunjumon, could not have been served to him. Had the petitioner been served with a notice, the petitioner would have rushed to the 2[nd] respondent bringing the factual position to his notice. In any view of the matter, since the issue is with regard to the 'non filing of return' and further since the law sought to be relied on by the respondents i.e., **M/s. Baby v. State of Kerala (1998 (1) KLT S.N. 4 Page 7)** has been overruled by the Full Bench of this Court as per the decision reported in **State of Kerala v. Shahid (2006(2) KLT 484)** , the petitioner is entitled to succeed, submits the learned counsel. 6. The question that was considered by the Full Bench of this Court in **State of Kerala v. Shahid (2006(2) KLT 484)** was with reference to Section 17 and 19 of the KGST Act, which are the 'special provision' and 'general provision' respectively, with regard to the manner of assessment to be made. The W.P.C. No. 23377 of 2012 -5- assessment contemplated under Section 19 in respect of the 'escaped turnover' was held as not applicable, in view of the specific provision to be followed by virtue of Section 17 in respect of the case for 'non filing of returns'. The Bench observed with reference to the maxims, “Generalia Specialibus non-derogant” (to the effect that the general provisions do not derogate from the special provisions) and “Generalibus Specialia derogant” (to the effect that special provisions derogate from the general provisions) and held that, when a special provision is there, there cannot be any reliance on the general provision. It was accordingly that, the verdict rendered by the Division Bench was overruled as per the aforesaid decision. 7. This Court finds that the law declared by the Full Bench is squarely applicable to the case in hand. In view of the availability of the 'special provision', with regard to the non filing of return under Section 22 of the KVAT Act, it was never open to the 2[nd] respondent to have resorted to the 'general provision' under Section 25. That apart, in a proceeding under Section 25, an effective opportunity of hearing has to be given to the assessee. The pre-assessment notice stated as served to one W.P.C. No. 23377 of 2012 -6- 'Kunjumon', whose whereabouts/particulars are not known, can't be considered or accepted as valid service on the assessee. 8. This Court finds that, this is a case which ought to have been dealt with, under Section 22 of the KVAT Act and that, the 2[nd] respondent is not justified in having initiated and finalized the proceedings under Section 25 of the KVAT Act. In the said circumstance, Exts. P1 and P2 are set aside and the 2[nd] respondent is directed to complete the assessment in tune with the mandate under Section 22 of the KVAT Act, after hearing the petitioner. The petitioner shall furnish the correct address before the 2[nd] respondent for issuing notice and such other proceedings along with a copy of the judgment within 'two weeks' from the date of receipt of a copy of this judgment. The matter shall be finalized accordingly, within 'two months' thereafter. Writ petition is allowed. No cost. ## **P.R. RAMACHANDRA MENON, JUDGE.** lk/Kp/-