M/S. BRIGHT DIAMONDS X/546-10, S S COMPLEX, PALLIKKULAM ROAD, THRISSUR-680001, THRISSUR DISTRICT v. STATE TAX OFFICER, STATE GOODS AND SERVICES TAX DEPARTMENT, 1ST CIRCLE, PUTHOLE, THRISSUR-680004; COMMISSIONER OF STATE TAX, STATE GOODS AND SERVICES TAX DEPARTMENT, TAX TOWERS, KILLIPPALAM, KARAMANA.P.O, THIRUVANANTHAPURAM-695002; STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVT. TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695001; ASSISTANT COMMISSIONER OF STATE TAX, STATE GOODS AND SERVICES TAX DEPARTMENT, PUTHOLE, THRISSUR-680004

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS** ## **THURSDAY, THE 23RD DAY OF JANUARY 2020 / 3RD MAGHA, 1941** ## **WP(C).No.801 OF 2020(A)** ## **PETITIONER:** **M/S. BRIGHT DIAMONDS X/546-10, S S COMPLEX, PALLIKKULAM ROAD, THRISSUR-680001, THRISSUR DISTRICT, REPRESENTED BY ITS MANAGING PARTNER, SRI.MANOJ.K.V.** **BY ADV. SRI.TOMSON T.EMMANUEL** ## **RESPONDENTS:** - **1 STATE TAX OFFICER STATE GOODS AND SERVICES TAX DEPARTMENT, 1ST CIRCLE, PUTHOLE, THRISSUR-680004.** - **2 COMMISSIONER OF STATE TAX, STATE GOODS AND SERVICES TAX DEPARTMENT, TAX TOWERS, KILLIPPALAM, KARAMANA.P.O, THIRUVANANTHAPURAM-695002.** - **3 STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVT. TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695001.** - **4 ASSISTANT COMMISSIONER OF STATE TAX, STATE GOODS AND SERVICES TAX DEPARTMENT, PUTHOLE, THRISSUR-680004.** ## **SMT.THUSHARA JAMES, GOVT.PLEADER** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 23.01.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No.801 OF 2020(A)** **2** ## **ALEXANDER THOMAS, J.** **=========================== W.P(C) No.801 of 2020 ===========================** Dated this the 23[rd] day of January, 2020 ## **JUDGMENT** The case projected in this Writ Petition is as follows: The petitioner is a partnership firm conducted business under the name and style 'Bright Diamonds' at Pallikulam in Thrissur district. It was a registered dealer under the KVAT Act, 2003, before the 1[st] respondent, engaged in the manufacturing and sale of Diamond and Color stone gold ornaments. The petitioner filed monthly and Ext.P-1 annual return for 2015-16, conceded its entire sales under the rate 5% and 1% on the sales of jewellery and precious stone Rs.4,80,41,372/and Rs.1,06,04,825/- respectively. As a result of filing Ext.P-1 annual return under Sec.20 of the KVAT Act, 2003 completed self assessment under Sec.21 of the Act. Petitioner filed Ext.P-2 audited financial statement along with Audit report for 2015-16. Against pre-assessment notice issued by 1[st] respondent for 2015-16, petitioner submitted Ext.P3 ledger copy for receipt of making charges Rs.26,43,973/- along with Ext.P-4 Form No.26AS under the Income Tax Act towards proof of **WP(C).No.801 OF 2020(A)** **3** income tax deducted at source. But the 1[st] respondent served completed Ext.P-5 order in creating huge additional demands by making estimations under wrong calculations. Hence, the petitioner filed Ext.P-6 application before the 1[st] respondent, for rectifying mistakes in Ext.P-5 order. This Court was pleased to pass Ext.P-7 judgment, in directing to rectify the mistakes in Ext.P-5 order. It is pertinent to note that one of the mistake sought to be rectified (point No.3 in Ext.P-6 application) was that since Ext.P-5 order is passed on 18.11.2019 under Sec.25AA(3) is that other income shown in trading profit and loss account shall be assessed only if, it affects the output tax or input tax credit. Now the grievances of the petitioner is that the 1[st] respondent passed Ext.P8 order, without affording an opportunity of hearing, directed by this Court in Ext.P7 judgment. More so, in Ext.P8 estimated receipt of making charges Rs.1,90,853/- to Rs.63,61,767/under wrong calculation/estimation, even if it does not effects output/input tax. Apart from that applied wrong break-up for 1% at Rs.84,51,035/-, which is below turnover Rs.1,06,04,825/- conceded in Ext.P1 annual return for 2015-16. Ext.P9 is the Kerala Finance Act, by which Sec.25AA introduced in KVAT Act with effect from 01.04.2019. **WP(C).No.801 OF 2020(A)** **4** From the above it can be seen that Ext.P8 order is passed only to make huge amount as additional demands, without proper reasoning. It is settled law that any order is passed with reason is soul less, unsustainable. Even though Ext.P8 order is appealable order, it is also settled law that when an order is clearly against law laid down by this Court and against the specific provisions of the Act, it could be challenged through a writ petition, in a number of decisions in _**South**_ _**Travancore Distilleries & Alleged products v. the Asst.Commissioner of Commercial Taxes & another**_ [1997 KTR 364(Ker.)(DB)], _**VG Textiles (P) Ltd. v. CTO**_ [(1996) 106 STC 123], _**C.K.Sunny v. Asto**_ [(2004) 12 KTR 360], _**M.S.Jewelers v. Asst.Commissioner**_ [(1994) 2 KTR 389 (DB)(Ker.)]. 2. In the light of these averments and contentions, the petitioner has filed the instant Writ Petition (Civil) with the following prayers: - “i) to call for the records from 1[st] respondent leading to issuance of Ext.P8 order passed for 2015-16 and to issue a writ of certiorari or any other appropriate writ or direction quashing Ext.P8 order passed without affording an opportunity of hearing order by this Hon'ble in Ext.P7 judgment; - ii) to issue a writ in the nature of mandamus or any other appropriate writ or order directing the 1[st] respondent to reconsider ground No.3 in Ext.P6 application for rectification of mistake in Ext.P5 order, within a time limit fixed by this **WP(C).No.801 OF 2020(A)** **5** Hon'ble Court and to stay further proceedings to Ext.P8 demand, till then; - iii) to issue a writ in the nature of mandamus or any other appropriate writ or order directing the 1[st] respondent to consider Sec.25AA(3) of Ext.P9 Kerala Finance Act while reconsidering Ext.P8 order, with an opportunity of hearing. - iv) to pass such other orders as this Hon'ble Court may deem justified in the facts and circumstances of the case; AND - v) to award the cost of this proceedings to the petitioner.” 3. Heard Sri.Tomson T.Emmanuel, learned counsel appearing for the petitioner and Smt.Thushara James, learned Government Pleader appearing for the respondents. 4. While hearing the matter on the previous occasion, this Court has requested the learned Government Pleader to get specific instructions from the 1[st] respondent, as to whether reasonable opportunity of being heard was afforded by the petitioner before the decision which resulted in Ext.P-1 assessment order was rendered, etc. Today, when the matter has been taken up for consideration, Smt.Thushara James, learned Government Pleader appearing for the respondents would submit on the basis of instructions that it is seen that the 1[st] respondent has not afforded the reasonable opportunity of being heard to the petitioner before rendering a decision, which led to the impugned Ext.P-8 rectification order. **WP(C).No.801 OF 2020(A)** **6** 5. Without getting into the merits of the controversy in any manner, it is only to be held that therefore, the impugned proceedings are initiated for non-compliance of the principles of natural justice and also in violation of the specific directions issued by this Court in Ext.P-7 judgment dated 02.12.2019 in W.P(C)No.32682/2019, whereby it is directed that the petitioner should be heard, before the abovesaid decision is taken. 6. In that view of the matter, it is ordered that the impugned proceedings require interdiction and a remit. To effectuate the remit, it is ordered that the impugned Ext.P-8 order will stand quashed and the matter in relation thereto will stand remitted to the 1[st] respondent, for consideration and decision afresh. The 1[st] respondent will issue notice of hearing to the petitioner and will permit the petitioner to file written statements in the matter and thereafter afford a reasonable opportunity of being heard to the petitioner and then will take a decision in the matter, in accordance with law and then pass fresh orders thereon, in accordance with law. The impact of the contentions of the petitioner were based on Sec.25AA of the Kerala Value Added Tax Act may also be duly heard and considered and adverted to by the 1[st] respondent, before **WP(C).No.801 OF 2020(A)** **7** he renders the decision. With these observations and directions, the above Writ Petition (Civil) stands finally disposed of. **Sd/-** **ALEXANDER THOMAS JUDGE** vgd **WP(C).No.801 OF 2020(A)** **8** ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF ANNUAL RETURN DATED 26.07.2016 SUBMITTED BEFORE 1ST RESPONDENT FOR THE YEAR 2015-16.** **EXHIBIT P2 TRUE COPY OF AUDITED FINANCIAL STATEMENT FOR 2015-16 SUBMITTED BY PETITIONER BEFORE 1ST RESPONDENT.** **EXHIBIT P3** **TRUE COPY OF RELEVANT PAGE OF LEDGER ACCOUNT FOR MAKING CHARGES RS.26,43,973/SUBMITTED AGAINST PRE-ASSESSMENT NOTICE ISSUED FOR 2015-16** **EXHIBIT P4 TRUE COPY OF FORM NO.26AS FOR ASSESSMENT YEAR 2016-17 SUBMITTED ALONG WITH REPLY TO THE PRE-ASSESSMENT NOTICE TO PROVE RECEIPT OF MAKING CHARGES.** **EXHIBIT P5 TRUE COPY OF ORDER DATED 18.11.2019 PASSED BY 1ST RESPONDENT U/S.25(1)READ WITH SEC.25 AA TO KVAT ACT FOR 2015-16** **EXHIBIT P6** - **TRUE COPY OF THE APPLICATION DATED 28.11.2019 SUBMITTED BEFORE 1ST RESPONDENT FOR RECTIFICATION OF MISTAKE U/S.66 TO THE KVAT ACT, IN EXT P5 ORDER FOR 2015-16.** - **EXHIBIT P7 TRUE COPY OF JUDGMENT DATED 02.12.2019 IN WP(C)NO.32682 OF 2019 PASSED BY THIS HON'BLE COURT TO CONSIDER AND PASS ORDERS IN EXT P6 APPLICATION IN EXT P5 ORDER.** **EXHIBIT P8 TRUE COPY OF ORDER DATED 06.01.2020, PASSED BY 1ST RESPONDENT, COMMUNICATED TO PETITIONER ON 09.01.2020, IN MAKING HUGE ESTIMATION OF TAXABLE TURNOVER, UNDER WRONG CALCULATION, ON RECEIPT OF MAKING CHARGES.** **WP(C).No.801 OF 2020(A)** **9** ## **EXHIBIT P9** **TRUE COPY OF THE RELEVANT PAGES OF KERALA FINANCE ACT 2019, WHEREIN INTRODUCED SEC.25AA IN KVAT ACT, WITH EFFECT FROM 01.04.2019, PUBLISHED THROUGH KERALA GAZETTE.**