M/S GKB RX Lens (P) Ltd v. Intelligence Officer, Squad No. VIII, Commercial Taxes, Ernakulam; The Assistant Commissioner (Assessment), Special Circle-II, Commercial Taxes, Thevara, Ernakulam District; The Commissioner of Commercial Taxes, Kerala; The State of Kerala represented by the Secretary, Taxes Department

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **FRIDAY, THE 02ND DAY OF NOVEMBER 2018 / 11TH KARTHIKA, 1940** **WP(C). No.2253 of 2017** ## **PETITIONER:** **M/S.GKB RX LENS (P) LTD P-4, KASBA INDUSTRIAL ESTATE, PHASE-1,** **KOLKATA-700107, HAVING BRANCH OFFICES AMONG OTHER PLACES AT DOOR NO.41/1482-A, VALLANKI TOWER, KRISHNASWAMI ROAD, ERNAKULAM, COCHIN-682035, 7/770 NATIONAL BUILDING, S.M.STREET, KOZHIKODE-673001 AND T.C.26/2044, GROUND FLOOR, TUTORS LANE, STATUE, THIRUVANANTHAPURAM AND IS REPRESENTED BY SRI.K.S.MOHANDAS, REGIONAL MANAGER.** **BY ADVS. SRI.E.P.GOVINDAN SMT.G.DEEPA** ## **RESPONDENTS:** **1 THE INTELLIGENCE OFFICER SQUAD NO.VIII, COMMERCIAL TAXES, COMMERCIAL TAXES COMPLEX, THEVARA, ERNAKULAM, PIN-682015.** **2 THE ASSISTANT COMMISSIONER [ASSESSMENT] SPECIAL CIRCLE-II, COMMERCIAL TAXES, THEVARA, ERNAKULAM DISTRICT, PIN-682015.** **3 THE COMMISSIONER OF COMMERCIAL TAXES KERALA, PUBLIC BUILDING, VIKAS BHAVAN P.O., THIRUVANANTHAPURAM, PIN-695001. 4 THE STATE OF KERALA REPRESENTED BY THE SECRETARY, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, TRIVANDRUM, PIN-695001. SRI.C.E. UNNIKRISHNAN, SPECIAL GOVERNMENT PLEADER** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 02.11.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** WP(C). No.2253 of 2017 2 ## **JUDGMENT** ## **K. Vinod Chandran, J.** **The petitioner in the above Writ Petition challenge the proceedings initiated under Section 67 of the Kerala Value Added Tax Act, 2003 (for short “KVAT Act”), on the ground of limitation. We have noticed in** _**W.A. No.344/2017, [Intelligence Officer v. Mohammed Sameer]**_ **that under Section 67 initially, at the inception of the KVAT Act, there was a limitation provided of one year, which was enhanced to three years in 2009 and then removed from the Statute in the assessment year 2014-15. We have also held that even if no limitation is specifically provided in the Statute, the proceedings should be finalised within a reasonable period. As to reasonable time for completion of proceedings under Section 67, it was found that it should be five years as provided under Section 25 for re-assessment. On the commencement of such period of limitation, we have followed a Division** WP(C). No.2253 of 2017 3 **Bench judgment in** _**W.A.No.385/2009 dated 18.02.2009 [M/s Acme Furniture and Interiors v. CTO];**_ **which held the commencement to be on detection of offence. We noticed the observation in** _**W.A.No. 385/2009**_ **that there is no time provided for detection of offence, which we held should be within a proximate period from the date of inspection and any delay caused will have to be satisfactorily explained; except in cases where the proceedings are finalised within the period of limitation or a reasonable period from the date of inspection itself. On these broad principles laid down by us, as also the other Division Bench decision, we proceed to consider the question of limitation as urged in these writ petitions.** **2. The facts in the above case indicate that an inspection was conducted in the three branches of the petitioner/assessee on 22.06.2010 as is evident from Ext.P1. A summons was issued on 06.12.2011, after more than 1½ years. Then a subsequent notice** WP(C). No.2253 of 2017 4 **was issued only on 20.05.2016. The proceedings are hit by gross delay, argues the petitioner.** **3. The learned Special Government Pleader submits that he did not get an opportunity to file a Counter Affidavit and states on instruction that after inspection, there were other summons issued to the petitioner and that the petitioner had not produced any books of accounts, despite repeated summons. Hence under Section 44 of the Kerala Value Added Tax Act, 2003 [for brevity, the Act], permission was sought from the higher authority for keeping the seized records beyond the period stipulated and eventually on the petitioner/ assessee not producing the books of accounts and not co-operating with the enquiry proceedings, issued notice in the year 2016. By that time the provision under Section 67 of the Act was also amended and there was no stipulation of a limitation period from the year 2014.** WP(C). No.2253 of 2017 5 **4. As earlier noticed, in** _**W.A.No.385/2009,**_ **a Division Bench of this Court had found that there is no time stipulated in the Statute for detection of offence, though there is a limitation provided for finalisation of proceedings. Their Lordships found that the limitation provided in Section 67 is for completion of proceedings, which period has to be computed from the date of detection of offence. In such circumstances, it was also held that detection of offence should be within a reasonable time from the date of inspection or the date of verification of books of accounts.** **5. We have also held in** _**W.A.No.344/2017**_ **that the issue of summons for production of books of accounts and the notice proposing penalty; a sure sign of detection of offence, should be within a reasonable time, proximate from the date of inspection or examination of books of accounts; if the final order passed is after a long period viz: after the normal period of limitation provided or a** WP(C). No.2253 of 2017 6 **reasonable period as understood from the nature of the statute. Repeated summons for production of this or that book would not absolve the Department from the duty to finalise the proceedings within a reasonable time from the date of inspection.** **6. We do not think that any time need be granted to file a Counter Affidavit, since the submission is that after the summons issued on 06.12.2011, there were further summons issued and due to the non-co-operation of the assessee, the seized records were kept for long and the detection of offence could only be said to have been occasioned on the issuance of notice on 20.08.2016. We have already held that the summons issued and the detection of offence should be reasonably proximate to the date of inspection, unless the proceedings itself are finalised within the limitation period or within the reasonable period as we noticed.** WP(C). No.2253 of 2017 7 **7. In the present case, the inspection was conducted in June, 2010. The first summons was issued on 06.12.2011 within the limitation period of three years as the provision stood from 2009 onwards. There was absolutely no reason why the Officer did not finalise the proceedings on the basis of the materials recovered without waiting for the assessee to produce the books for almost five years. Even now the Officer has finalised the proceedings in 2016 without any books of accounts being produced by the assessee. The mere non-cooperation of the assessee did not at all hamper the Department from finalising the proceedings, since they could have deemed the non-co-operation to be a cause for assuming that there is no maintenance of proper books of accounts. We hence reject the contentions of the Department and find the repeated summons a mere ruse to save limitation.** **8. The proceedings were initiated and the first summons issued when there was a period of** WP(C). No.2253 of 2017 8 **limitation stipulated. Even if we take the date of summons, to be the date, from which the detection of offence had to be made, on a reasonably proximate day; the time expires by 2014. We do not think that the proceedings can be sustained and we set aside Ext.P1.** **The writ petition is allowed leaving the parties to suffer their respective costs.** **Sd/-** **K. VINOND CHANDRAN, JUDGE** **Sd/-** **ASHOK MENON, JUDGE** **sp/05/11/18** **//True Copy//** **P.A. To Judge** WP(C). No.2253 of 2017 9 ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF PENALTY ORDER DATED 8.12.2016 ISSUED BY THE FIRST RESPONDENT** - **EXHIBIT P2 TRUE COPY OF JUDGMENT DATED 2.11.2016 IN W.P.(C) NO.35064/2016(G) OF THE HONOURABLE KERALA HIGH COURT** - **EXHIBIT P3 TRUE COPY OF JUDGMENT DATED 21.11.2016 IN WRIT APPEAL NO.2240/2016 OF THE HONOURABLE KERALA HIGH COURT** - **EXHIBIT P4 TRUE COPY OF REPLY DATED 9.12.2016 SUBMITTED BY THE PETITIONER TO TEH FIRST RESPONDENT** - **EXHIBIT P5 TRUE COPY OF PENALTY NOTICE DATED 20.8.2016 ISSUED BY THE FIRST RESPONDENT** - **EXHIBIT P6 TRUE COPY OF SHOP INSPECTION REPORT NO.310534 DATED 22.6.2010 RELATING TO ERNAKULAM BRANCH, ISSUED BY THE FIRST RESPONDENT** - **EXHIBIT P7 TRUE COPY OF SHOP INSPECTION REPORT NO.61443 DATED 22.6.2010 RELATING TO KOZHIKODE BRANCH** - **EXHIBIT P8 TRUE COPY OF SHOP INSPECTION REPORT NO.274717 AND 274718 DATED 22.6.2010 THIRUVANANTHAPURAM BRANCH** - **EXHIBIT P9 TRUE COPY OF RELEVANT PORTION OF CIRCULAR NO.5/2005 DATED 4.4.2005 UNDER KVAT ACT** - **EXHIBIT P10 TRUE COPY OF LETTER DATED 24.9.2016 ISSUED BY THE PETITIONER TO THE FIRST RESPONDENT, REQUESTING SUPPLY THE COPIES OF RECORDS SEIZED** - **EXHIBIT P11 TRUE COPY OF LETTER DATED 24.9.2016 SUBMITTED BY THE PETITIONER TO THE FIRST** WP(C). No.2253 of 2017 10 **RESPONDENT, SEEKING THE DETAILS OF PURCHASE OF MOBILE PHONES** **EXHIBIT P12 TRUE COPY OF REVISED ASSESSMENT ORDER DATED 4.12.2012 PASSED BY THE SECOND RESPONDENT EXHIBIT P13 TRUE COPY OF ANNUAL RETURN DATED 27.7.2011 FOR THE YEARS 2010-11 FILED BY THE PETITIONER** **EXHIBIT P14 TRUE COPY OF AUDIT REPORT DATED 29.12.2011 FOR THE YEARS 2010-11**