M/S. T.M. Steels and Cements A.G. Road Calicut-1 v. Intelligence Officer, Department of Commercial Taxes, Kozhikode, and Others

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **FRIDAY ,THE 26TH DAY OF OCTOBER 2018 / 4TH KARTHIKA, 1940** **WP(C).No. 8446 of 2017** ## **PETITIONER/S:** **M/S. T.M. STEELS AND CEMENTS A.G.ROAD, CALICUT-1, REPRESENTED BY ITS MANAGING PARTNER T.M.SALEEM.** **BY ADVS. SRI.K.SRIKUMAR (SR.) KUM.ANAGHA LAKSHMY RAMAN SRI.K.MANOJ CHANDRAN SRI.P.R.AJITHKUMAR SRI.P.V.THOMAS SRI.S.A.MANSOOR (PATTANAM)** ## **RESPONDENT/S:** - **1 THE INTELLIGENCE OFFICER, DEPARTMENT OF COMMERCIAL AXES, SQUAD NO.VI, KOZHIKODE-673 001.** - **2 INSPECTING ASSISTANT COMMISSIONER (INTELLIGENCE) DEPARTMENT OF COMMERCIAL TAXES, KOZHIKODE-673 001.** - **3 THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES (INTELLIGENCE), DEPT. OF COMMERCIAL TAXES, KOZHIKODE-673 001.** - **4 THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES DEPT. OF COMMERCIAL TAXES, KOZHIKODE-673 001.** ## **BY SRI C E UNNIKRISHNAN, SPL GOVERNMENT PLEADER** ## **OTHER PRESENT:** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 26.10.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** _WP(C) 8446/2017_ 2 ## **JUDGMENT** ## 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 the order passed dated 13.02.2017 pursuant to an inspection conducted on 28.10.2011; being vitiated on the ground of period of limitation having expired. The Writ Petition along with some others were referred to a Division Bench since the question of limitation under Section 67 was pending before us in _**W.A.No.344/2017**_ which we have decided today. 2. We have noticed in _**W.A.No.344/2017,**_ _**[Intelligence Officer vs. 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 _WP(C) 8446/2017_ 3 later 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 Bench judgment in _**W.A No.385/2009 dated**_ ## _**18.02.2009 [M/s Acme Furniture and Interiors Vs.**_ _**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. _WP(C) 8446/2017_ 4 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 this Writ Petition. 3. Suffice it to notice the facts as stated by the learned Senior Counsel appearing for the petitioner. The date of inspection admittedly was on 28.10.2011 and a notice issued on 31.10.2011 directing production of books of accounts. The petitioner submits that the books of accounts were produced and verified and the Intelligence Officer was satisfied that there is no offence. Later, a second summons was issued on 09.10.2016, after five years. This is to merely save limitation, is the argument. 4. The learned Special Government Pleader submits with reference to the counter-affidavit that though a summons was issued in 2011, no books of accounts were produced. We immediately observe that if the books of accounts were not produced, then a further notice could have been issued and if the failure to respond continues; the Intelligence Officer could have finalised the _WP(C) 8446/2017_ 5 proceedings and imposed penalty on the defects noticed on inspection, finding that there are no books of accounts produced by the assessee and hence presumed to be not maintained. 5. 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. 6. Here, the inspection was conducted in October, 2011 and summons was issued on 31.10.2011. The assessee submits that the books of accounts were produced immediately. For argument sake, we would accept the contention of the learned Special Government Pleader that no books of accounts were produced. Even then, there was _WP(C) 8446/2017_ 6 no warrant for keeping the matter pending till 2016, when a subsequent summons was issued. We also notice that in the year 2011, when the proceedings were initiated, there was a limitation of three years provided for finalisation of proceedings. The Officer should have acted with alacrity and promptitude, keeping in mind the limitation provided. We cannot take it that since no time is provided for detection of offence, the same can be at the sweet will of the Department. 7. We have also today 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 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. _WP(C) 8446/2017_ 7 8. In the instant case the inspection was on 2011 and immediately thereafter summons was issued. At that point there was a limitation of three years provided in the Statute to complete the proceedings. It will be puerile to contend that for detection of offence the Department could wait for a larger period from the date of inspection than that provided to complete the proceedings. Otherwise there should be satisfactory explanation offered for the delay occasioned. Here there is no explanation and it is the blunt averment of the Department that the assesee failed to produce the books of accounts in 2011 and hence the Officer waited till 2016 to issue a further summons. Ext.P4 order passed also asserts that even the second summons was not responded to and hence the Officer proposes to finalise the proceedings by verifying the materials recovered and the data available in the KVATIS. So detection of offence was possible even without the books of accounts and so could the proceedings have been finalised. It is strange that such wisdom dawned on the Officer very late and not within a reasonable, proximate time from the first _WP(C) 8446/2017_ 8 instance of non production of books of accounts. We, hence, find the proceedings impugned in the Writ Petition to be barred by limitation and Ext.P4 order is set aside allowing this Writ Petition. No order as to costs. ## **Sd/-** **K.VINOD CHANDRAN JUDGE** **Sd/-** **ASHOK MENON** **JUDGE** _WP(C) 8446/2017_ 9 ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT-P1: TRUE COPY OF THE NOTICE DATED 05.01.2017. EXHIBIT-P2: TRUE COPY OF THE LETTER DATED 18.01.2017. EXHIBIT-P2(A): TRUE COPY OF THE LETTER DATED 30.01.2017. EXHIBIT-P3: TRUE COPY OF THE REPLY DATED 09.02.2017. EXHIBIT-P4: TRUE COPY OF THE PNEALTY ORDER DATED 13.02.2017. EXHIBIT-P5: TRUE COPY OF SIR & SHOP INSPECTION REPORTS NO.219858 DATED 28.10.2011.**