T. Oommen Panicker Top Constructions v. Commercial Tax Officer Works Contract & LT, Kollam; Harbour Engineering Circle, Kozhikode; Chief Engineer, Harbour Engineering Department, Thiruvananthapuram; Government of Kerala, represented by its Secretary, Revenue Department; District Collector, Kollam; Tahsildar (R.R.), Taluk Office, Kottarakkara

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** ## **FRIDAY, THE 15TH DAY OF MARCH 2013/24TH PHALGUNA 1934** ## **WP(C).No. 37300 of 2010 (J)** **---------------------------------------** ## **PETITIONER(S):** **-----------------------** **T.OOMMEN PANICKER TOP CONSTRUCTIONS, TOPS MANOR, PANAVELI.P.O. KOTTARAKKARA.** **BY ADV. SRI.S.ABDUL RAZZAK** ## **RESPONDENT(S):** - **----------------------------** **1. THE COMMERCIAL TAX OFFICER WORKS CONTRACT & LT, KOLLAM.691 001.** **2. THE SUPERINTENDING ENGINEER, HARBOUR ENGINEERING CIRCLE, KOZHIKODE-673 001.** ## **3. CHIEF ENGINEER,** - **HARBOUR ENGINEERING DEPARTMENT THIRUVANANTHAPURAM-695 009.** **4. GOVERNMENT OF KERALA, REPRESENTED BY ITS SECRETARY, REVENUE DEPARTMENT GOVT.SECRETARIAT, THIRUVANANTHAPURAM-695 001.** **5. THE DISTRICT COLLECTOR, CIVIL STATION, KOLLAM-691 001.** **6. THE TAHSILDAR (R.R.) TALUK OFFICE, KOTTARAKARA. 691 506.** **BY GOVERNMENT PLEADER SMT.LILLY K.T.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15-03-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **tss** ## **W.P.(C) NO.37300/2010** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:-** **P1:- COPY OF ORDER NO.R2-69492/01/CT/ DTD. 21.2.2003 OF THE COMMISSIONER FOR TAXES.** **P1(A):- COPY OF INTERIM ORDER DTD. 28.3.2003 IN CMP. 1849/03 IN MFA. 364/03.** **P2:- COPY OF COMMON JUDGMENT DTD. 26.7.2007 IN S.T.REV. NO.12/2003 AND CONNECTED CASES.** **P3:- COPY OF COMMON JUDGMENT DTD. 26.7.2007 IN M.F.AS. NO.364 ,368, 367 & 369 / 2003.** **P4:- COPY OF THE IST RESPONDENT'S REVISED ASSESSMENT ORDER DTD. 20.3.03 FOR 94-95.** **P5:- COPY OF THE IST RESPONDENT'S REVISED ASSESSMENT ORDER DTD 20.3.03 FOR 95-96.** **P6:- COPY OF THE IST RESPONDENT'S REVISED ASSESSMENT ORDER DTD 22.3.03 FOR 96-97.** **P7:- COPY OF THE IST RESPONDENT'S REVISED ASSESSMENT ORDER DTD. 22.3.03 FOR 97-98.** **P8:- COPY OF TERMINATION ORDER DTD. 5.11.2007 OF THE 2ND RESPONDENT.** **P9:- COPY OF REPRESENTATION DTD. 15.1.08 BEFORE THE 3RD RESPONDENT.** **P10:- COPY OF THE ORDER DTD. 29.3.2008 OF THE 3RD RESPONDENT.** **P11:- COPY OF THE REPRESENTATION DTD. 7.8.2008 BEFORE THE 4TH RESPONDENT.** **P12:- COPY OF THE SALE NOTICE DTD. 19.1.2009 OF R6.** **P13:- COPY OF THE INTERIM ORDER DTD. 2.3.2009 IN WPC. 6016/09 OF THIS HONOURABLE COURT.** **P14:- COPY STAY EXTENSION ORDER DTD. 2.7.2009 IN WPC. 6016/09 OF THIS HONOURABLE COURT.** **P15:- COPY OF DEMAND NOTICE DTD. 27.1.2009 FOR RS. 1,24,13,650/- ISSUED BY THE 6TH RESPONDENT.** **P16:- COPY OF SALE NOTICE DTD. 16.11.2010 ISSUED BY THE 6TH RESPONDENT.** **RESPONDENT'S EXHIBITS:NIL** **//TRUE COPY//** **P.A. TO JUDGE** **tss** ## **A.M.SHAFFIQUE, J** *** * * * * * * * * * * * *** W.P.C.No.37300 of 2010 ---------------------------------------Dated this the 15[th] day of March 2013 ## **J U D G M E N T** The petitioner challenges Ext.P16, the revenue recovery proceedings initiated by the 6[th] respondent. The revenue recovery proceedings had been initiated on three counts. One is the sales tax dues due to the 1[st] respondent as per Exts.P4 to P7 assessment orders. The second is dues payable to respondents 2 and 3 in respect of quantification of damages for the breach of contract alleged as per Exts.P8 and P10. The other demand is the royalty payable for granite quarrying. The total demand is Rs.2,57,49,040/-. 2. This Court, while admitting the writ petition, had granted an interim stay and it remains in force. 3. In respect of the amount payable as sales tax dues, the main contention of the petitioner is that Exts.P4 to P7 assessment orders are non est and void. Therefore no demand is to be made pursuant to the same. It is the W.P.C.no.37300/2010 2 contention of the petitioner that the assessment originally made was set aside by the Commissioner and the matter was remitted back to the assessing authority for fresh disposal. The assessing authority was directed to finalise the assessments for the years 1994-95 to 1997-98 within three months from the date of receipt of the order. 4. The main purpose of the remand and fresh consideration was to enable the petitioner to produce evidence for the department materials supplied. According to the petitioner, after the remand, the assessing authority issued notice for hearing. The petitioner submitted an application seeking adjournment stating that they intend to file an appeal before the High Court under Section 40 of the Kerala General Sales Tax Act. The petitioner preferred appeals on 26/03/2003. The appeal was admitted on 28/03/2003. An interim stay was granted staying further proceedings pursuant to the order passed by the Commissioner of Commercial Taxes by this court on the W.P.C.no.37300/2010 3 same day. Ext.P2 is the said interim order. The appeal was disposed of by judgment dated 26/07/2007 dismissing the appeals, however, granting liberty to the assesse to take up all contentions that are available to him and to produce all documents that are necessary to substantiate his case before the assessing authority. 5. Apparently, the petitioner as well as the department proceeded on the basis that assessment orders were not passed pursuant to Ext.P1 order of the Commissioner of Commercial Taxes. But it seems that an order has been passed on 20/03/2003 making fresh assessment. Exts.P4 to P7 are the same. It is stated by the department that these assessment orders were served on the petitioner on 28/03/2003. 6. According to the petitioner, these assessment orders were void and non est in so far as reasonable oppurtunity have not been given to contest the matter as directed in Ext.P1 order. They have in fact sought for W.P.C.no.37300/2010 4 adjournment as the petitioner wanted to file a statutory appeal and without granting time the assessments were completed. According to the petitioner, the assessment orders passed on 20/03/2003 were not communicated immediately after passing such orders. 7. In regard to the proceedings of the Superintending Engineer, Harbour Engineering as evident from Ext.P8 and the Chief Engineer's order Ext.P10 it could be seen that the demand is made for the damages suffered by the department, as the contract was terminated at the risk and cost of the petitioner. According to the learned counsel for the petitioner, such an assessment cannot be made as there is no provision for fixing a liability by the department. That apart, in so far as the petitioner does not admit that he had committed breach of contract, it is not open for the department to make their own assessment and demand the difference in cost or damages from the petitioner. W.P.C.no.37300/2010 5 8. In regard to the royalty demanded for granite quarrying, according to the petitioner, since there is a provision which exempts payment of royalty for quarrying granite for the purpose of the Government from Government land, the same principle should apply when granite is quarried from private land as well since the granite was used for departmental works. 9. In fact, the petitioner had filed two other writ petitions W.P.C.Nos 6016 of 2009 and 17607 of 2006 in relation to the demand made by the Harbour Engineering Department as well as the royalty payable to the Government for granite quarrying. These writ petitions were disposed of permitting the petitioner to take up the contentions in the present writ petition as per judgment dated 06/03/2013. 10. Counter affidavit is filed by the respondent inter alia contending that the demand made by way of Exts.P4 to P7 assessment orders were genuine and in so far as the W.P.C.no.37300/2010 6 petitioner had not taken any steps to challenge the said assessment orders by filing an appeal, the said demand had become final. In regard to the demand made by the Harbour Engineering Department, it is contended that the assessment had been made on the basis of the provisions of the contract and the petitioner is liable to compensate the loss suffered by the department by committing breach of contract. In regard to the claim for royalty, it is submitted that the royalty is payable as per the provisions of the Mines and Mineral Concession Rules, as the petitioner had quarried granite from private property which is not exempted from the provisions of the Act. According to the petitioner, their representation is pending with the Government wherein the petitioner had sought for exemption. 11. Respondents also have taken a contention that the writ petition is belatedly filed as it is not open for the petitioner to challenge Exts.P4 to P7 after seven years of passing the assessment orders and three years after the W.P.C.no.37300/2010 7 judgment in the Appeals. 12. The first question to be considered is whether the assessment orders Exts.P4 to P7 is void or non est. If a statutory time had not been granted to an assessee it can be stated that the assessment is void. That is not the situation here. In this case by Ext.P1 the assessment orders were set aside and three months time was granted to the department to make a fresh assessment. During that period, apparently the petitioner could have adduced sufficient evidence to substantiate his contentions. The only point that requires to be proved by the petitioner was that the departmental materials which were supplied for the work undertaken by the petitioner suffered sales tax or not. 13. According to the learned counsel for the petitioner, what was required to be produced was the documents relating to purchase of materials from the Harbour Engineering Department which would have settled the issue. Nevertheless, the petitioner wanted to file an appeal against W.P.C.no.37300/2010 8 Ext.P1 order and in the appeals, further proceedings pursuant to Ext.P1 was stayed. But the department had taken a contention as evident from Exts.P4 to P7 that the notices were issued pursuant to Ext.P1. The petitioner sought for time on the ground that he intended to file an appeal against Ext.P1 order. According to the department, it was not a reasonable request. Hence the request for time was rejected and they passed assessment orders on 20/03/2003 itself. This approach of the department would show that a fair opportunity was not given to the petitioner to substantiate his contentions. Normally when a person seeks time for filing an appeal and that too a statutory appeal it would have been reasonable for the department to have granted a reasonable time and wait for the outcome of the appeal or else one more opportunity ought to have been granted to adduce evidence after rejecting the request for an adjournment. Failure to do so had resulted in the petitioner suffering the assessment orders Exts.P4 to P7. In W.P.C.no.37300/2010 9 fact, Ext.P1 proceedings were stayed by this Court in the Appeals. Therefore, all further proceedings were kept in abeyance. 14. That being the situation, the only other factor which is relevant to be considered is the time factor after the disposal of the Appeals. The judgment was passed by a Division Bench of this Court on 26/07/2007 giving an opportunity to the petitioner to produce all documents before the assessing authority. Apparently this was based on an assumption that assessment orders were not passed. But, still, the petitioner kept quite. No documents were produced probably knowing about the fact that the assessment orders were already passed. But the question is why the petitioner had waited for another three years and had approached this Court only when revenue recovery proceedings were initiated. Apparently there is delay and laches on the part of the petitioner. The question is whether this writ petition could be thrown out on the ground of delay W.P.C.no.37300/2010 10 and laches. Learned counsel for the petitioner relies upon the judgment of the Supreme Court in **Shankara Cooperative Housing Society Limited** [(2011) 5 SCC 607], paragraph 54 is relevant which reads as under: 54. The relevant considerations, in determining whether delay or laches should be put against a person who approaches the writ court under Article 226 of the Constitution is now well settled. They are: (1) There is no inviolable rule of law that whenever there is a delay, the Court must necessarily refuse to entertain the petition; it is a rule of practice based on sound and proper exercise of discretion, and each case must be dealt with on its own facts. (2) The principle on which the Court refuses relief on the ground of laches or delay is that the rights accrued to others by the delay in filing the petition should not be disturbed, unless there is a reasonable explanation for the delay, because Court should not harm innocent parties if their W.P.C.no.37300/2010 11 rights had emerged by the delay on the part of the petitioners. 15. On this basis, it is submitted by the learned counsel for the petitioner that in so far as the department is concerned, no prejudice will be caused to them if an opportunity is granted to the petitioner to adduce evidence in regard to assessment orders Exts.P4 to P7. Department is not like an ordinary individual. The present demand as far as the petitioner is concerned is huge and if the petitioner is entitled for the benefits as claimed by him, definitely the demand will be considerably reduced. That apart, this Court had already taken cognizance of the case and had granted an interim stay of the recovery proceedings. Such being the situation, I do not think that ends of justice will be met if the writ petition is thrown out on the ground of delay at this stage of proceedings. 16. Having regard to the fact that Exts.P4 to P7 assessment orders were passed in a hurry and without giving a reasonable opportunity for the petitioner to adduce W.P.C.no.37300/2010 12 evidence, I am of the view that Exts.P4 to P7 are liable to be set aside and the petitioner should be granted sufficient opportunity to make his submissions or adduce evidence in the matter. 17. In regard to the claim made by the Harbour Engineering Department, the learned counsel for the petitioner relies upon a Division Bench judgment of this Court in **Shriram Engineering Construction Co.Ltd. v. K.S.I.D.C.** _[2007(2) KLT 388]_ . This Court, after having taken into consideration the judgment of the Supreme Court in S **tate of Karnataka v. Rameshwara Rice Mills, Thirthahalli** _[AIR 1987 SC 1359]_ held in paragraphs 6 and 7 as under: “6. The maxim nemo sibi esse judex vel suis jus dicere debet, i.e., no man, can, judge his own cause is accepted by Indian Courts in various decisions. See for example paragraph 17 of the decision in _Bihar State Mineral Development Corporation v. Encon Builders (I)(P) Ltd, ((2003) 7 SCC 418)_ and W.P.C.no.37300/2010 13 the decision in _P.V.Paily v. State of Kerala [2000(3) KLT 343 = AIR 2000 Ker.268)._ We also agree with the contention that settled dues to the notified Government Company can be realised through revenue recovery proceedings as if it is a Government due and the dues should be an agreed or adjudicated amount. Dues cannot be demanded and recovered by revenue recovery proceedings according to whims and fancies of the parties. In this case, already a claim was made by the petitioner. On its rejection by the Managing Director, the matter is pending in the civil court and claim by the KSIDC is not adjudicated. When the legality of termination itself is a question pending adjudication in a civil court, the Chief Engineer cannot make a demand and threaten the petitioner with revenue recovery proceedings. Now, we will consider the contention of the respondents based upon Clause 34 of Ext.P2 contract that Managing Director of KSIDC, one of the contesting parties, can determine the amount without W.P.C.no.37300/2010 14 adjudication by a third party even when breach of contract is not admitted. In this case, Ext.P1w order is not an adjudicated order of the managing Director as envisaged in Clause 18 of the Notice inviting tenders for work (supra). Even going by the contractual terms which were relied on by the respondents, there is no power for the Chief Engineer to determine the amount and demand and recover it from the petitioner. Here, so far the Managing Director has not decided the amount as mentioned in the clause relied on by the respondents. Further, clauses 18 and 34 (supra) would show that civil court's jurisdiction, if the amount really and genuinely disputed, is not ousted, but is genuinely contested by the parties. 17. A similar clause like Clause 31 was interpreted by the Apex Court in State of Karnataka v. Rameshwara Rice Mills, Thirthahalli (AIR 1987 SC 1359) wherein it was held as follows: _“On a plain reading of the words it is clear that the right of the second party to assess damages_ W.P.C.no.37300/2010 15 _would arise only if the breach of conditions is admitted or if no issue is made of it. If it was the intention of the parties that the officer acting on behalf of the State was also entitled to adjudicate upon a dispute regarding the breach of conditions the wording of clause 12 would have been entirely different. It cannot also be argued that a right to adjudicate upon an issue relating to a breach of conditions of the contract would flow from or is inhered in the light conferred to assess the damages arising from a breach of conditions. The power to assess damages, as pointed out by the Full Bench, is a subsidiary and consequential power and not the primary power. Even assuming for argument's sake that the terms of clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, we do not think that adjudication by the Officer regarding the breach of the contract can be sustained under law because a party to the agreement cannot be an arbiter in his own cause. interests of justice and equity require_ W.P.C.no.37300/2010 16 _that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract. The position will, however, be different where there is no dispute or there is consensus between the contracting parties regarding the breach of conditions. In such a case the Officer of the State, even though a party to the contract will be well within his rights, in assessing the damages occasioned by the breach in view of the specific terms of clause 12”._ A Division Bench of this Court earlier, two decades ago, in _K.A.Ponnappan v. The D.F.O.Chalakudy and others (1984 KLJ 853)_ held that proceedings under the Revenue Recovery Act can be initiated only after determination of the amount even if it is a Government due. The Division Bench held as follows: _“In case the contract conceives of determination otherwise than through a civil suit such as arbitration, that may be the mode of_ W.P.C.no.37300/2010 17 _determination. Normally the civil court will have to determine whether any damages is due and if so what the quantum is. Only on such determination of the amount it could be said to be due and then the Revenue Recovery Act can be put into action. Enforcement by resort to the Revenue Recovery Act when there is no amount due is not permissible. Amount would not be due merely because of breach. Breach gives rise to a right to sue. When that right is exercised and as a consequence it is found on adjudication that amount is due, that would be recoverable. This aspect the learned Single Judge has not considered though it is seen urged before him and it is seen riased under ground No.2. In these circumstances we think the demand under Revenue Recovery Act cannot succeed. The proceedings for recovery will stand quashed.”_ When breach is not admitted, before determining the amount by suit or arbitration by independent authority, revenue recovery cannot be initiated for recovering disputed damages as settled by this court in various decisions. (See _Abraham Sebastian v. State of Kerala (2002(3)KLT 839)_ (judgement delivered for Division Bench by Justice B.N.Srikrishna (as he then was) _, Mohammed Kunhi v. Executive Engineer (2001 (3) KLT_ W.P.C.no.37300/2010 18 _733), V.P.Kunhammed v. State of Kerala (1999(3) KLT SN 49 Case No.50 = 1999 (2) KLJ 678) and K.A.Sobhanadas v. State of Kerala & Anr. (1984 KLJ 684)._ 18. The position of law therefore is clear. If the breach of contract is not admitted, it is not open for one of the parties to the contract to decide the said dispute and therefore going by the facts and circumstances involved in the case, I do not think that the Harbour Engineering Department is entitled to recover any amount from the petitioner. Their remedy is only to file a suit and recover any damages which are legally due to them. 19. In regard to the claim for royalty for quarrying under the Mines and Minerals Concession Rules, according to the petitioner, he had sought for an exemption from the Government which is still pending consideration. 20. Due to long lapse of time, probably the said application may not be entertained. Hence the petitioner W.P.C.no.37300/2010 19 should be given an opportunity to submit a fresh representation to the Government for waiver of such dues. 21. Having regard to the aforesaid findings, the writ petition is allowed as follows: i) Exts.P4 to P7 assessment orders are set aside. ii) 1[st] respondent is directed to finalise the assessment for the years 1994-95 to 1997-98 within a period of three months from the date of receipt of a copy of the judgment. iii) The petitioner shall appear before the assessing authority and adduce necessary evidence within a period of six weeks from today and the assessing officer shall complete the assessment after hearing the petitioner on such date as may be notified. iv) Exts.P8 and P10 are quashed. (v) The petitioner shall submit a fresh representation to the Government for waiver of royalty under the Mines and Minerals Concession Rules in respect of the demand made W.P.C.no.37300/2010 20 towards royalty for granite quarrying from private property within a period of one month from today and the Government shall dispose of the said representation within a further period of three months. Until disposal of the said representation, any recovery proceedings shall be kept in abeyance. vi) Ext.P16 is quashed, without prejudice to the right of the revenue authorities to initiate further proceedings after completing the assessments with respect to the sales tax dues and after the Government passing order as far as the claim for royalty is concerned. (sd/-) ## **(A.M.SHAFFIQUE, JUDGE)** jsr W.P.C.no.37300/2010 21 W.P.C.no.37300/2010 22