High Court of KeralaDivision Bench2018-10-26Disposed of

T.F Thomas M/S Tharakan Super Market vs The Commercial Tax Officer, Kunnamkulam, and The Intelligence Officer Investigation Branch Department of Commercial Taxes, Thrissur

Case / Petition Number:WP(C).No.12391/2017

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: K. Vinod Chandran,J.
Ashok Menon,J.
Judgment Date: 2018-10-26
Court Decision / Holding: Writ petitions disposed of. Petitioners relegated to statutory remedies; appeals to be filed within 30 days of receiving a certified copy of the judgment. If filed within the time limit, such appeals will be treated as timely and decided on merit. Recovery, if any, to be kept in abeyance for four months while stay applications are considered. No costs.
Final Disposition: Disposed of

Parties to the Case

Appellants / Petitioners

T.F Thomas M/S Tharakan Super Market, Koonammookkchi, Thrissur District

Respondents

The Commercial Tax Officer, Kunnamkulam 680 503
The Intelligence Officer Investigation Branch Department of Commercial Taxes, Thrissur 680 001

Legal Representation & Advocates

Counsels for Petitioners

• Sri. Harisankar V. Menon
• Smt. Meera V. Menon

Counsels for Respondents

• Sri C E Unnikrishnan

Case Synopsis & Summary

The petitioners challenge proceedings initiated under Section 67 of the Kerala Value Added Tax Act, 2003 (KVAT Act) on the ground that the orders are vitiated by a period of limitation. The writ petitions were treated with a Division Bench due to pending questions on limitation in W.A No.344/2017 (The Intelligence Officer v. Mohammed Sameer). The court notes that initial KVAT limitation under Section 67 started as one year, later extended to three years and then removed from the statute in 2014-15; failing which proceedings must be completed within a reasonable time, with five years as a benchmark under Section 25 for reassessment. In the facts, the departmental exercise began with an inspection of tobacco seller A.P. Kakku. Penalty against the seller issued on 30.09.2014, with notices to purchasing dealers issued in 2017. The court accepts that the timing of detection can anchor the permissible period, and that finalisation within five years of detection is permissible. It concludes that the petitioners should be relegated to statutory remedies, permitting appeals within 30 days from certified copy, with stay/recovery to be kept in abeyance for four months. Writ petitions disposed of with no costs.

Provisions of Law Cited

Section 67 KVAT Act, 2003Section 25 KVAT Act, 2003

Legal Doctrines & Maxims

Reasonable period for finalisation of proceedings
Detection of offence as the anchor for starting limitation
Detention of offence (as discussed in Acme Furniture & Interiors)

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners contend that production of accounts was completed promptly upon summons and that the period of limitation under Section 67 should be counted from the date of detection of the offence, with the related five-year cap under Section 25 for reassessment. They emphasize that the delay in issuing notices to purchasers beyond the initial inspection undermines the validity of penalties raised after the limitation expired. They urge that continued proceedings after the 2014-15 amendments violate the reasonable-time principle and undermine the protective purpose of limitation regimes.

Contentions of Respondents

The respondents submit that verification of records across multiple dealers required substantial time, and that the sequence of notices—against the selling dealer first, followed by purchasing dealers—reflects the detection process. They argue that, even where statutory perfection is absent, the five-year window and the fact that notices were issued within this timeframe justify finalisation. They contend there is no fixed, universal limitation period in KVAT, especially given workload and data volume.

Cited Precedents (2)

Case Name	Citation	Treatment	Explanation
The Intelligence Officer v. Mohammed Sameer	W.A No.344/2017	Positive	The Division Bench decision is relied upon to guide the interpretation of limitation, including the shift from a 1-year to 3-year limit and the subsequent removal of a specific period, reinforcing the principle that proceedings must be completed within a reasonable time.
M/s Acme Furniture and Interiors v. CTO	W.A No.385/2009 (dated 18.02.2009)	Positive	Cited and followed to establish that the commence of limitation starts from the detention/detection of offence, a principle the Court applies to the KVAT proceedings and timing for finalisation.

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Extracted Judgment Text

Exact text extracted from official judgment records.

# **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. 12391 of 2017** ## **PETITIONER/S:** **T.F THOMAS M/S.THARAKAN SUPER MARKET, KOONAMMOOCHI, THRISSUR DISTRICT.** **BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON** ## **RESPONDENT/S:** |**1**|**THE COMMERCIAL TAX OFFICER**| |---|---| ||**KUNNAMKULAM 680 503.**| **2 THE INTELLIGENCE OFFICER INVESTIGATION BRANCH DEPARTMENT OF COMMERCIAL TAXES, THRISSUR 680 001.** ## **BY SPECIAL GOVERNMENT PLEADER SRI C E** ## **UNNIKRISHNAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 26.10.2018,ALONG WITH WP(C)NOS.12381/2017, 12384/2017, 12392/2017, 12394/2017, 12397/2017,12401/2017 & 18350/2017 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.P(C) No.12381/2017 & Con.Cases 2 **W.P(C)Nos.12381/2017, 12384/2017, 12391/2017, 12392/2017, 12394/2017, 12397/2017, 12401/2017 & 18350/2017** **==> picture [118 x 9] intentionally omitted <==** **Vinod Chandran, J** **The petitioners in the above writ petitions challenge, the proceedings initiated under Section 67 of the Kerala Value Added Tax Act, 2003 (for short “KVAT Act” only) on the ground of the orders passed being vitiated on the ground of period of limitation having expired. The writ petitions 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; The 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 yeas in 2009 and then 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** W.P(C) No.12381/2017 & Con.Cases 3 **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 detention of offence. We noticed the observation in W.A 385 of 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. 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.** **3. A dealer in tobacco one A.P Kakku's premises were inspected by the intelligence wing of the Commercial Taxes Department. Allegations were raised of** W.P(C) No.12381/2017 & Con.Cases 4 **unaccounted sales to various dealers in and around Thrissur. Summons were issued to the said Kakku as also the purchasing dealers to produce their books of accounts. It is submitted that the summons to the purchasing dealers were issued in December of 2012.** **4. The learned Counsel appearing for the petitioners submit that the petitioners herein, who were the alleged purchasers, had produced their books of accounts immediately on receipt of summons. The Intelligence Officer sat over it and first issued a notice of penalty against the said Kakku on 30.09.2014. The penalty proceedings against Kakku were concluded by order dated 30.12.2016. Subsequently notices to the alleged purchasers were issued on 23.01.2017, long after the period of limitation that existed at the time of inspection as also the production of books of accounts.** **5. The learned Counsel for the petitioners specifically refer to the declaration in W.A 385/2009 that though the limitation commences only from the date of detection of offence; it should be detected within a** W.P(C) No.12381/2017 & Con.Cases 5 **reasonable period from the date of verification of records. Especially since the provision did not provide for a specific time within which a notice alleging an offence had to be issued; which is a sure sign of detection of offence. When the records were submitted in the year 2012, there was no reason for waiting till 2017 to finalise the proceedings. As on 2012 there was a limitation period of three years provided under Section 67 of the KVAT Act and there is no reason why the intelligence Officer delayed the verification and intimation of the specific allegation against the purchasing dealers. This extended beyond the period of limitation of three years, argues learned Counsel. The subsequent amendment would not come to the aid of the Department since the limitation period of three years expired even before the notice against the present petitioners were issued.** **6. The learned Special Government Pleader appearing for the respondent State however would submit that the proceedings required verification of a number of records of different assessees and that was** W.P(C) No.12381/2017 & Con.Cases 6 **why there was time taken to issue a notice. It is argued that at first, the proceedings against the selling dealer had to be concluded and it was after that the purchasing dealers were proceeded with. By the time, the selling dealer was issued with a notice, there was no limitation under the KVAT Act and if at all, the detection of offence has to be related to the date on which the notice was issued against the selling order.** **7. We take note of the order issued against the selling dealer produced as Ext.P7 in W.P(C) No.12381/2017 which runs to 126 pages. A number of transactions are dealt with in the said order. The said transaction were also with respect to various dealers in and around Thrissur. We also see from the documents read in the order that the summons to the purchase dealers were issued in the year 2012 and 2013, spread over the months December and January to March. Even if the records were produced immediately, considering the volume of records of the various purchasing dealers as also the selling dealer, required to be verified before** W.P(C) No.12381/2017 & Con.Cases 7 **a specific allegation could be raised, we are of the opinion that there could be no ground of limitation urged in the above cases. The detection of offence against the selling dealer could be the date on which the petitioners could at best plead for the limitation to commence. The records having been verified the selling dealer was issued with a notice on 30.09.2014 making specific allegation of offence having committed by him of suppression of sales. The said offence definitely was found on a verification of the records of the purchasing dealers too.** **8. There is no satisfactory explanation as to why notices were not issued in the name of the petitioners, the purchasing dealers on 23.09.2014. But, even then, the conclusion of proceedings is within five years from the date of detection. As we found in W.A No.344/2017; if the finalisation is carried out within the limitation period there can be no allegation raised of the notice of penalty, the sure sign of detection of offence, being not proximate to the inspection or verification of accounts. In the present cases, as we** W.P(C) No.12381/2017 & Con.Cases 8 **found, against the purchasing dealers the date of detection of offences should relate back to 30.09.2014. The order now issued against the purchasing dealers impugned in the writ petitions are dated 18.03.2017; within the limitation period. It is within the five year reasonable time decalred by us, if the statute does not provide for a specific period of limitation to operate. The summons issued in 2012-13 to a number of dealers, and verification of the records produced by all of them culminated in the detection of offence on 30.09.2014. The delay in detection by issuance of notice, to the selling dealer has been explained which we have found to be satisfactory. The period of three years hence commences from the date of issuance of notice to the selling dealer. The order against the purchasing dealers is passed within the period provided of limitation. The argument that notices to the purchasing dealers were delayed and was not proximate to the verification of their records, has no legs to stand since the proceedings were finalised within three years from 30.09.2014.** W.P(C) No.12381/2017 & Con.Cases 9 **9. In such circumstances, we are of the opinion that the petitioners would have to be relegated to the statutory remedy. The petitioners would be entitled to file appeals under the statute within 30 days from the date of receipt of a certified copy of this judgment. If such appeals are filed, within the date specified by us, the same would be considered as filed within time and decided on merit since the petitioners had immediately on issuance of the impugned orders, approached this Court under Article 226.** **10.Considering the fact that the matters were pending here for more than an year, if appeals are filed within the time stipulated by us, recovery should be kept in abeyance for a further period of four months, within which time the stay applications filed would be considered.** **Writ petitions are disposed of. No costs.** **Sd/K. Vinod Chandran, Judge** **Sd/Ashok Menon, Judge** **jma** W.P(C) No.12381/2017 & Con.Cases 10 ## **APPENDIX** ## **in WPC No.12391/2017** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 COPY OF THE NOTICE ISSUED BY THE 2ND RESPONDENT 20.1.2017** **EXHIBIT P2 COPY OF LETTER ISSUED BY M/S. A.P.KAKKU ASSOCIATES, THRISSUR TO THE PETITIONER EXHIBIT P3 COPY OF REQUEST SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT EXHIBIT P4 COPY OF DEPOSITION OF THE PETITIONER EXHIBIT P5 COPY OF LETTER SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDET EXHIBIT P6 COPY OF ORDER ISSUED BY THE 2ND RESPONDENT**