High Court of KeralaDivision Bench2022-11-03Appeals allowed; judgments under appeal set asi...

The Deputy Commissioner-III, Special Circle, State Goods and Services Tax Department, Kollam v. B. Mohanachandran Nair and Prasanthi Cashew Company and Others (WA Nos. 1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020)

Case / Petition Number:WA Nos. 1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: S.V. Bhatti
Bechu Kurian Thomas
Judgment Date: 2022-11-03
Court Decision / Holding: Appeals are allowed. The judgments under appeal are set aside. The dealers/respondents are given liberty to file appeals before the Appellate Authority by enclosing a copy of the judgment within four weeks from today. The delay during the pendency of the writ petition is excused. The appeals, if filed, shall be numbered, heard on merits, and disposed of in accordance with law.
Final Disposition: Appeals allowed; judgments under appeal set aside; liberty to file appeals before Appellate Authority; delay excused; appeals to be heard on merits and disposed of according to law.

Parties to the Case

Appellants / Petitioners

The Deputy Commissioner-III, Special Circle, State Goods and Services Tax Department, Kollam
State of Kerala, represented by its Secretary, Taxes Department, Government Secretariat, Thiruvananthapuram

Respondents

B. Mohanachandran Nair
Prasanthi Cashew Company
Martin George
Roopam Constructions
V.C. Constructions
Tara Exports

Legal Representation & Advocates

Counsels for Petitioners

• V K Shamsudheen

Counsels for Respondents

• Harisankar V Menon
• Meera V Menon
• K. Krishna

Case Synopsis & Summary

These writ appeals arise from assessments under the Kerala KVAT Act and related proceedings, consolidated for common questions of law. The core issue is whether notices of reassessment issued under Section 25 of the KVAT Act are sustainable in light of amendments extending the limitation period, and how precedents such as Baiju A A v. State Tax Officer and related decisions should be applied. The appellants (State authorities) contend that the amendments to Section 25, including raising the period from five to six years and the extension for certain proceedings, are applicable and prospective, thereby validating reassessment notices issued within the extended period. The respondents/dealers argue that applying the amended period would undermine vested rights and rely on Baiju A A and prior decisions that treated the amendment differently. The judgment acknowledges a common factual and legal framework across the batch of appeals and reviews the arguments on limitation, accrual of rights, and the prospective nature of amended provisions. The court ultimately diverges from earlier interpretations, holding that the amended Act applies and setting aside the challenged judgments.

Provisions of Law Cited

KVAT Act, Section 25KVAT Act, Section 25(1)KVAT Act, Section 25BFinance Act 11/2017

Legal Doctrines & Maxims

Prospective vs. retrospective construction of statutes
Doctrine of vested rights
Period of limitation in reassessment and accrual of rights
No vested right to continued reassessment after amendment

Submissions & Arguments

Contentions of Appellants / Petitioners

The counsels for the appellants contend that the statute governing reassessment under the KVAT Act was amended by Finance Act 11/2017, extending the period of limitation from five to six years and providing for extended timelines for determinations expiring up to March 31, 2017, to be extended up to March 31, 2018. They submit that the amendment is applicable to assessment years covered by reassessment notices issued within the extended period, and that the right to reassessment is not vested in dealers in the sense argued by respondents. The appellants emphasize that Baiju A A v. State Tax Officer (2020) (1) KHC 39 is not controlling in light of the amended provision, and that the Court must apply the amended period. They also argue that the notices in the present batch were issued within the extended limitation, satisfying the requirement of Section 25(1) as amended. The counsel concedes that the earlier decisions were superseded by the amendment and that the notices should not be quashed on this basis.

Contentions of Respondents

The respondents’ counsel submit that the Baiju A A decision, and related cases, hold that the amended provision is prospective and would not operate to revive old rights or extend the period for past years. They argue that the 2017 amendment should be treated with caution as a prospective change that cannot defeat vested or accrued rights for years prior to its enactment. They contend that reliance on Baiju A A and similar authorities should guide the approach to limitation, but that the court should not retroactively apply the amended provision to years where a right to reassessment had accrued. They maintain that the earlier judgments and principles should be followed, and that quashing reassessment notices on the grounds of amendment would undermine settled expectations and violate due process. They also point to decisions quoted in Commercial Tax Officer v. Najeem as persuasive on the timing and scope of reassessment rights.

Cited Precedents (3)

Case Name	Citation	Treatment	Explanation
Baiju A A and others v. State Tax Officer	2020 (1) KHC 39	Overruled	The present judgment relies on applying the amended KVAT Act provision and overrules the Baiju A A line of reasoning, adopting the amended period as applicable.
Commercial Tax Officer v. Najeem	2019 (27) KTR 119 (Ker.)	Mentioned Only	Cited for discussion on period of limitation; not adopted as controlling in light of the amended statute.
2018 (3) KLT 877	2018 (3) KLT 877	Mentioned Only	Referenced in the discussion of period extension but not treated as binding in the current decision.

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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 S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS THURSDAY, THE 3[RD] DAY OF NOVEMBER 2022 / 12TH KARTHIKA, 1944 WA NO. 1757 OF 2020 AGAINST THE JUDGMENTWP(C) 21510/2020 OF HIGH COURT OF KERALA ## APPELLANT/S: - 1 THE DEPUTY COMMISSIONER -III, SPECIAL CIRCLE, STATE GOODS AND SERVICES TAX DEPARTMENT, KOLLAM 691 002. - 2 STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVERNMENT, SECRETARIAT, THIRUVANANTHAPURAM 695 001. BY SR GOVERNMENT PLEADER V K SHAMSUDHEEN ## RESPONDENT/S: B. MOHANACHANDRAN NAIR PROPRIETOR, MS. PRASANTHI CASHEW COMPANY, MANGAD, KOLLAM. BY ADV HARISANKAR V MENON THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 03.11.2022, ALONG WITH WA.15/2021, 22/2021 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020 **-2-** IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS THURSDAY, THE 3[RD] DAY OF NOVEMBER 2022 / 12TH KARTHIKA, 1944 WA NO. 15 OF 2021 AGAINST THE JUDGMENTWP(C) 21506/2020 OF HIGH COURT OF KERALA APPELLANT/S: - 1 THE DEPUTY COMMISSIONER-III, SPECIAL CIRCLE, STATE GOODS AND SERVICES TAX DEPARTMENT, KOLLAM-691002. - 2 STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM-695001. BY SR GOVERNMENT PLEADER V K SHAMSUDHEEN RESPONDENT/S: PRASANTHI CASHEW COMPANY PVT LTD, MANGAD, KOLLAM, REPRESENTED BY ITS MANAGING DIRECTOR, B.MOHANACHANDRAN NAIR. BY ADV HARISANKAR V MENON THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 03.11.2022, ALONG WITH WA.1757/2020 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020 **-3-** IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS THURSDAY, THE 3[RD] DAY OF NOVEMBER 2022 / 12TH KARTHIKA, 1944 WA NO. 22 OF 2021 AGAINST THE JUDGMENT WP(C) 23283/2020 OF HIGH COURT OF KERALA APPELLANT/S: - 1 THE STATE TAX OFFICER(WORKS CONTRACT), STATE GOODS AND SERVICES TAX DEPARTMENT, MATTANCHERRY, KOCHI 682 002 - 2 STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM, PIN 695 001 BY SR GOVERNMENT PLEADER V K SHAMSUDHEEN ## RESPONDENT/S: MARTIN GEORGE, AGED 49 YEARS, BUILDING NO. VI/114 KACHAPILLY HOUSE, ANGAMALY SOUTH P.O, ERNAKULAM 683585 BY ADV HARISANKAR V MENON THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 03.11.2022, ALONG WITH WA.1757/2020 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020 **-4-** IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS THURSDAY, THE 3[RD] DAY OF NOVEMBER 2022 / 12TH KARTHIKA, 1944 WA NO. 24 OF 2021 AGAINST THE JUDGMENTWP(C) 20799/2020 OF HIGH COURT OF KERALA ## APPELLANT/S: - 1 THE STATE TAX OFFICER (WORKS CONTRACT),STATE GOODS AND SERVICES TAX DEPARTMENT,MATTANCHERRY,ERNAKULAM - 682 002. - 2 STATE OF KERALA,REPRESENTED BY ITS SECRETARY,TAXES DEPARTMENT,GOVT. SECRETARIAT,THIRUVANANTHAPURAM695 001. BY SR GOVERNMENT PLEADER V K SHAMSUDHEEN ## RESPONDENT/S: ROOPAM CONSTRUCTIONS EDAYAPURAM ROAD, ASOKAPURAM P.O., ALUVA - 683 101, REPRESENTED BY ITS MANAGING PARTNER SRI.V.S.MYTHEEN. BY ADVS.SRI.HARISANKAR V. MENON,SMT.MEERA V.MENON SMT.K.KRISHNA THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 03.11.2022, ALONG WITH WA.1757/2020 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020 **-5-** IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS THURSDAY, THE 3[RD] DAY OF NOVEMBER 2022 / 12TH KARTHIKA, 1944 WA NO. 1711 OF 2020 AGAINST THE JUDGMENTWP(C) 24438/2020 OF HIGH COURT OF KERALA ## APPELLANT/S: - 1 THE STATE TAX OFFICER (WC), STATE GOODS AND SERVICES TAX DEPARTMENT, ERNAKULAM-682 018 - 2 STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM,PIN695 001 BY SR GOVERNMENT PLEADER V K SHAMSUDHEEN ## RESPONDENT/S: V.C.CONSTRUCTIONS, VANACHIRACKAL HOUSE, XIII/294, KANGARAPADY, THRIKKAKKARA ,KOCHI-682 021, REPRESENTED BY ITS MANAGING DIRECTOR, YEJO JOHN BY ADV HARISANKAR V MENON THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 03.11.2022, ALONG WITH WA.1757/2020 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020 **-6-** IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS THURSDAY, THE 3[RD] DAY OF NOVEMBER 2022 / 12TH KARTHIKA, 1944 WA NO. 1709 OF 2020 AGAINST THE JUDGMENTWP(C) 21135/2020 OF HIGH COURT OF KERALA APPELLANT/S: - 1 ASSISTANT COMMISSIONER (ASSESSMENT), SPECIAL CIRCLE, STATE GOODS AND SERVICE TAX DEPARTMENT, KOLLAM-691 002 - 2 STATE OF KERALA, REPRESENTED BY SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM-695 001 BY SR GOVERNMENT PLEADER V K SHAMSUDHEEN RESPONDENT/S: TARA EXPORTS, NO.11,MUSALIAR NAGAR, 2ND MILE STONE, KILIKOLLOR ,P.O.KOLLAM-691 004, REPRESENTED BY ITS MANAGING PARTNER, NARAYAN BHARATHAN BY ADV HARISANKAR V MENON THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 03.11.2022, ALONG WITH WA.1757/2020 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020 **==> picture [16 x 9] intentionally omitted <==** **==> picture [109 x 15] intentionally omitted <==** [WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020] S.V. Bhatti, J. Heard Mr V K Shamsudheen, learned Senior Government Pleader and Mr Harisankar V Menon for parties. 2. A common identical question arises for consideration in the subject appeals. The State Goods and Services Tax (SGST) Department, represented by its Officers/Revenue is the appellant. The respondents are individual and independent dealers registered under the KVAT Act. The judgment under appeal reads as follows: “It is agreed by the Counsel on either side that the issue involved in this writ petition is squarely covered in favour of the petitioner by the decision of this Court in **Baiju A A and others v. State Tax Officer [2020 (1) KHC 39** ]. Accordingly, following the said judgment, the writ petition is allowed by WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020 **==> picture [16 x 10] intentionally omitted <==** quashing Ext.P2 assessment order with consequential reliefs to the petitioner.” 3. Mr Shamsudheen appearing for the appellants, contends that in the batch of appeals the applicability of the principle laid down in _**Baiju A A v. State Tax Officer**_[1] arises in the circumstances in each one of the cases. The notice issued under Section 25 of the KVAT Act is well within the period of limitation for issuing a re-assessment notice under Section 25(1) of the KVAT Act. Without mincing any expression, the learned counsel fairly states that for want of instructions or proper verification the appellants’ counsel consented to disposing of the writ petitions by following the principle laid down in _**Baiju A A**_ Case. Statement by the counsel appearing for both parties ignores a crucial test considered by this Court in _**Commercial**_ 1 2019 (27) KTR 119 (Ker.) WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020 **==> picture [16 x 10] intentionally omitted <==** _**Tax Officer v. Najeem**_[2] and _**Baiju A A**_ , namely with the expiry of 5 year period of limitation on the completion of 31.03.2017, a right is said to have been accrued in favour of dealers from the rigour or ordeal of reassessment. Therefore, as the Amended Act is made effective from 01.04.2017, notice under Section 25 of the KVAT Act could not be issued. To fit his argument it is stated, that the 5-year period expires by 31.03.2017 up to the Assessment Year 2011-12. Section 25(1) of the KVAT Act, as amended with effect from 01.04.2017, reads thus: “(3) in section 25, in sub-section (1), - (i) for the words "five years", the words "six years" shall be substituted; (ii) for the third proviso, the following proviso shall be substituted, namely: "Provided also that the period for proceeding to determine any assessment including those subjected to extension under section 25B which expires on 31st March 2017, shall be > 2 2018 (3) KLT 877 WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020 **==> picture [22 x 10] intentionally omitted <==** extended up to 31st March, 2018."; 4. In the cases on hand one has to examine whether the notices issued are within the period of limitation stipulated by the amended provision and also before a right accrued in favour of the dealer. Even assuming that _**Baiju A A**_ case was confirmed by a Division Bench of this Court, to which one of us (Justice S V Bhatti) was a party, still, if the notice was issued within the period of limitation, then it cannot be quashed by referring to the principles laid down in _**Baiju A A**_ case. The following table was commended for clarity on the period within which the notice has to be issued. |WA No|Year|5 year only|6 year only|Notice issued on| |---|---|---|---|---| |1757/20|2014-15|31.03.20|31.03.21|25.06.2020| |1709/20|2013-14|31.03.19|31.03.20|03.02.2020| |15/21|2014-15|31.03.20|31.03.21|25.06.2020| |1711/20|2014-15|31.03.20|31.03.21|15.06.2020| WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020 ## **-11-** |22/21|2013-14|31.03.19|31.03.20|19.02.2020| |---|---|---|---|---| |24/21|2013-14|31.03.19|31.03.20|23.01.2020| Therefore, he prays for setting aside the judgment under appeal. 5. The learned counsel appearing for the respondents does not dispute the dates referred to above, but the argument in support of judgment under appeal is that the judgments in _**Baiju A A**_ case and judgment dated 22.08.2022 in W.A. No.48/2020, have held that the Amending Act is applicable from 01.04.2017. Therefore, it is argued that the amendment since is prospective and would not be applicable to the subject Assessment Years. We are afraid the said argument, firstly, is against the well-established principles of construction on whether a Statute is prospective or retrospective, and, secondly, against the very dictum considered and laid down by this court WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020 **==> picture [22 x 10] intentionally omitted <==** in the decisions referred to above. 6. Illustratively stated, in W.A. No.1709 of 2020 the dealer is served with a reassessment notice for the year 2013-14. According to the unamended period of limitation, the Department has jurisdiction to issue a reassessment notice on or before 31.03.2020. The period of limitation is changed with effect from 01.04.2017. Therefore, as on the date, when the period is enlarged from 5 years to 6 years, the dealer does not have a vested right or accrued interest _vis-à-vis_ the reassessment procedure under Section 25. 6.1 When the provision is amended enhancing the period of limitation from 5 years to 6 years, the issuance of notice is well within the jurisdiction, and no exception could be taken. The argument of the respondents is accepted by this Court then, the amendment made through Finance Act 11/2017 is made WA Nos.1757/2020, 15/2021, 22/2021, 24/2021, 1711/2020, 1709/2020 **==> picture [22 x 10] intentionally omitted <==** more prospective than what is intended by the Legislature and the judgments of this Court. The subtle attempt made to sustain the judgments under appeal does not find favour with us for the above reasons. Hence, the judgments under appeal are set aside. The dealers/respondents herein are given liberty to file appeal before the Appellate Authority by enclosing a copy of the judgment within four weeks from today. The delay occasioned during the pendency of the appeal and the writ petition is excused. The appeals if filed shall be numbered, be heard on merits, and disposed of in accordance with law. Appeals are allowed. Sd/- S.V.BHATTI JUDGE Sd/- BECHU KURIAN THOMAS JUDGE jjj