Venugopal C. v. State of Kerala & Others

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **&** **THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH THURSDAY, THE 12[TH] DAY OF OCTOBER 2023 / 20TH ASWINA, 1945 WA NO. 1546 OF 2023** **AGAINST THE JUDGMENT DATED 21.8.2023 IN WP(C) 2550/2014 OF HIGH COURT OF KERALA** ## **APPELLANT/PETITIONER IN WPC:** VENUGOPAL C.,AGED 54 YEARS S/O.CHELLAPPAN, KALATHIL VEEDU, TC 7/37, KARUTHODE LANE, KANJIRAMPARA P.O., THIRUVANANTHAPURAM, PIN - 695030 BY ADVS.P.G.JAYASHANKAR P.K.RESHMA (KALARICKAL) S.RAJEEV (K/001711/2019) SAJANA V.H SHAIJU GEORGE AADERSH R.S. PANICKER ## **RESPONDENTS/RESPONDENTS IN WPC:** 1 STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM, PIN - 695001 2 THE COMMISSIONER, COMMERCIAL TAXES, TAXES TOWER, KARAMANA, THIRUVANANTHAPURAM, PIN - 695002 ## W.A.No.1546 of 2023 -:2:- 3 THE ASSISTANT COMMISSIONER, SPECIAL CIRCLE, KOZHIKODE, PIN - 673006 4 STATE OF KERALA, TALUK OFFICE, THIRUVANANTHAPURAM, PIN - 695023 5 M/S MILLENNIUM SPICES COMMODITIES, DOOR NO.6/1104, TRIDENT COMPLEX, CHEROOTY ROAD, KOZHIKODE, PIN - 673001 SR GP DR. THUSHARA JAMES THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 12.10.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.A.No.1546 of 2023 -:3:- ## **J U D G M E N T** ## **Dr. A.K.Jayasankaran Nambiar, J.** This writ appeal is preferred by the petitioner in W.P. (C).No.2550 of 2014, who is aggrieved by the judgment dated 21.8.2023 of the learned Single Judge in the writ petition. 2. The brief facts necessary for the disposal of this writ appeal are as follows: The appellant was formerly a partner of the 5[th] respondent firm who retired from the partnership with effect from 17.10.2000. The retirement deed is produced as Ext.P3 in the writ petition. In the writ petition it was the case of the appellant that, while he ceased to be a partner in the firm with effect from 17.10.2000, and the fact of his retirement from the partnership firm had been intimated to the respondent authorities under the Kerala General Sales Tax (KGST) Act, he was served with Exts.P5 and P6 assessment orders for the assessment year 2002-2003 under the KGST and Central Sales Tax (CST) Acts respectively, demanding _inter alia_ an amount of W.A.No.1546 of 2023 -:4:- ₹1,64,37,149/- towards differential tax demand. This was followed by Exts.P7 and P8 revenue recovery notices which showed him as a partner of the firm, who was jointly liable along with other partners for discharging the dues of the firm towards sales tax liability. It was his case in the writ petition that in view of the fact that he had retired from the partnership firm in the year 2000 itself, and the fact of his retirement was intimated to the Department, there was no justification whatsoever for demanding any tax from him towards the tax dues of the firm for the assessment year 2002-2003. 3. In a statement filed in the writ petition, the respondents admitted that the retirement deed submitted by the appellant had been received by them. Their objection however was that the statutory Form No.3 which was to be submitted by the appellant in terms of Rule 5(8) of the KGST Rules had not been submitted and therefore, the appellant could not wriggle out of his obligation to bear the tax burden along with the other partners for the assessment year 2002-2003. 4. The learned Single Judge who considered the writ petition found that, inasmuch as the aspect of whether or not the appellant continued to be a partner of the firm during the assessment year in W.A.No.1546 of 2023 ## -:5:- question was a factual aspect that had to be considered by the adjudicating authority, this was not a case that was to be considered by the High Court in proceedings under Article 226 of the Constitution of India. The learned Single Judge therefore relegated the appellant to the statutory remedy of preferring an appeal against the assessment order and the recovery proceedings that were impugned in the writ petition. 5. Before us, it is the submission of Ms. P.K. Reshma, the learned counsel for the appellant that the learned Single Judge erred in relegating the appellant to the alternative remedy in circumstances where the factual aspect of whether or not the appellant had retired from the partnership firm in 2000 was admitted by the respondents. She relies on Ext.P3 retirement deed, the receipt of which is not denied by the respondents, as also the fact that in the penalty proceedings initiated by the respondents in the same year against the partnership firm, the appellant was not shown as a partner, to point out that the Department was well aware that the appellant had ceased to be a partner in the year 2000 itself and therefore, could not be proceeded against for recovery of the tax in the assessment year 2002-2003. She also places reliance on the judgment in _**Pratap**_ W.A.No.1546 of 2023 ## -:6:- ## _**Singh** v._ _**Shri Krishna Gupta & Others**_ (AIR 1956 SC 140)] to argue that although it may be a fact that the Form No.3 prescribed under Rule 5(8) of the KGST Rules was not submitted, the submission of the retirement deed, the receipt of which is not denied by the respondents, could be treated as substantial compliance with the statutory provisions for the purposes of quashing the demand against the appellant. She stresses on the finding of the Supreme Court that it is the substance that counts and must take precedence over mere form and that while some rules are vital and go to the root of the matter and cannot be broken, there are other rules that are only directory and a breach of those rules can be overlooked provided there is substantial compliance of the rules read as whole and provided no prejudice is caused to the Department. 6. Per contra, it is the submission of the learned Senior Government Pleader Dr. Thushara James that it is a settled position in law that when the statute prescribes a mode of doing a thing, the assessee can comply with the statutory provision only by following the procedure prescribed by the statute and in no other manner. It is her contention that the said proposition applies with added vigour in tax matters where the interests of revenue have to be safeguarded. W.A.No.1546 of 2023 ## -:7:- 7. On a consideration of the rival contentions, we find ourselves in agreement with the submissions of the learned counsel for the appellant, and for the reasons that follow, we are of the view that this writ appeal must succeed. It is not in dispute that the retirement deed that showed the appellant as having retired from the partnership firm in the year 2000 was received by the Department well before the assessment year 2002-2003. It is also not in dispute that in the penalty proceedings initiated for the said period, the appellant was not shown as partner of the firm that was proceeded against. Still further, in the assessment proceedings against the firm, the partner who was admitted to the partnership in lieu of the appellant was also shown as a partner of the firm that was proceeded against. In our view, the said actions on the part of the Department would by themselves indicate that the Department was in the know of things and in particular of the fact that the appellant had ceased to be a partner of the firm in 2000 itself. The acceptance by the Department of the retirement deed, and their knowledge with regard to the fact of retirement of the appellant, are in our view sufficient for us to conclude that the object of Rule 5(8) of the KGST Rules was met in the facts of the instant case. If that be so, then it is apparent that W.A.No.1546 of 2023 ## -:8:- the Department could not have proceeded against the appellant for realisation of the tax dues of the firm for the assessment year 20022003. We are also of the view that inasmuch as the factual aspects above were never in dispute, it was unnecessary for the learned singe judge to have relegated the appellant to pursue his alternative remedy under the statute. In the result, we allow this writ appeal by setting aside the impugned judgment of the learned Single Judge and by setting aside the assessment orders/revenue recovery notices impugned in the writ petition to the extent it pertains to the appellant herein. SD/- **DR. A.K.JAYASANKARAN NAMBIAR JUDGE** SD/- ## **DR. KAUSER EDAPPAGATH** **JUDGE** kp