MUBARAK ALI vs. STATE OF KERALA

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OT.Rev/48/2022HC KeralaKLHC01015048202208 December 2022Bench: HONOURABLE MR.JUSTICE S.V.BHATTI,HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS19 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the penalty proceedings were not time-barred. It reasoned that the proviso to Section 67(1) of the KVAT Act speaks of the natural flow of events, and when an assessee interdicts the proceedings by obtaining a stay, that period should be excluded from the limitation calculation. The Court agreed with the Tribunal's finding that the dealer could not benefit from the stay obtained, and thus, the initiation and completion of penalty proceedings were within time. However, the Court found that the Tribunal had not adequately considered the merits of the penalty imposed, particularly the quantum, merely referring to a reduction in penalty by the revisional authority. Therefore, the Court set aside the Tribunal's findings on the merits of the penalty and remitted the matter back to the Tribunal for a fresh consideration and disposal of the grounds raised on the quantum and other merits of the penalty. The Court confirmed the Tribunal's finding on the limitation period.

What were the facts?

The cases involve tax revision petitions filed by Jojo Francis, Mubarak Ali, and Vijaya Kumaran.V, proprietors of poultry farms, against orders of the Kerala Value Added Tax/Agrl. Income Tax and Sales Tax Appellate Tribunal (Tribunal). The core issue revolves around penalty proceedings initiated under Section 67(1) of the KVAT Act. In O.T. Rev. No. 50/2022, Jojo Francis received a notice under Section 67(1) on 10.12.2010. He filed a writ petition, obtaining a stay on the enquiry. The writ petition was disposed of on 01.10.2012. Subsequently, the Intelligence Officer confirmed the penalty on 20.02.2014, which was upheld by the Deputy Commissioner and then the Tribunal. The petitioners challenge the Tribunal's order, arguing that the penalty proceedings were time-barred and that the merits of their case were not properly considered.

What were the issues?

1. Whether the penalty proceedings initiated under Section 67(1) of the KVAT Act, for which a notice was issued on 10.12.2010 and an order of penalty was passed on 20.02.2014, were concluded within the period of limitation stipulated by the proviso to Section 67(1) of the KVAT Act, considering the stay obtained by the assessee in writ proceedings. Assessee's Contention: The penalty proceedings are beyond the period of limitation. The Tribunal erred in considering the limitation aspect. Revenue's Contention: The period during which the assessee obtained a stay of enquiry should be excluded from the calculation of the limitation period. The assessee cannot benefit from the delay caused by their own legal action. 2. Whether the Tribunal adequately considered the merits of the penalty levied, including the quantum, or if its findings were based solely on a reduction in penalty by a revisional authority, thereby failing to address the grounds raised by the dealer on merits. Assessee's Contention: The Tribunal did not consider the merits of the case; the reduction in penalty by the revisional authority does not absolve the Tribunal from examining the underlying grounds for the levy. The Tribunal's observation that a reduction in penalty implies consideration of merits is flawed. Revenue's Contention: The Tribunal's findings on merits should be appreciated, and if there is a deficiency, the matter should be remitted for fresh consideration.

Which sections of the Income-tax Act were involved?

Section 67(1),Section 63

AI-generated summary — verify with the full judgment below

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 8TH DAY OF DECEMBER 2022 / 17TH AGRAHAYANA, 1944 OT.REV NO. 46 OF 2022 AGAINST THE ORDER TAVAT 523/2018 OF AGRL.I.T.ADDITIONAL BENCH,KOZHIKODE REVISION PETITIONER/S:

JOJO FRANCIS, AGED 55 YEARS PROPRIETOR, M/S. ANITTA POULTRY FARM, MUTHALAMADA, GOVINDAPURAM, PALAKKAD DISTRICT.

BY ADVS. HARISANKAR V. MENON K.KRISHNA; MEERA V.MENON; R.SREEJITH

RESPONDENT/S:

STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM 695001 OTHER PRESENT:

GP SMT JASMINE M M THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 08.12.2022, ALONG WITH OT.Rev.50/2022, 48/2022 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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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 8TH DAY OF DECEMBER 2022 / 17TH AGRAHAYANA, 1944 OT.REV NO. 50 OF 2022 AGAINST THE ORDER TAVAT 524/2018 OF AGRL.I.T.ADDITIONAL BENCH,KOZHIKODE REVISION PETITIONER/S:

JOJO FRANCIS, AGED 55 YEARS PROPRIETOR, M/S. ANITA POULTRY FARM, MUTHALAMADA, GOVINDAPURAM, PALAKKAD DISTRICT

BY ADVS. HARISANKAR V. MENON MEERA V.MENON

RESPONDENT/S:

STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT.SECRETARIAT, THIRUVANANTHAPURAM-695 001 GP SMT JASMINE M M THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 08.12.2022, ALONG WITH OT.Rev.46/2022 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

OT.Rev Nos.46/2022, 50/2022, 48/2022, 47/2022, 97/2020

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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 8TH DAY OF DECEMBER 2022 / 17TH AGRAHAYANA, 1944 OT.REV NO. 48 OF 2022 AGAINST THE ORDER TAVAT 526/2018 OF AGRL.I.T.ADDITIONAL BENCH,KOZHIKODE REVISION PETITIONER/S:

MUBARAK ALI, AGED 41 YEARS, PROPRIETOR, M/S.BISMILLAH POULTRY FARM, M.PUDUR, PALAKKAD DISTRICT, PIN - 678 581.

BY ADVS. HARISANKAR V. MENON MEERA V.MENON

RESPONDENT/S:

STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM - 695 001. GP SMT JASMINE M M THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 08.12.2022, ALONG WITH OT.Rev.46/2022 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

OT.Rev Nos.46/2022, 50/2022, 48/2022, 47/2022, 97/2020

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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 8TH DAY OF DECEMBER 2022 / 17TH AGRAHAYANA, 1944 OT.REV NO. 47 OF 2022 AGAINST THE ORDER TAVAT 525/2018 OF AGRL.I.T.ADDITIONAL BENCH,KOZHIKODE REVISION PETITIONER/S:

MUBARAK ALI, AGED 41 YEARS PROPRIETOR, M/S.BISMILLAH POULTRY FARM, M.PUDUR, PALAKKAD DISTRICT, PIN - 678 581.

BY ADVS. HARISANKAR V. MENON MEERA V.MENON RESPONDENT/S:

STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM - 695 001.

GP SMT JASMINE M M THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 08.12.2022, ALONG WITH OT.Rev.46/2022 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

OT.Rev Nos.46/2022, 50/2022, 48/2022, 47/2022, 97/2020

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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 8TH DAY OF DECEMBER 2022 / 17TH AGRAHAYANA, 1944 OT.REV NO. 97 OF 2020 AGAINST THE ORDER TAVAT 596/2018 OF AGRL.I.T.ADDITIONAL BENCH,KOZHIKODE REVISION PETITIONER/S:

VIJAYAKUMARAN .V, AGED 57 YEARS M/S.VISMAYA POULTRY FARM, CHITTICHIRAKALAM, NENMENI, KOLLENGODE, PALAKKAD DISTRICT.

BY ADVS. HARISANKAR V. MENON SMT.MEERA V.MENON, SMT.K.KRISHNA RESPONDENT/S:

STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT.SECRETARIAT, THIRUVANANTHAPURAM-695001.

GP SMT JASMINE M M THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 08.12.2022, ALONG WITH OT.Rev.46/2022 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

OT.Rev Nos.46/2022, 50/2022, 48/2022, 47/2022, 97/2020

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O R D E R

[OT.Rev Nos.46/2022, 50/2022, 48/2022, 47/2022, 97/2020] S.V. Bhatti, J.

We have heard Mr Harisankar V Menon learned counsel for the petitioners, and Mrs M M Jasmin, learned Government Pleader for the respondents.

2.

The revisions are tagged together since the identical question of law under Section 67 of the KVAT Act arises for consideration.

2.1 The Counsel appearing for the parties have treated the circumstances in O.T. Rev. No.50/2022 as the lead case for the narration and consideration. Both the Counsel have further stated that the consideration and conclusion in O.T. Rev. No. 50/2022 would also apply to other revisions.

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O.T. Rev. No. 50/2022

3.

Jojo Francis is a dealer registered under the KVAT Act and doing business in poultry farming. On 10.12.2010, the dealer received notice under Section 67(1) of the KVAT Act. The dealer filed W.P.(C) No.541/2011, challenging the notice dated 10.12.2010. This Court admittedly had granted a stay of enquiry pursuant to notice dated 10.12.2010. On 01.10.2012, the writ petition was disposed of, directing the competent authority to deal with Ext.P3 in the manner directed by this Court. On 20.02.2014, the Intelligence Officer confirmed the penalty proposed for the acts of omission and commissions noted in the penalty proceedings. The order of penalty was confirmed by the Deputy Commissioner vide order dated 08.04.2015. The dealer filed TA(VAT) No.524/2018 before the Kerala Value

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Added Tax/Agrl. Income Tax and Sales Tax Appellate Tribunal, Additional Bench, Kozhikode (for short, Tribunal). The Tribunal dismissed the appeal through the order impugned in the instant revision. Hence, the revision under Section 63 of the KVAT Act.

4.

Mr Harisankar V Menon argues that Section 67(1) proviso stipulates the outer limit for completion of penalty proceedings. The proceedings under Section 67(1) could be stated to have been set in motion by notice dated 10.12.2010. The order of penalty is dated 20.02.2014. Reckoning the period of limitation from 10.12.2010 till 20.02.2014, the order is beyond the period of limitation, and the Tribunal illegally and erroneously considers this aspect of the matter. Secondly, it is argued that the Tribunal did not consider the dealer's case on the merits raised on the levy of penalty, quantum, etc. He invites our attention to the following paragraphs:

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“10. With regard to the merits of the case it is seen that the Revisional Authority has given maximum deduction to the appellant and that is evident from the modified order produced by the learned Additional Law Officer. It is seen that as per the order of Revisional Authority, the penalty of 10,57,512/- is reduced to 8,63,512/-. Therefore in the merits also we find no reason to interfere with the impugned orders passed by the authorities below. Hence these points are answered accordingly.” and contends that the reduction of penalty cannot be the basis for confirming the other grounds raised on merits. Therefore, prays for setting aside the order under revision.

5.

Adv Jasmin contends that Section 67(1) proviso reads thus: "Provided that the authority empowered under this section shall dispose of the case within three years from the date of detection of offence mentioned under this section except where the extension of time is granted by the Deputy Commissioner."

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6.

In the case on hand, the dealer filed writ petition and obtained stay of enquiry in penalty proceedings. Briefly stated, the order of stay was in operation for two years. The dealer cannot take advantage of his unsuccessful effort and put the period of limitation as a ground for proceeding in the penalty proceeding. The three-year period at best could be calculated by excluding the period during which there was a stay of operation and a stay of enquiry before the Intelligence Officer. While replying to the argument that the Tribunal did not consider the merits, she commends to this Court to appreciate the grounds stated on merits and whether the Tribunal fell short in discharging its function as a second appellate authority. For that being the case, confirming the findings for the limitation period for reconsideration of other issues, the matter ought to be remitted to the Tribunal for consideration

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and disposal afresh.

7.

Having considered the submissions, we are of the view that the first ground under Section 67 of the KVAT Act, namely that the penalty proceedings are not concluded within the period of limitation, it should be kept in mind that Section 67(1) proviso speaks of the natural flow of events and circumstances surrounding an enquiry under Section 67 of the Act. Admittedly, the dealer has not allowed the continuation of, if it could be stated as the cause of action, or once the time starts running, it is not stopped except in the manner provided by law. These are fundamentals in appreciating the cause of action and reckoning the limitation period. But, the incapacity or interdiction with the free flow of events are exceptions to be kept in mind for calculating the period of limitation with the starting point of the cause of action. Reverting to the

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circumstances on hand, it can be stated that by his choice or option, the dealer interdicts the running of the period of limitation, and the dealer cannot be gainsaid that his choice of filing the writ petition enures to dealer’s benefit. The Tribunal considered the reckoning of the limitation period by adverting to the relevant circumstances and the manner in which the proviso must be read to determine the limitation. We are in complete agreement with the Tribunal’s findings on the limitation raised under Section 67(1) of the KVAT Act. Hence, confirmed the findings.

8.

The next question is the non-consideration of the dealer’s case on merits by referring to the order of the revisional authority. The findings are brief, and it holds tenable, for the Tribunal has not considered the merits raised by the dealer on quantum etc. Therefore, to the limited extent

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of considering the grounds raised on the merits of the penalty imposed by the primary authority, the case stands remitted to the Tribunal for disposal afresh. 8.1 To sum up, we conclude that the findings of the Tribunal on Section 67(1) r/w proviso on the period of limitation are tenable and confirmed. For the discussion above, the succinct findings recorded while disposing of the revision on the merits of the matter are set aside, and the case is remanded to the limited extent for consideration and disposal afresh. 8.2 Accordingly, we confirm the finding that the initiation and the completion of penalty proceedings are within time. To the extent indicated above, the order of the Tribunal is set aside. We remit the matter to the Tribunal for examination of grounds raised on the quantum etc., of the penalty. The

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Tribunal considers and disposes of the case preferably within four weeks from the date of receipt of the order. The O.T. Revisions are ordered accordingly.

Sd/- S.V.BHATTI JUDGE

Sd/- BECHU KURIAN THOMAS JUDGE

jjj

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APPENDIX OF OT.REV 50/2022

PETITIONER ANNEXURES Annexure A COPY OF JUDGMENT IN WPC NO.34462/2010 OF HIS HON'BLE COURT DATED 01.10.2012 Annexure B COPY OF ORDER ISSUED BY THE INTELLIGENCE OFFICER (IB), MATTANCHERRY AT MINI CIVIL STATION,ALUVA DATED 20.02.2014 Annexure C COPY OF ORDER IN KVAT REVISION PETITION NO.209/14 OF THE DY.COMMISSIONER , PALAKKAD DATED 08.04.2015 Annexure D COPY OF CERTIFICATE ISSUED BY THE DISTRICT ANIMAL HUSBANDRY OFFICER, PALAKKAD DATED 23.01.2015 Annexure E COPY OF ORDER IN TA (VAT) NO.524/2018 OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOZHIKODE DATED 20.12.2021

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APPENDIX OF OT.REV 48/2022

PETITIONER ANNEXURES Annexure A COPY OF JUDGMENT IN WP(C) NO.34462/2010 OF THIS HON'BLE COURT. Annexure B COPY OF ORDER ISSUED BY THE INTELLIGENCE OFFICER (IB) MATTANCHERRY AT MINI CIVIL STATION, ALUVA. Annexure C COPY OF ORDER IN KVAT REVISION PETITION NO.207/14 OF THE DY. COMMISSIONER, PALAKKAD. Annexure D COPY OF CERTIFICATE ISSUED BY THE DISTRICT ANIMAL HUSBANDRY OFFICER, PALAKKAD. Annexure E COPY OF ORDER IN TA (VAT) NO.526/2018 OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOZHIKODE.

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APPENDIX OF OT.REV 47/2022

PETITIONER ANNEXURES Annexure A COPY OF JUDGMENT IN WP(C) NO.34462/2010 OF THIS HON'BLE COURT. Annexure B COPY OF ORDER ISSUED BY THE INTELLIGENCE OFFICER (IB), MATTANCHERRY AT MINI CIVIL STATION, ALUVA. Annexure C COPY OF ORDER IN KVAT REVISION PETITION NO.208/14 OF THE DY. COMMISSIONER, PALAKKAD. Annexure D COPY OF CERTIFICATE ISSUED BY THE DISTRICT ANIMAL HUSBANDRY OFFICER, PALAKKAD. Annexure E COPY OF ORDER IN TA (VAT) NO.526/2018 OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOZHIKODE.

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APPENDIX OF OT.REV 97/2020

PETITIONER ANNEXURES ANNEXURE A COPY OF JUDGMENT IN WP(C)NO.34462/2010 OF THIS HON'BLE COURT DATED 01.10.2012. ANNEXURE B COPY OF ORDER ISSUED BY THE INTELLIGENCE OFFICER (IB), MATTANCHERRY AT MINI CIVIL STATION ALUVA DATED 20.02.2014. ANNEXURE C COPY OF ORDER IN KVAT REVISION PETITION NO.190/14 OF THE DY.COMMISSIONER, PALAKKAD DATED 04.03.2015. ANNEXURE D COPY OF ORDER IN TA(VAT)NO.596/2018 OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOZHIKODE DATED 02.03.2020.

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APPENDIX OF OT.REV 46/2022

PETITIONER ANNEXURES Annexure A COPY OF JUDGMENT IN WP(C) NO.34462/2010 OF THIS HON'BLE COURT. Annexure B COPY OF ORDER ISSUED BY THE INTELLIGENCE OFFICER (IB), MATTANCHERRY AT MINI CIVIL STATION, ALUVA. Annexure C COPY OF ORDER IN KVAT REVISION PETITION NO. 210/14 OF THE DY.COMMISSIONER, PALAKKAD Annexure D COPY OF CERTIFICATE ISSUED BY THE DISTRICT ANIMAL HUSBANDRY OFFICER, PALAKKAD. Annexure E COPY OF ORDER IN TA(VAT) NO. 523/2018 OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOZHIKODE

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