STATE OF KERALA, vs. SRI. ABDUL RAHMAN KUNJU,

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE MR.JUSTICE MOHAMMED NIAS C.P. WEDNESDAY, THE 22ND DAY OF FEBRUARY 2023 / 3RD PHALGUNA, 1944 OT.REV NO. 89 OF 2022 AGAINST THE ORDER/JUDGMENTTAVAT 80/2018 OF AGRL. INCOME TAX ADDITIONAL BENCH, TVM REVISION PETITIONER: STATE OF KERALA, REPRESENTED BY THE JOINT COMMISSIONER OF STATE TAX (LAW) , DEPARTMENT OF KERALA STATE GOODS AND SERVICE TAX, ERNAKULAM, PIN - 686016 BY ADV GOVERNMENT PLEADER SMT. JASMINE RESPONDENT: SRI. ABDUL RAHMAN KUNJU, CASHEW EXPORTERS, CHANTHANATHOPPU, KOLLAM, PIN - 691014 BY ADVS. HARISANKAR V. MENON MEERA HARISANKAR K.KRISHNA THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 22.02.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

A.K.JAYASANKARAN NAMBIAR & MOHAMMED NIAS C.P., J.J ----------------------------------------------------- OTRV.No.89 of 2022 ----------------------------------------------------- Dated this the 22nd day of February, 2023 ORDER A.K.Jayasankaran Nambiar, J. The State is the revision petitioner before us, aggrieved by the order dated 19.01.2022 of the Kerala Value Added Tax Act Appellate Tribunal, Addl.Bench, Thiruvananthapuram, in TA (VAT) No.80/2018. 2. The brief facts necessary for disposal of this revision petition are as follows:- The respondent herein is a dealer in cashew and an assessee on the files of the Assistant Commissioner (Assessment), Commercial Tax Office, Special Circle, Kollam for the purposes of the Kerala Value Added Tax Act. During the assessment year 2006-07, the assessee had filed returns and claimed exemption in respect of that portion of the turn over as was covered by 'C' Forms/'F' Forms. The Intelligence Officer (Investigation Branch), on verification of the 'C' Forms and 'F' Forms furnished by the assessee was of the view that some of those 'C' Forms/'F' Forms were bogus as the mandatory declarations were not seen issued by the assessing authorities of the outside States and further the said declarations contained spelling mistakes. The department, therefore, proceeded to issue a notice to the assessee under Section 67

OT.REV NO. 89 OF 2022 3 of the KVAT Act, on 20.12.2008. 3. Although the assessee filed a detailed reply refuting the averments in the said notice issued by the department, the department chose to constitute an investigation team taking note of the complaints received regarding the use of bogus 'C' Form/ 'F' Forms by other dealers in cashew, on 02.12.2011. The said investigation team filed their report before the department on 17.12.2012 and based on the said report, the department issued summons on 02.09.2013 to the respondent assessee asking him to produce his books of accounts for verification. The said books of accounts were produced before the department on 01.10.2013, and after verifying the same, another notice dated 25.03.2014 was issued by the department to the respondent assessee. Thereafter, after considering the reply preferred by the assessee to the said notice, an order imposing penalty on the assessee was passed on 14.05.2014. 4. Aggrieved by the said order of penalty, the respondent assessee preferred an appeal before the first appellate authority, who dismissed the appeal. In the further appeal preferred by the respondent assessee before the Appellate Tribunal, the Tribunal allowed the appeal by setting aside the penalty order and the first appellate order. The relevant finding of the Tribunal in its order which is impugned by the State in this revision petition reads as follows: “7. The penalty in question is initiated in connection with production of bogus 'F' Forms during

OT.REV NO. 89 OF 2022 4 the assessment period 2006-07. At that time proviso to section 67 stipulating time limit of three years for completing the penalty proceedings was in force. Of course the limitation will commence from the date of detection of offence. In the given case notice proposing penalty under section 67 was originally issued to the appellant on 20.12.2008 alleging that the appellant produced bogus 'F' Forms for making unlawful claim for concessional rate of tax and therefore liable to be imposed penalty for evasion of tax. From the said notice it is crystal clear that offence against the appellant was detected in 2008 itself. As stated earlier the appellant submitted reply disputing liability on 10.01.2009. Therefore going by proviso to section 67 of the Act as it stood then, the penalty proceedings should have been completed on or before 20.12.2011. But the Intelligence Officer could could not complete the proceedings within that period. As per records investigation in the matter was going on for a very long period resulted in issuing a revised notice in March 2014 followed by the penalty order referred above in May 2014. In fact proviso to section 67 specified that the period of limitation can be extended by the Deputy Commissioner. In the given case no order is seen passed by the Deputy Commissioner extending the period of limitation. In the absence of such an order, the Intelligence Officer has no authority to pass the penalty order beyond the period of limitation prescribed thereunder. The State has no answer to address this material aspect relating to limitation. On a consideration of the above facts, we are fully satisfied that the penalty order passed against the appellant is barred by limitation and hence it is legally not valid. Consequently the appellate order confirming the same

OT.REV NO. 89 OF 2022 5 also has no legs to stand. Points are answered in favour of the appellant”. 5. Before us, it is the contention of Smt. Jasmine, the learned Government Pleader appearing on behalf of the revision petitioner that the Tribunal erred in finding that the penalty order passed against the respondent was barred by limitation. It is her submission that the detection of the offence that led to the penalty order was only on 17.12.2012, the date on which the investigation team constituted by the department had filed their report in the matter. It is her submission that the three year limitation period commenced only from that date, and since the penalty order was passed on 14.05.2014, well before the expiry of the three year period from the date of the report of the investigation team, the penalty order ought not to have been set aside as barred by time. It is her further submission that at any rate, the Deputy Commissioner had by an order dated, 20.09.2012 granted an extension for the purpose of completing the proceedings under Section 67, and if the said extension was also taken into account, the penalty order could not said to be barred by limitation. She would further submit that on 01.04.2014, the provision prescribing the limitation period for completion of the penalty proceedings was omitted from the statue and hence, there was no provision that required the penalty orders to be passed within any particular period of time on the date when the penalty order was actually passed namely; 14.05.2014.

OT.REV NO. 89 OF 2022 6 6. Per contra, it is the submission of Sri. Harisankar V. Menon, the learned counsel for the respondent assessee that the penalty order was clearly hit by the limitation provision under Section 67 as rightly found by the tribunal in the order impugned in this revision petition. In particular, she would point out that the very fact that the notice under Section 67 was initially issued to the assessee on 20.12.2008 was a clear indication of the fact of detection of the offence by the department, since in terms of Section 67, a notice could not have been issued to the assessee unless and until the department was satisfied that any of the enumerated offences had been committed. It is, therefore, her submission that the limitation provision having been in existence on the date of detection of the offence, and on the date of issuance of notice by the department, the orders imposing penalty ought to have been passed within the period of limitation of three years from the date of the notice. 7. On a consideration of the rival submissions, we find force in the submission of the learned Counsel for the respondent assessee that the starting point of limitation in the matter of imposition of penalty under Section 67 of the Kerala Value Added Tax Act namely, the date of detection of the offence, could not have been postponed to a stage later than the date of issuance of the notice under Section 67 namely, 20.12.2008. As rightly contended by the learned counsel for the assessee, Section 67 prescribes certain criteria for the issuance of a notice thereunder to the assessee. Primary among those is the criteria that there has to be a subjective satisfaction of the officer concerned, regarding the commission

OT.REV NO. 89 OF 2022 7 of the offence. If the satisfaction of the Officer concerned is the pre- requisite for issuance of notice itself, that satisfaction being the jurisdiction fact, then we would be justified in assuming that the starting point of limitation for the purposes of the proviso to Section 67 would be the date of issuance of the first notice under Section 67. In the instant case the notice was issued on 20.12.2008 and accordingly, the limitation period for completing the proceedings pursuant thereto expired on 20.12.2011. The penalty order in the instant case having been passed on 14.05.2014, we find no reason to interfere with the order of the Tribunal impugned in this revision petition that holds the proceedings to be barred by limitation. The revision petition is accordingly dismissed. Sd/- A.K.JAYASANKARAN NAMBIAR, JUDGE

Sd/- MOHAMMED NIAS C.P, JUDGE saap

OT.REV NO. 89 OF 2022 8 APPENDIX OF OT.REV 89/2022 PETITIONER ANNEXURES Annexure -1 A TRUE COPY OF THE PENALTY ORDER DATED 14-05-2014 PASSED UNDER SECTION 67(1) OF KVAT ACT READ WITH SECTION 9(2) OF THE CST ACT FOR THE YEAR 2006-07 Annexure - 2 A TRUE COPY OF THE ORDER PASSED BY THE DEPUTY COMMISSIONER (APPEALS) II, KOLLAM IN KVATA NO. 1492/2017 DATED 31-10-2017 Annexure - 3 A TRUE COPY OF THE ORDER PASSED BY THE APPELLATE TRIBUNAL IN TA(VAT) NO. 80/2018 DATED 19-01-2022

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