THE DEPUTY COMMISSIONER (INTELLIGENCE), COMMERCIAL TAXES vs. THE DEPUTY DIRECTOR OF INCOME TAX (INV)-II, ERNAKULAM

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WP(C)/17650/2014HC KeralaKLHC01063272201422 July 2014Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court of Kerala noted that the Assistant Commissioners of the Commercial Tax Department had been notified to exercise the functions of a Collector under the Kerala Revenue Recovery Act, 1968. The Special Government Pleader for the Petitioner-State submitted that proceedings had been taken and the diamond jewellery, held by the income tax department, had been attached. In light of these subsequent actions by the Petitioner-State to assert their claim through attachment proceedings under the Kerala Revenue Recovery Act, the Court found that the writ petition was no longer necessary. Therefore, the writ petition was rendered infructuous. No specific finding was made on the jurisdictional issue or the merits of the KVAT claim itself, as the petition was disposed of on procedural grounds.

What were the facts?

The Deputy Commissioner (Intelligence), Commercial Taxes, Ernakulam (Petitioner-State) filed a writ petition seeking a stay on the release of diamond ornaments. These ornaments were seized by income tax authorities under Section 132 of the Income Tax Act, 1961, from respondents 3 and 4 at the airport, as they lacked proper documentation. The income tax authorities informed the commercial tax authorities in Kerala, who issued a notice under Section 67(1) of the Kerala Value Added Tax (KVAT) Act, 2003, alleging the goods were intended for sale in Kerala. A penalty was imposed, and an appeal was pending without a stay. The second respondent, M/s. Fancy Diamond India (P) Ltd., claimed ownership and obtained a release order from the High Court of Bombay. The Petitioner-State contended that the commercial tax department had a claim over the jewellery.

What were the issues?

1. Whether the High Court of Kerala has jurisdiction to stay the release of goods ordered by the High Court of Bombay, given the jurisdictional complexities raised by the Petitioner-State's claim under the KVAT Act, 2003. Assessee's Contentions (implied through the writ petition): The Petitioner-State argued that the diamond jewellery should not be released because the Commercial Tax Department has a claim over it, implying that the Bombay High Court's order might not have considered this claim or that Kerala has jurisdiction over the goods due to their intended sale within the state. Revenue's Contentions (implied through the writ petition): The Revenue (represented by the Deputy Director of Income Tax) was involved in the seizure under the Income Tax Act. The Petitioner-State's action was against the release order, suggesting a dispute over the ultimate authority over the seized goods.

Which sections of the Income-tax Act were involved?

Section 132,Section 67(1),Section 33

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN TUESDAY, THE 22ND DAY OF JULY 2014/31ST ASHADHA, 1936 WP(C).No. 17650 of 2014 (E) ---------------------------- PETITIONER: -------------------------- THE DEPUTY COMMISSIONER (INTELLIGENCE), COMMERCIAL TAXES, ERNAKULAM.

BY SPL.GOVERNMENT PLEADER SRI.GEORGE MECHERIL RESPONDENTS: ---------------------------- 1. THE DEPUTY DIRECTOR OF INCOME TAX (INV)-II, ERNAKULAM. M/S.FANCY DIAMONDA INDIA (P) LTD., 111, PRASAD CHAMBERS, OPERA HOUSE, MUMBAI - 400 004. 3. PRATIK MEHTA, 12, SHOUBNA BUILDING, MATHURADAS ROAD, KANDIVIL (WEST), MUMBAI - 400 067. 4. APOORVA SHAH, 2-1, CHAROTAR PARK, OLD PADRA ROAD, BARODA - 390 020.

R1 BY ADV. SRI. JOSE JOSEPH, SC, INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 22-07-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Kss

K.VINOD CHANDRAN, J. --------------------------------------- ---------------------------------------- Dated this the 22nd day of July, 2014 J U D G M E N T Petitioner is the State, which seeks a stay of the release of the diamond ornaments, directed to be released by the High Court of Bombay as per Ext.P15. The short facts are that the respondents 3 and 4 were detained, at the airport by the Air Intelligence Unit, and huge quantity of diamond jewellery were found in their possession. Since no proper documents, accompanied such goods, the same was seized subsequently by the income tax authorities under Sec.132 of the Income Tax Act, 1961. The income tax authorities also informed the commercial tax authorities, within the State, about such seizure. A notice was issued, as Ext.P3 under Sec.67(1), of the Kerala Value Added Tax Act, 2003 alleging that the goods were intended for sale within

the State of Kerala. Admittedly, an order was passed imposing penalty, at twice the amount of tax sought to be evaded, by Ext.P10. An appeal is said to be pending, in which no order of stay is passed. Demand notices have also been issued. It was in the meantime, that the second respondent, who claimed ownership of the jewellery, approached the High Court of Bombay, within whose jurisdiction the respondents 2 to 4 function and the 2nd respondent is registered and as an assessee under the Income Tax Act. The High Court of Bombay granted release of the goods, as per Ext.P15. Petitioner-State has filed the above writ petition contending that the diamond jewellery, is not liable to be released, since the Commercial Tax Department has raised a claim over it. The jurisdictional aspects come to fore in considering the above Writ Petition. In any event, now it is brought to the notice of this Court, that under Sec.33 of the KVAT Act, 2003 the Assistant Commissioners, of the Commercial Tax

Department have been notified, to exercise the functions of a Collector, under the Kerala Revenue Recovery Act, 1968. It is submitted by the Special Government Pleader (Taxes) appearing for the petitioner-State that now proceedings have been taken and the diamond jewellery, with the income tax department, have been attached. In such circumstance, the writ petition is no longer necessary. The writ petition is hence infructuous.

Sd/-

K.VINOD CHANDRAN, Judge Sbna

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