The Court rules that penalty proceedings must be initiated within a reasonable period, setting a precedent for future tax-related cases.
In a significant ruling, the Kerala High Court has set aside a penalty notice issued to M/s. Taj Garden Retreat, Kumarakom, on the grounds of being time-barred. The Division Bench, comprising Justices A. Muhamed Mustaque and Harisankar V. Menon, emphasized that penalty proceedings under the Kerala General Sales Tax Act, 1963 must be initiated within a reasonable period, even if the statute does not specify a limitation period.
The case revolved around a show cause notice issued on December 20, 2018, for transactions related to Indian Made Foreign Liquor (IMFL) and Foreign Made Foreign Liquor (FMFL) from the assessment year 2011-12. The notice followed an inspection conducted on March 8, 2012. The appellant, Taj Garden Retreat, challenged the notice as being issued beyond the reasonable time frame, arguing that it was hopelessly barred by limitation.
The Court referred to its earlier judgment in W.A.No.344 of 2017, which established that proceedings should be completed within a reasonable period akin to the five-year limitation prescribed for assessments under the Act. The Court found that the notice was issued well beyond this five-year period, which ended on March 31, 2017, thereby rendering the notice time-barred.
The judgment further clarified that non-cooperation by the assessee does not absolve the Department from its responsibility to act within a reasonable period. The Court rejected the Department's argument that repeated notices and adjournments caused delays, stating that the Department should have proceeded based on available documents.
This ruling underscores the importance of adhering to reasonable time limits for initiating penalty proceedings, providing clarity and protection to businesses against indefinite liability for past transactions. Legal experts suggest that this decision will have far-reaching implications for tax administration in Kerala, setting a benchmark for reasonable timelines in penalty proceedings.
Bottom Line:
Kerala General Sales Tax Act, 1963 - Penalty proceedings initiated under Section 45A of the Act must be commenced and completed within a reasonable period of time, even if no specific limitation period is prescribed under the statute.
Statutory provision(s): Kerala General Sales Tax Act, 1963, Section 45A; Article 226 of the Constitution of India.
M/s.Taj Garden Retreat, Kumarakom v. State of Kerala, (Kerala)(DB) : Law Finder Doc Id # 2816076
