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2023 DIGILAW 555 (KER)

U Sugathan v. Intelligence Officer (IB)-1

2023-07-19

ANU SIVARAMAN

body2023
JUDGMENT : This writ petition is filed seeking the following reliefs: “i) Issue a writ of mandamus or any other appropriate writ, order or direction, directing the respondents to produce the entire records leading to the issuance of Exts.P1, P2, P4, P6, P8, P9, P12 and P13 notices and Exts.P3, P5, P10 and P11 orders. ii) Issue a writ of certiorari and quash Exts.P1, P2, P4, P6, P8, P9, P12 and p13 notices and Exts.P3, P5, P10 and P11 orders. iii) Issue a writ of mandamus or any other appropriate writ or order, declaring that the petitioner is not bound to make the payments as shown in Exts.p1, P2, P4, P6, P8, P9, P12 and P13 notices and Exts.P3, P5, P10 and P11 orders.” 2. Heard the learned counsel for the petitioner and the learned Government Pleader appearing for the respondents. 3. It is submitted by the learned counsel for the petitioner that the petitioner is running a hotel in Kovalam. An inspection had been conducted on 11.04.2008 in the hotel and a Shop Inspection Report was prepared on the said date. It is stated that five years thereafter, Exhibit P8 notice had been issued to the petitioner proposing a penalty of Rs.25,080/-under Section 17A of the Kerala Tax on Luxuries Act, 1976. It is submitted by the learned counsel for the petitioner that the detection of the offences was on 11.04.2008 and that the penalty notice issued on 15.03.2013 as well as the order of penalty and the demand raised on 31.03.2013, are completely unsustainable, since a time period of more than 5 years have elapsed from the date of detection of the offence. 4. This Court, while admitting the writ petition had rendered an interim order, wherein it is stated as follows: “The petitioner in the above writ petition challenges Exhibit P3 and P5 orders of imposition of penalty under Section 67 of the Kerala Value Added Tax Act, 2003 and Exhibits P10 and P11 penalty orders under Section 17A of the Kerala Tax on Luxuries Act, 1976 for the respective years of 2007-08 and 2008-09. The penalty orders have been issued based on a shop inspection conducted on 11.4.2008 as is evidenced from Exhibit P4 as also the notices issued before the finalization of the above mentioned penalty proceedings; which notices have been produced along with the writ petition. The penalty orders have been issued based on a shop inspection conducted on 11.4.2008 as is evidenced from Exhibit P4 as also the notices issued before the finalization of the above mentioned penalty proceedings; which notices have been produced along with the writ petition. Though no specific ground has been raised in that aspect, what looms large is the delay in finalization of the penalty proceedings. The proviso to Section 67 of the KVAT Act specifically prescribes a period of three years from the date of detection of the offence, for disposal of the case. Though Section 17A of the Kerala Tax on Luxuries Act does not prescribe any limitation, it is trite that the penalty proceedings should be finalized within a reasonable period. In such circumstance, there shall be an interim stay of Exhibits P3, P5, P10 and P11 orders until further orders.” 5. A detailed counter affidavit has been placed on record by the first respondent. It is stated that the Intelligence Wing of the Commercial Tax Department had conducted an inspection on 11.04.2008 at various hotels and resorts in Kovalam and a Shop Inspection Report was also prepared. It is stated that on receipt of the files, the first respondent had issued summons dated 16.11.2009 to the petitioner to produce Books of Accounts. It is stated that he had requested repeated adjournments for the production of the Books of Accounts and it was only on 25.09.2012 that at least partial Books of Accounts were produced by the petitioner before the 1st respondent. It is stated that it was only on production of the partial Books of Accounts that the offence was detected and the notices were, therefore, duly issued as evidenced by Exhibit P1. It is further submitted that since no objection was filed by the petitioner and since he did not appear for a personal hearing, even though time was allowed, the penalty proposed in the notices for the assessment years 2007-08 and 2008-09 was confirmed and the orders were served on the petitioner. It is stated that thereafter, demand notices were also issued as evidenced by Exhibits R1(i) and R1(j). 6. It is submitted that since the detection of the offence was only on the verification of the books of accounts produced by the petitioner in the year 2012, the notices issued on 15.03.2013 were well within time. It is stated that thereafter, demand notices were also issued as evidenced by Exhibits R1(i) and R1(j). 6. It is submitted that since the detection of the offence was only on the verification of the books of accounts produced by the petitioner in the year 2012, the notices issued on 15.03.2013 were well within time. In support of the said contention, the learned Government Pleader places reliance on a judgment of a Division Bench of this Court dated 26.10.2008 in W.A.No.344/2017, wherein it is held as follows: “8. Ordinarily a notice proposing penalty is a sure sign of detection of offence. But after inspection of offence if there is a requirement to verify the books of accounts, then the summons for production of any records should be issued within a reasonable period; not the reasonable time we earlier referred to for completion, but immediately or reasonably proximate to the inspection. The further notice, indicating a detection of offence should also be proximate to the verification of the books. Then necessarily; the detection of offence would be taken as the date on which the notice of penalty is first issued. However this reasonable period for summons or notice will have no relevance if the final order itself is issued within the reasonable period for completion or the period of limitation, as prescribed under the statute. If the finalisation is carried out within the period of limitation, provided for finalisation; from the date of inspection or verification; there can be no allegation raised of the notice of penalty, the sure sign of detection of offence being not proximate to the inspection or verification of accounts. The purpose for making such prescriptions of reasonable period; on judicial intervention, when there is no limitation provided in the statute shall not create road blocks at every twist and turn, resulting in the penal provisions being rendered nugatory.” Reliance is also placed in a decision in St. Mary's Hotels (P) Ltd. v. Intelligence Officer [ 2010 KHC 294 ] by the learned Government Pleader. 7. In the instant case also, shop inspection was conducted on 11.04.2008 and the 1st respondent had issued summons dated 16.11.2009 to produce books of accounts. Time was sought for repeatedly by the petitioner to produce the same. These aspects are revealed from Exhibits R1(a) to R1(f) produced along with the counter affidavit. 7. In the instant case also, shop inspection was conducted on 11.04.2008 and the 1st respondent had issued summons dated 16.11.2009 to produce books of accounts. Time was sought for repeatedly by the petitioner to produce the same. These aspects are revealed from Exhibits R1(a) to R1(f) produced along with the counter affidavit. It is stated that it was only on 25.09.2012 that the cash book for the year 2008-09 and ledger for the year 2007-08 were produced by an authorized representative of the petitioner. It is submitted that it was on inspection of the partial books of accounts produced that the offence was detected by the 1st respondent and notice was issued on 15.03.2013. It is submitted that since it was the petitioner, who caused the delay in production of the books of accounts, he cannot take advantage of his own delay to contend that the proceedings are belated. 8. Having considered the contentions advanced, I notice that while it is admitted that an inspection had been conducted on 11.04.2008, the documents produced along with the counter affidavit would show that Ext.R1(a) notice was issued on 16.11.2009 to appear with records. It appears that time was sought for by the petitioner repeatedly and it was only on 25.09.2012 that partial books of accounts had been produced by an authorized representative. Thereafter, Ext.P1 notice [Exhibit R1(g)] was issued on 15.03.2013. 9. This Court has held that limitation for imposition of penalty starts only from the date of detection of offence and not from the date of inspection by the authorities concerned. In St. Marys' Hotel (supra), it was held that it is only after verification of the books and accounts, in the light of the incriminating circumstances brought out in the course of the inspection, that the offence, if any, can be detected. The position is reiterated in the judgment dated 18.2.2009 in W.A.No.385 of 2009 (M/s.Acme Furniture and Interiors vs. CTO) and in judgment dated 26.10.2018 in W.P.(C).No.12391 of 2017 (T.F.Thomas v. The Commercial Tax Officer and another). In the instant case, the 1st respondent had verified the books of accounts, detected the offence and had issued notices on 15.03.2013 and the order of penalty was passed on 31.03.2013 after hearing the petitioner. In the instant case, the 1st respondent had verified the books of accounts, detected the offence and had issued notices on 15.03.2013 and the order of penalty was passed on 31.03.2013 after hearing the petitioner. In the above factual situation and in the light of the judgments of this Court referred to above, it cannot be held that the proceedings are belated. No other sustainable ground has been made out. The writ petition, therefore, fails. The same, is accordingly, dismissed.