Point of Law: Section 21 provides for self-assessment of returns filed under Section 20.

JUDGMENT :

S.V. Bhatti, J.

‘A stitch in time saves nine’

is a proverb that means if you sort out a problem immediately, it may later save a lot of extra time and work. Sections 20 to 39 of Chapter V and Section 6 of the Kerala Value Added Tax Act, 2003 (for short ‘the VAT Act’) provide for different obligations on the Dealer and the Officers in filing returns, assessment, recovery of tax, or alternatively penalty etc., for an alleged act of commission or omission by the Dealers covered by the VAT Act. For reasons, nay bona fide reasons, the enforcing machinery could not perform its duties and functions in reassessment etc., within the timelines of the VAT Act. Resulting in a slew of amendments to the VAT Act, and in the batch of appeals, the Court is concerned with the amendments made to Section 42(3) of the VAT Act by the Kerala Finance Act 2016 (for short ‘Act 18/2016’).

2. We have heard Mr Mohammed Rafiq learned Special Government Pleader (Taxes), and Mr Shamsudheen, learned Senior Government Pleader for the State/appellants, learned Advocates A Kumar, Abdul Azees, Sreekumar, Ananthakrishnan for the Dealers/ respondents.

2.1 WP(C) No.13673/2017 and batch of cases are disposed by the impugned common judgment dated 18.12.2019, and the operative portion of the judgment reads thus:

“In the result, these writ petitions are disposed of by upholding the retrospective operation of Section 42(3) of the KVAT Act, but declaring that the power to reopen assessments under the said provision cannot be exercised in relation to such assessments where the period for which the assessee concerned is obliged to retain the books of account under Rule 58(20) of the KVAT Rules has expired. The retrospective operation of Section 42(3) of the KVAT Act will thus stand controlled by the period of limitation aforementioned, and the legality of the notices/orders impugned in these writ petitions shall stand determined by the said declaration.”

Hence, the Writ Appeals, except W.A. No.1206/2020, are at the instance of the State/respondents in the Writ Petition. W.A. No.1206/2020 is filed by the dealer/petitioner in W.P.(C) No. 21004/2017.

2.2 The appeals, since involve common questions of law, are disposed of by this common judgment. W.A. No.676/2020 has been treated as the lead case for referring to the circumstances and the case of respective parties. The parties are referred to, both for convenience and consistency, as the State and Dealers, respectively.

W.A. No.676/2020

3. The Department of Commercial Taxes, Thrissur, served notice dated 25.02.2017 on M/s. MCP Enterprises, a registered dealer, proposing to reopen and make the best judgment assessment for the Assessment Year 2010-11. The case of the dealer is that as per the applicable law to the return period, the limitation expired by 31.03.2016 and issuing notice dated 25.02.2017, by recourse to the amended Section 42(3) of the VAT Act, is illegal. The amendment does not enable reopening a time-barred assessment. Briefly stated, the notice impugned in the writ petition is beyond the period of limitation applicable for the reassessment of a return under any of the circumstances covered by Section 25 of the VAT Act.

3.1 Further, it is urged that Section 42(3) cannot be pressed into service for reopening an assessment which is barred by time under Section 25(1) of the VAT Act; Section 42(3) has no retrospective operation; an assessment cannot be treated as pending without even service of notice under Section 25 of the VAT Act; Section 42(3) attempts to do away with the safeguards built into Sections 21, 22, 24, and 25 of the VAT Act; Section 42(3) avoids limitation, extinguishes the assessee’s valuable rights under Section 25(1). The word ‘pending’ in Section 42(3) is meant to cover only the cases where notice is issued by the Department. The legal fiction in the expression ‘treated as pending’ does not ta