IMPORTANT POINT
Retrospective amendments to tax legislation must not infringe upon accrued rights or create unfair disadvantages for assessees, ensuring reasonable time limits for assessments.

JUDGMENT :

A.K.Jayasankaran Nambiar, J.

This Writ Appeal preferred by the State impugns the judgment dated 09.06.2020 in W.P.(C).No.11291 of 2020.

2. The brief facts necessary for disposal of the Writ Appeal are as follows:

The writ petitioner was an electrical contractor and a dealer under the Kerala Value Added Tax Act [hereinafter referred to as the “KVAT Act”]. During the assessment year 2011-12, he filed returns along with audit reports in Form 13 and Form 13A as prescribed under the KVAT Act and Rules. Thereafter, nothing was heard from the Department, and the petitioner assumes that the assessment has become final. He was however served with a notice dated 13.02.2019 under Section 25(1) read with Section 42(3) of the KVAT Act. In the proceedings that followed, his objections were considered and Ext.P5 assessment order passed confirming a substantial demand against him.

In the writ petition, the respondent/writ petitioner impugned Ext.P1 notice and Ext.P5 assessment order inter alia on the ground that the proceedings that led to the said assessment order were barred by limitation.

3. The learned Single Judge, who considered the writ petition, found that inasmuch as the notice under Section 25(1) was issued beyond six years, it was barred by limitation even going by the provisions of Section 25(1) as amended with effect from 01.04.2017 by the Finance Act, 2017. In finding the notice under Section 25(1) of the KVAT Act to be barred by limitation, the learned Judge relied on the judgment of this Court in Baiju A.A. and Others v. State Tax Officer and Others - [2020 (1) KHC 39]. As regards the validity of the notice, to the extent it invoked Section 42(3) of the KVAT Act, the learned Judge found that even the said notice was barred by limitation going by the judgment of the Division Bench of this Court in M/s. MCP Enterprises v. State of Kerala and Others – [2020 (1) KHC 127]. The writ petition was therefore allowed by setting aside Ext.P1 notice and Ext.P5 assessment order.

4. In the appeal before us, the main contention raised by Sri.V.K.Shamsudheen, the learned senior Government Pleader, is that, while it may be a fact that the notice, to the extent it invoked Section 25(1) of the KVAT Act, was barred by limitation as laid down in Baiju A.A. [supra], the same could not be said of the notice, to the extent it invoked Section 42(3) of the KVAT Act. It is pointed out that the Division Bench in MCP Enterprises [supra] had only clarified that the provisions of Section 42(3) of the KVAT Act do not have a retrospective effect beyond a period of five years and did not hold that the provision itself could not be invoked after a period of five years from the end of the assessment year.

5. We have considered the said submission of the learned senior Government Pleader but find ourselves unable to accept the same. The very issue as to whether, on the expiry of the period envisaged for reopening assessments under Section 25 of the KVAT Act, notices for reopening assessments could be issued invoking Section 42(3) of the KVAT Act was considered by a Single Bench of this Court comprising of one of us [Dr. Justice A.K. Jayasankaran Nambiar] in M/s. MCP Enterprises v. State of Kerala – [2020 (2) KLT 295]. In the said case, the petitioners had contended that in cases where the period for re-opening assessments under Section 25 of the KVAT Act had expired, the Revenue could not invoke Section 42(3) of the KVAT Act to re-open assessments that had already become final under the KVAT Act. While dealing with the said contention, the Court went into the Scheme of Section 42(3) of the KVAT Act and found as follows in paragraphs 7 to 10 of the said judgment;

“7. On a consideration of the facts and circumstances of the case as also the submissions made across the bar, I find that Section 42 of the KVAT Act was amended through a Notification dated 13.11.2016, and the amendment was given retrospective effect from 01.04.2005, the date on which the KVAT Act was