IMPORTANT POINT
Re-assessment under Section 25A of the KVAT Act cannot occur if the original assessment is time-barred under Section 25(1), ensuring adherence to statutory limitations.

ORDER :

Dr . A.K. Jayasankaran Nambiar, J.

In this batch of cases comprising of O.T. Revisions, Writ Petitions and Writ Appeal, the main issue that arises for consideration is whether notwithstanding the fact that the completion of an assessment under the Kerala Value Added Tax Act [hereinafter referred to as the “KVAT Act”] has become barred by limitation under Section 25(1) of the KVAT Act, the mere fact that a notice is issued by the Revenue invoking the provisions of Section 25A of the KVAT Act would enable the Revenue to complete a re-assessment by ignoring the period of limitation under Section 25(1) of the KVAT Act ?

2. While the O.T. Revisions preferred by the assessees impugn the orders of the Appellate Tribunal that uphold the contention of the Revenue that re-assessment proceedings initiated under Section 25A of the KVAT are not subject to the limitation period prescribed under Section 25(1) of the KVAT Act, the O.T. Revisions and Writ Appeal preferred by the State impugn the orders of the Appellate Tribunal/Single Judge that reject the said contention of the Revenue. The writ petitions are preferred challenging notices/assessment orders that adopt the said view of the Revenue.

3. To appreciate the issue raised in these cases, it would be apposite to first notice the relevant statutory provisions under the KVAT Act. As per the Scheme of the KVAT Act, the assessment procedure commences with the filing of a return by the assessee. If the return filed by the assessee conforms to the requirements under the KVAT Act and Rules, in respect of the details of turnover to be furnished and the tax to be paid thereon, and there is no query raised by the Revenue within the period prescribed for the same, the assessment to tax is completed as a self assessment to tax by the assessee under Section 21 of the KVAT Act. If an assessee does not file a return as contemplated by the KVAT Act and Rules or files a defective return, then the assessment is completed on best judgment basis by the Revenue after following the procedure under Section 22 of the KVAT Act. In certain cases, as enumerated under Section 24 of the KVAT Act, an assessment can be completed pursuant to consideration of audit objections in relation to the details furnished by the assessee along with his returns. The assessments completed under Sections 21, 22 and 24 can still be re-opened in terms of Section 25 of the KVAT Act to assess such turnover as an escaped assessment to tax in an earlier assessment. The power to assess escaped turnover under Section 25 has, however, to be exercised within the period stipulated under the KVAT Act for the exercise of such power. The said period was five years from the end of the assessment year concerned till 31.03.2017 and was extended to six years from the end of the assessment year concerned thereafter. Section 25A of the KVAT Act is relevant for our purposes, and reads as follows:

“25A. Assessment of tax based on Audit Objections:-

Notwithstanding anything contained in this Act, where an objection has been raised by the Comptroller and Auditor General of India in respect of an assessment or reassessment made or scrutiny of any return field under this Act, and if the assessing authority is satisfied that such objection is lawful, the assessing authority shall proceed to re-assess the dealer or dealers with respect to whose assessment or re-assessment or scrutiny as the case may be, the objection has been made.

Provided that no order under the section shall be passed without giving the dealer an opportunity being heard.”

As already noticed above, the main issue that arises for consideration is whether the Revenue can proceed to re-assess an assessee by placing reliance on a report of the Comptroller and Auditor General of India [CAG], by ignoring the period of limitation of five years/six years envisaged in Section 25(1) of the KVAT Act.

4. We have heard Sri.A.Kumar, the learned senior counsel for the petitioners as also Sri.Mohammed Rafi