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2025 Supreme(Online)(KER) 2114
HIGH COURT OF KERALA
A. K. Jayasankaran Nambiar, Easwaran S., JJ
THE STATE TAX OFFICER (WORKS CONTRACT) – Appellant
Versus
LEELA ELECTRIC POWER SERVICES – Respondent
WA 231/2021
SRI.V.K.SHAMSUDHEEN, ADV.SRI.K.J.ABRAHAM, ADV.SRI.NIKHIL JOHN
Retrospective amendments in tax legislation must not infringe upon accrued rights of assessees and should align with reasonable limitations to avoid prejudice.
Headnote:(A) Kerala Value Added Tax Act - Sections 25(1) and 42(3) - Writ Appeal against assessment order - Notice issued beyond six years was barred by limitation as per Section 25(1) - The court affirmed that retrospective amendments must not infringe upon accrued rights of assessees - The classification of assessees based on turnover was upheld as constitutional. (Paras 3, 4, 5, 9, 10)
(B) Retrospective legislation - The legislature's power to enact retrospective laws is recognized, but such provisions must not cause substantial prejudice to assessees or deprive them of accrued rights. (Paras 8, 9)
Facts of the case:
The writ petitioner, an electrical contractor, challenged the assessment order issued under the KVAT Act, arguing that the notice was barred by limitation. The learned Single Judge agreed, citing relevant case law.
Findings of Court:
The court upheld the Single Judge's decision, confirming that the retrospective application of Section 42(3) must align with reasonable limitations to avoid prejudice to assessees.
Issues: The main issues included the validity of the notice under Section 25(1) and the implications of retrospective amendments under Section 42(3).
Ratio Decidendi: The court ruled that retrospective amendments must not infringe upon accrued rights and that the classification of assessees based on turnover is constitutionally valid.
Result: Writ Appeal dismissed.
J U D G M E N T
Dr. 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 (1) as amended with effect from 01.04.2017 by the Finance Act, 2017. In finding the notice under (1) of the KVAT Act to be barred by limitation, the learned Judge relied on the judgment of this Court inBaiju 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 inM/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 inBaiju 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 inMCP Enterprises [supra] had only clarified that the provisions of (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 re- opening assessments under Section 25 of the KVAT Act, notices for re- opening 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] inM/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 of the KVAT Act had expired, the Revenue could not invoke (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 (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 brought into force in the Stat
