Betty Sebastian, W/O. V.D Sebastian V. The Assistant Commissioner, Department of Commercial Taxes, Special Circle-III and The Fast Track Team, Commercial Taxes Department, Special Circle-III and The Kerala Agricultural Income Tax and Sales Tax Appellate Tribunal, Additional Bench, Ernakulam

ST.Rev./4/2018

AI Insights

The case involves Betty Sebastian, the petitioner, who was assessed for sales tax on her dealings with non-stick cookware and aluminum utensils for the years 2003-04 and 2004-05. Initially, her assessments were completed by the Fast Track Team under Section 17D of the K.G.S.T. Act, levying tax at 4% for the entire turnover. However, a reopening of these assessments was later ordered, leading to a higher tax rate being applied to non-stick cookware at 12%. The primary legal contention revolved around the legality of the reopening of the assessments and whether it was done within the permissible limits of time and procedure under the relevant tax laws.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 818883 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 26-03-2018
• Assessment Year: misc
• Other Referred Cases: Supply House v. State of Kerala, Mohammed Kunju v. Asst. Commissioner of Commercial Taxes, State of Punjab v. M/s Shreyans Indus Ltd., Hindustan Petroleum Corporation v. Assistant Commissioner, Geo Sea Foods Vs. Addl. STO, State Of Kerala Vs. Abhilash T. Mathew
• Laws Referred To: Kerala General Sales Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: MOHAMMED RAFIQ
• Assessee Lawyers: LIJU STEPHEN; INDU JACOB
• Keywords: Assessment Reopening; Limitation; Sales Tax Revision; Non-stick Cookware; Aluminum Utensils
• Section: 19; 17D

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY, THE 26TH DAY OF MARCH 2018 / 5TH CHAITHRA, 1940 S.T.Rev.No. 4 of 2018 [AGAINST THE COMMON ORDER DATED 27.06.2017 IN TA.NO.75/2014 OF THE KERALA AGRL. INCOME TAX AND SALES TAX APPELLATE TRIBUNAL, ADDITIONA. BENCH, ERNAKULAM]. -------------------- PETITIONER(S): BETTY SEBASTIAN, W/O. V.D SEBASTIAN, NOW RESIDING AT FLAT NO. 7C, BETRONS TOWERS, BLOSSOM ROAD, ELAMKULAM, ERNAKULAM, KOCHI-20. BY ADVS.SRI.LIJU.V.STEPHEN SMT.INDU SUSAN JACOB RESPONDENT(S): 1. THE ASSISTANT COMMISSIONER, DEPARTMENT OF COMMERCIAL TAXES, SPECIAL CIRCLE-III, COMMERCIAL TAX COMPLEX, EERNAKULAM, KOCHI - 682 015. 2. THE FAST TRACK TEAM, COMMERCIAL TAXES DEPARTMENT, SPECIAL CIRCLE-III, COMMERCIAL TAX COMPLEX, ERNAKULAM, KOCHI - 682 015. 3. THE KERALA AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, ERNAKULAM 682 015 R1 & R2 BY SENIOR GOVERNMENT PLEADER SRI.MOHAMMED RAFIQ. THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 26-03-2018, ALONG WITH S.T.REV.NO.5 OF 2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: S.T.REV.NO.4 OF 2018 APPENDIX PETITIONER'S ANNEXURES: ANNEXURE-A TRUE COPY OF THE ORDER DATED 26.02.2011 FOR THE ASSESSMENT YEAR 2003-2004. ANNEXURE-B TRUE COPY OF THE APPEAL MEMORANDUM FILED BY THE PETITIONER IN T.A.No.75 of 2014 DATED 25.10.2014 FOR THE ASSESSMENT YEAR 2003-2004. ANNEXURE-C CERTIFIED COPY OF THE ORDER DATED 27.06.2017 OF THE 3RD RESPONDENT IN T.A.NO.75 OF 2014. RESPONDENT'S ANNEXURES: NIL. vku/- [ true copy ] “C.R.” K. Vinod Chandran & Ashok Menon, JJ. ------------------------------------------------------- S.T.Rev.Nos.4 & 5 of 2018 ------------------------------------------------------- Dated, this the 26th day of March, 2018 ORDER Vinod Chandran, J: The revision petitioner-assessee is concerned with two assessment years, ie: 2003-04 and 2004-05. The assessee was dealing with non-stick cookware and aluminum utensils. The assessee filed returns for the aforesaid years and for reason of the Kerala General Sales Tax (“K.G.S.T.” for short) having ceased to have effect with 2004-05, the assessments were completed by the Fast Track Team under Section 17D of the K.G.S.T. Act. The assessment was completed in accordance with the returns levying tax at the rate of 4% for the entire turnover. The order was passed on 24-07-2009. The assessee accepted the same and paid the tax in accordance with the demand raised. 2. Later, by Annexure-A produced in both the Revisions, there was a reopening of assessments made and fresh orders passed on 26-02-2011 for both the years. The reopening was for reason of the assessee having returned only 4% tax, for the turnover of non-stick cookware dealt with by the assessee; which was levied tax @ 12%. The assessee had a contention that the aluminum S.T.Rev.4 & 5 of 2018 - 2 - household utensils dealt with by the assessee was assessable only @ 4% as per the judgments of this Court, prior to a Full Bench decision. 2008 (2) KLT 448 (FB) [Supply House v. State of Kerala] found that only household utensils made of aluminum or aluminum alloys fall under Entry 5 of the First Schedule to the K.G.S.T. Act. Non-stick cookware made of aluminum was found to be home appliances, classifiable under Entry 104 (116 in the subject assessment year) exigible @ 12%. In such circumstances, the assessee cannot take a contention that he had been collecting tax at the lower rate on the basis of the earlier judgments. Especially going by the principle that hardship to the assessee, for not having collected tax at the higher rate, by reason of a belief harboured that rate was lower, cannot offer any mitigation from the actual levy at the higher rate, as per the taxing statute. 3. The question raised before this Court in the Revision is also not on the exigibility of the non-stick cook ware, which stands covered by the Full Bench decision; but on the issue of whether the reopening was hit by limitation. We have to notice certain facts, which are necessary for framing the questions of law. The assessment order as we already noticed was by the Fast Track Team as S.T.Rev.4 & 5 of 2018 - 3 - constituted under Section 17D. The original assessment order was passed on 24-07-2009 and on 27-12-2010 there was a notice issued for re-opening by the Assessing Officer, to which the dealer replied by communication dated 26-02-2011. Notice issued and the final order passed at Annexure A was made by a single officer, the Assessing Officer, when the original assessment was made by the Fast Track Team. Before the Tribunal, three issues were raised, one on limitation, the other on there being no fresh material for reopening and then the question of a single officer having reopened the assessment. The Tribunal only dealt with the issue of single officer having reopened an assessment, completed by a team of four officers. The Tribunal set aside the order, but however observed that there is still liberty reserved for the Department to reopen the assessment. We are not asked to deal with the question of whether the reopening was proper by the Assessing Officer, since the Tribunal has already dealt with it and held in favour of the assessee and there is no revision by the State. We also concur with the opinion of the Tribunal. 4. The Tribunal however did not consider the question as to whether the Commissioner has the power to permit reopening of S.T.Rev.4 & 5 of 2018 - 4 - the assessment beyond the limitation period. The question also arises; if the Commissioner is so conferred with power, whether it can be reopened without notice to the petitioner. The assessee has not questioned the power of the Commissioner to permit reopening, without notice, but all the same, the question does arise. The Tribunal also did not consider the question on limitation as raised before the Tribunal. We hence re-frame the questions of law as follows:- (1) Whether the Tribunal was right in leaving liberty to the Department to reopen the assessment on permission issued by the Commissioner ? (2) Whether the Tribunal was right in having ignored the provisions of limitation under Section 19 and the amendments made to Section 17 as per the Finance Act, 2010 on 28-07-2010 ? (3) Whether the Commissioner could have reopened the assessment under Section 17D, without notice to the petitioner and ought not the Tribunal have considered the question? 5. On the question of limitation, the learned Counsel for the petitioner would contend that Section 17D does not in any manner efface the limitation provided under Section 19. Even if Section 17D is found to be not controlled by Section 19, the amendments on S.T.Rev.4 & 5 of 2018 - 5 - 28-07-2010, to Section 17, would bring in a limitation for reopening of assessments. The learned Counsel would rely on the decision of a learned Single Judge reported in 2008 (4) KLT 157 [Mohammed Kunju v. Asst. Commissioner of Commercial Taxes] as also the decision of the Hon'ble Supreme Court reported in (2016) 4 SCC 769 [State of Punjab v. M/s Shreyans Indus Ltd.] The learned Government Pleader per contra would rely on the decision reported in 2009 (4) KHC 819 [Hindustan Petroleum Corporation v. Assistant Commissioner] and an unreported decision of a learned Single Judge in W.P.(C) No.19613/2013 dated 22-06-2016 [Saji Thomas v. Assistant Commissioner (Assmt.)]. 6. We extract Section 17D hereunder: “17D. Fast Track method of completion of Assessment.- (1) Notwithstanding anything contained in any other law for the time being in force or in any other provisions of this Act assessments pending under the Act as on the 1st day of April, 2007 may, subject to the provisions of sub-section (2), be completed under the fast track method. (2) The assessment under sub-section (1) shall be completed in the following manner, namely:- (a) The assessment shall be completed by a 'team' comprising of a team of officers which shall be constituted by the Commissioner; S.T.Rev.4 & 5 of 2018 - 6 - (b) In the case of files relating to Special Circles, there shall be three Assistant Commissioners in the team, headed by a Deputy Commissioner. In the case of Ordinary Circles, the team shall be headed by an Assistant Commissioner and comprise three Commercial Tax Officers as members; (c) All files of the dealer pertaining to an assessment year shall be clubbed with assessment file and taken up for disposal; (d) No assessment completed by the teams shall be re-opened unless there is fresh receipt of materials pertaining to tax evasion: Provided that the assessment may be re-opened with the prior permission of the Commissioner; (e) The assessment shall be completed fairly by a summary proceeding; (f) the team shall be competent to offer reasonable concessions after recording the reasons thereof on the estimation of suppression of turnover on account of any offences detected against the dealer, and also on the interest payable up to a maximum of fifty per cent of that payable, in cases where the dealer offers immediate payment of the dues; (g) The hearings shall be open to public. The date and venue of the sitting shall be intimated in advance to the dealers concerned. Information shall also be published through the local media; (h) No adjournment in the cases listed at a session shall be permitted except under exceptional circumstances; S.T.Rev.4 & 5 of 2018 - 7 - (i) If a dealer fails to appear, the assessment shall be finalised 'ex-parte' following the principles of natural justice; (3) All assessment under fast track method shall be by unanimous decisions signed by all team members. (4) Notwithstanding anything contained in any other law for the time being in force the officers of the team shall be absolved from personal liability on account any assessment order issued in good faith. (5) Notwithstanding anything contained in any other provisions of this Act, appeals against the assessment orders issued under fast track method shall lie within forty five days to the Sales Tax Appellate Tribunal and no such appeal shall lie unless the dealer has paid the entire tax amount.” 7. Clause (d) of sub-section (2) of Section 17D provides for reopening of assessment, but however only when there is fresh receipt of materials pertaining to tax evasion. In the present case, there is no fresh material obtained by the Department and the assessment was reopened only on the finding that there was a mistake in the return in so far as showing the tax leviable on non-stick cookware at 4%, as against the actual levy at 12%. We notice that the proviso to clause (d) enables reopening with the prior permission of the Commissioner, in which event the issue of fresh receipt of materials would not at all arise. Hence, when there is an S.T.Rev.4 & 5 of 2018 - 8 - order of the Commissioner definitely there could be a reopening made even in the absence of receipt of fresh materials. 8. Now, we will examine the contention raised by the assessee of the proceedings being hit by limitation. We have to emphasize that Section 17D does not provide for any limitation and the contention of the learned Counsel is based on the limitation under Section 19; which is asserted to be applicable to assessments under Section 17D. The learned Counsel for the petitioner has a contention that the non-obstante clause, as seen from Section 17D would only make inapplicable any provisions in the KGST Act, which are in conflict with the scheme under Section 17D. A decision of the Hon'ble Supreme Court reported in AIR 1984 SC 1022 [Union of India v. G.M.Kokil & others] was also placed before us to advance the said proposition. We are not convinced that the aforesaid decision has any application. 9. In the cited case the provision examined was more complex than a pure and simple non-obstante clause. The Inspectors, Senior and Junior Supervisors and Store Keepers of the Security Press at Nasik, registered as a factory, claimed overtime wages at double the normal rates as per the Factories Act, 1948. The claim S.T.Rev.4 & 5 of 2018 - 9 - was resisted by the management on the contention that the claimants are not workers. The provision examined; Section 70 of the Bombay Shops and Commercial Establishments Act [for brevity “BS&CE Act”], made inapplicable the provisions of BS&CE Act to a factory and the provisions of the Factories Act, 1948 was held to be applicable “notwithstanding anything contained in that Act” to all persons employed in the factory. This was held to have the effect of enlarging the scope of the Factories Act to all persons employed, irrespective of whether they are 'workmen' or not in AIR 1959 SC 1226 [B.P.Hira Vs.C.M.Pradhan]. A defense was taken that the State Government was empowered under Section 64 of the Factories Act to exempt employees, from the application of Section 59. By Rule 100 the claimants came within the exempted category. The non obstante clause, in Section 70, as found by the Supreme Court, gave overriding force as against the contrary provisions in the same statute or another. Here, the non-obstante clause specifically makes inapplicable all the other provisions of the KGST Act. There is also no limitation provided under the section. A reopening is permitted on receipt of new materials or on the permission of the Commissioner; without any time limit. The provisions in Section 19 runs contrary to S.T.Rev.4 & 5 of 2018 - 10 - the wide elbow room permitted under Section 17D and even if the dictum applies; it does, in favour of the revenue. 10. Apposite here, would be reference to Hindustan Petroleum Corporation, where the Division Bench found that Section 17D begins with a non-obstante clause which sets it free from any other law or the other provisions of the KGST Act, in so far as the assessment pending under the Act as on the 1st of April, 2007. In such circumstances, there is no question of there being a limitation in so far as a reopening is concerned, either by receipt of fresh materials or by permission obtained from the Commissioner. Section 17D is a code by itself and is not controlled by the provisions of the KGST Act, which are in conflict with the scheme as envisaged therein. 11. The learned Counsel for the assessee then would rely on the first proviso to Section 17 introduced as per the amendment on 28-07-2010. The proviso is as follows: (i) in sub-section (6), for the fourth proviso, the following proviso shall be substituted, namely:- “Provided also that the assessment relating to the years upto and including the year 2004-05 pending as on 31st March, 2010 shall be completed on or before the 31st day of March, 2011: Provided further that in cases where any assessment completed under this Act has been reopened with the S.T.Rev.4 & 5 of 2018 - 11 - permission of the Commissioner,m the time limit mentioned in section 19 shall not apply.” 12. Section 17 as the nominal heading indicates is the procedure to be followed by the assessing authority. The aforesaid amendment introduced provisos to sub-section (6) of Section 17, providing for limitation for completing assessment. One proviso mandates that the assessment relating to the years upto and including the year 2004-2005, pending as on 31-03-2010, shall be completed on or before the 31st March, 2011. The further proviso also provided that this limitation would not apply in cases wherein assessments were completed under the Act and already reopened under Section 19. This has no application to the petitioner, whose assessment was completed in the year 2009 under Section 17D and then later reopened under Section 17D by virtue of the permission granted by the Commissioner. As already held, Section 17D provided for reopening, without any limitation, when there is receipt of fresh materials and when there is permission from the Commissioner. A provision for limitation would definitely be in conflict with the scheme of Section 17D. 13. The further argument is based on Mohammed Kunju S.T.Rev.4 & 5 of 2018 - 12 - which dealt with the provisions of Section 17(6) to Section 17(9) and Section 17A which again would not be applicable in the scheme of Section 17D. In 2003 the legal heirs of a deceased dealer received notices for completing the assessments of the years 1974-75 and 1980-81; which were respectively remanded for fresh consideration by the First Appellate Authority, by orders of 1982 and 1989. The legal heirs defended the notice on grounds of limitation, pointing out insertion of sub-sections (6) to (9) in Section 17. Sub-section (8) mandate completion of remanded assessments within four years of the order of remand. The Department relied on Section 17A, which was found to have not provided for any fresh limitation other than that found in sub-section (6) & (8) of Section 17, but only provided for validation of all assessments completed by virtue of Section (6), which brought in a period of limitation and provided time to complete the assessments pending till then. This was also to neutralize the decision of this Court in (2000) 119 STC 236 [Geo Sea Foods Vs. Addl. STO], which set aside the assessments of far earlier years on the ground of completion having not been effected within a reasonable time. On introduction of Section 17A this Court's Full Bench in 2006 KLT 72 (F.B) [Geo Sea Foods Vs. S.T.Rev.4 & 5 of 2018 - 13 - Addl. STO] upheld the assessments so completed. This has no application here. 14. There is another contention raised by the learned Counsel based on M/s Shreyans Indus Ltd. Therein the issue was with respect to the Statute prescribing an outer limit of three years to complete the assessment. There was also a provision enabling the Commissioner to extend the period of limitation. The assessments were not completed within the period of limitation. Notices were issued after limitation was over and objections were raised specifically on the question of limitation. When such objections were received, the Assessing Officer approached the Commissioner and obtained a permission to extend the period of limitation. The Hon'ble Supreme Court found that if at all an extension is permissible, it has to be done before the period of limitation is over. When the limitation is over, the assessments are barred and there is no question of an enabling provision being resorted to, for extending the time. When the period of limitation has expired then there cannot be a fresh life given to such assessments. The above proposition also does not apply here, wherein Section 17D does not provide for a specific period of limitation. S.T.Rev.4 & 5 of 2018 - 14 - 15. We also notice an unreported judgment of a learned Single Judge in W.P.(C) No.19613/2013 dated 22-06-2013 [Saji Thomas v. Assistant Commissioner (Assessment)], wherein this specific issue was considered and answered against the assessee and in favour of the Revenue. We agree with the decision of the learned Single Judge. We find that there is no limitation under Section 17D and Section 19 would not be applicable to reopening of assessments completed under Section 17D. If at all, there could be only; the restriction of reopening being completed within a reasonable period. In the present case, the assessment was of the years 2003-04 and 2004-05 completed in 2009 within the period of limitation. It was permitted to be reopened by the Commissioner in 2010. The reopening was proposed to be made in the very same year and the final order was passed immediately thereafter. There could hence be no ground of unreasonable delay found to interfere with the reopening carried out. 16. In this context, we have to notice that the reopening was made specifically on the permission granted by the Commissioner, which was on 08-12-2010. Admittedly, there is no reference to the permission of the Commissioner in Annexure A. The S.T.Rev.4 & 5 of 2018 - 15 - assessee asserts that the order of the Commissioner was produced at the time of hearing before the Tribunal and never before in any of the proceedings initiated by the assessee. The learned Senior Government Pleader also submits that the order produced before the Tribunal was an authenticated copy of the permission. An authenticated copy or otherwise, we are more concerned with the same having not been produced before any of the authorities or even referred to in the notice issued or in the order finalized as per Annexure A. The learned Senior Government Pleader would point out that the only proceeding from an order under Section 17D is directly to the Tribunal. The Counsel for the assessee points out that there were other proceedings in so far as a civil suit instituted against the Department as also two Writ Petitions filed before this Court, wherein the permission issued by the Commissioner was never adverted to by the Department. 17. The question then is as to the sustainability of the Commissioner's order. A Division Bench of this Court in 2013 KHC 2519 [State Of Kerala Vs. Abhilash T. Mathew] held that even when there is an enabling provision, permitting assessment or reassessment on orders of the Commissioner or any assessing S.T.Rev.4 & 5 of 2018 - 16 - authority, extending the period of limitation; necessarily notice has to be issued to the assessee. In this case, we find that no notice has been issued to the assessee. This is not a ground the assessee raised before the Tribunal because the assessee was confronted with the permission only at the hearing of the appeal. We however notice that if a remand is now made; the assessment under the KGST Act would be kept alive after more than a a decade from its ceasing to have effect. There is also considerable delay in the filing of the appeal before the Tribunal, occasioned from the part of the assessee, of four years. Then, three years the appeal was pending before the Tribunal. We are now eight years from the date of reopening; four of which elapsed due to the wrong forum approached by the assessee and three lost at the Tribunal. Hence we are only one year from the reopening which is a reasonable period within which a reopening can be permitted as directed by the Tribunal. Even if we set aside the order of the Commissioner, necessarily, the Commissioner would have liberty reserved to consider it afresh, with notice. We are however anguished by the futility of such a remand. There is no ground validly possible of being raised by the assessee, against the reopening. Especially when we have found Section 17D being not S.T.Rev.4 & 5 of 2018 - 17 - regulated by Section 19 and the Full Bench having found the non-stick cook ware exigible to tax at the higher rate. The exercise would be an empty formality and futile. 18. In such circumstances, we uphold the Tribunal's order, directing a fresh consideration by the Fast Track Team. We are told that the same has been completed. Hence what remains if at all, is for the assessee to file an appeal, from that order, if there is a dispute on quantum. The issues decided herein cannot be reopened in the quantum appeal if at all filed. The questions of law framed at 1 & 2 are answered in favour of the revenue and against the assessee and that framed at 3, against the revenue but in the facts and circumstances as noticed herein above not inuring to the benefit of the assessee. The revisions, in effect, stand rejected. Sd/- K.Vinod Chandran Judge Sd/- Ashok Menon Judge vku/- [ true copy ] "