In a recent ruling, a two-judge bench of the Kerala High Court ruled that the amendment in Kerala Value Added Tax ( KVAT ) Act extending the period of limitation for re-assessment under section 25(1) to six years from Five years cannot be applicable to the completed assessments as the same has no retrospective effect.
While hearing a bunch of appeals against the decision of the Single Judge, Justices Vinod Chandran and Ashok Menon clarified that even a legislative amendment enhancing the period of limitation for reassessment cannot affect assessments already concluded, unless specific intent to give retrospective application is manifest from the language of the amendment.
“We have followed the Full Bench decision insofar as finding that the limitation was for not concluding the assessment but for initiation of proceedings. The interpretation placed on the words ‘proceed to determine…’ by the Full Bench, was following the earlier decision of a Division Bench which considered in pari materia provisions under the KGST Act, in Tirur Medical Stores V. State of Kerala [1978 KLT 415]. In such circumstance the action initiated by the Department after the period of limitation provided, by issuance of notices under Section 25(1) cannot be sustained.”
The petitioners in the instant case, challenged the amendment to the said provision. Section 25(1) gave power to the revenue to issue notice to the assessee to re-assess concluded assessment on best of judgment basis where there is escapement of turnover from assessment, within a period of five years from the last date of the assessment year.
Earlier, the Single Judge quashed the assessment notices on the ground that they were time barred. Before the Court there were cases where notices under Section 25(i) were issued by the Assessing Authorities, after the expiry of 5 years from the last date of the assessment year. The Court held that notice under Section 25{t) cannot be issued beyond the period of limitation.
“We have demonstrated from the various decisions of the Hon’ble Supreme Court placed before us by both the parties that there is no irrefutable rule that an amendment by substitution is invariably retrospective. We find the amendment by substitution in the present case, extending the period of limitation from 5 years to 6 years to be not applicable to those assessments which stood completed and the 5 year period for re-opening of assessment under Section 25(1) stood expired. We do not see any reason to interfere with the impugned judgments on the basis of the amendment made subsequent to the judgment. Though the legislature had the competence to extend the period of limitation with retrospective effect, the same was not done. We cannot but observe that even if such an exercise was carried out, necessarily there should have been a validation clause so as to get over the judgment of the writ Court. Rai Ramakrishna, Meerut Development Authority, M/s Arooran Sugars Limited, and Indian Aluminium Co. are cases in which the legislature despite the judgment of a constitutional court; brought in amendments removing the defect pointed out in the judgments, and also provided a validation clause by which the action taken under the defective provision stood validated under the retrospective amendment made. This exercise is totally absent in the amendment made to section 25 (1), substituting the period of limitation from five to six years,” the bench said.
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