14 Year Delay to Issue Tax Notice: Kerala HC Holds No Protection u/s 17D KGST Act on “Fast Track Assessments” [Read Order]

The Kerala High Court recently delivered a judgment clarifying the scope of limitation exercisable by the Revenue in terms of the Kerala General Sales Tax (KGST) Act, 1963.

The case arose when the Revenue Department, through the Fast Track Assessment Team, issued a tax notice dated November 20, 2019 to the respondent, K. Sasilal, proprietor of Kala Agencies, concerning the assessment year 2004-05.

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The respondent-assessee proceeded to challenge the notice before a Single Judge Bench of the Kerala High Court who held that though Section 17D of the KGST Act did not prescribe any period of limitation, the delay of 14 years could not be statutorily reasoned with.

The Government Pleader appearing for the Revenue placed reliance on Betty Sebastian v. Assistant Commissioner, Department of Commercial Taxes and Others (2018) to substantiate their position.

Meanwhile, K.N.Sreekumaran appeared for the respondent assessee.

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The Division Bench comprising Justice Dr. A.K. Jayasankaran Nambiar and Justice Easwaran S. concurred with the findings of the Single Judge in the impugned judgment, noting that even in Betty Sebastian, the Division Bench had emphasized that excessive delays could not be justified under Section 17D of the KGST Act.

The Bench held that condoning a 14-year delay would be contrary to the inherent scheme of the provision and would "do violence to the language used in the statutory provision." The Court further remarked that the KGST Act itself had been repealed in relation to the commodity in question, and the Kerala Value Added Tax (KVAT) Act had since been introduced, making the Revenue’s position even more untenable.

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In light of the observations made, the Kerala High Court proceeded to dismiss the appeal, reaffirming that the absence of a limitation period under Section 17D does not imply that tax authorities have unchecked discretion to act arbitrarily, in contravention of statutory principles.

To Read the full text of the Order CLICK HERE

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