The High Court of Kerala has upheld the validity of Section 174 of the Kerala State Goods and Services Tax (KSGST) Act, 2017 and dismissed the claims of limitation under Section 25(1) of the Kerala Value Added Tax (KVAT) Act, 2003.
The ruling came in response to a writ appeal filed by Redlands Ashlyn Motors PLC, represented by its partner, Sunitha Ashlyn.
The appellant, represented by T.C. Suresh Menon, M. Unnikrishna Menon and B. Deepak had challenged the legality of Section 174 of the KSGST Act, arguing that it exceeded the state’s legislative power. The High Court’s decision was influenced by the precedent set in the case of Sheen Golden Jewels (India) Ltd. v. State Tax Officer(IB)-1 [2023 (1) KLJ 49]. The respondent revenue was represented by Smt. M.M. Jasmine.
The writ appeal was filed against the order in WP(C). No. 33583 of 2018 wherein, the appellant, along with several others had initially filed a batch of writ petitions wherein the Kerala High Court has ruled against them. Aggrieved by the same, the present writ appeal was filed by the appellant.
In WP(C). No. 33583 of 2018 and connected cases, the petitioners, including well-known entities like Kalyan Jewellers, New Paint Point, P.V. Ramaswamy & Company and Redlands Ashlyn Motors PLC, had argued that Section 174 of the KSGST Act was ultra vires the state’s legislative power. They also claimed that the demands made under the KSGST Act were barred by limitation under Section 25(1) of the KVAT Act.
In response to these claims, the court made a critical reference to a previous judgment dated 11th January 2019 in the case of W.P (C)No. 11335 of 2018 and connected cases, which had ruled against the petitioners on similar grounds.
The judgment affirmed that proceedings initiated under the KVAT Act after the introduction of the GST are valid, provided they comply with the provisions of the KSGST Act. The court emphasised the importance of the savings clause in Section 174(2) of the KSGST Act, which is designed to preserve the validity of proceedings initiated under previous tax laws, such as the KVAT Act, to ensure a smooth transition to the GST regime. The migration to GST does not absolve taxpayers of their obligations under the repealed KVAT Act. The state retains the right to recover unpaid taxes under KVAT as long as it adheres to the relevant provisions. It also emphasised the significance of adhering to tax compliance deadlines and the authority of the tax department to demand and collect overdue taxes within the statutory timeframes.
In the present writ appeal, the High Court dismissed the appeal by following the judgment of the Division Bench in Sheen Golden Jewels (India) Ltd. v. State Tax Officer(IB)-1 [2023 (1) KLJ 49]. In this case, the court held that proceedings initiated under the KVAT Act after the introduction of GST are valid due to the savings clause in Section 174(2) of the KSGST Act.
The court emphasised that the issues raised in the writ appeal had already been conclusively decided in the earlier judgment, and the State Legislature was within its competence to enact Section 174(2) of the KSGST Act.
The court rejected arguments that the repeal of the KVAT Act erased every legal obligation under the old tax law, emphasising that the savings clause was intended to ensure certainty in proceedings even after the repeal.
The transition to GST does not absolve taxpayers from their obligations under the previous tax regime. Tax authorities have the legal authority to enforce the collection of overdue taxes within the specified timeframes.
In conclusion, the division bench comprising Justice A.K. Jayasankaran Nambiar and Justice Mohammed Nias C.P. of theKerala High Court has upheld the validity of Section 174 of the KSGST Act and rejected claims of limitation under Section 25(1) of the KVAT Act in the writ appeal filed by Redlands Ashlyn Motors PLC in line with the precedent set in the case of Sheen Golden Jewels (India) Ltd. v. State Tax Officer(IB)-1 [2023 (1) KLJ 49],where proceedings initiated under the KVAT Act after the introduction of GST were deemed valid under the savings clause of the KSGST Act.
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