In a significant decision, the Kerala High Court has ruled that, State Legislature did not have power to Amend the Kerala Value Added Tax Act ( KVAT Act ) which is not in existence after the introduction of the Constitution (One Hundred and First Amendment) Act, 2016.
The Petitioners M/S. Calicut Land Mark Builders and Developers India (P) Limited and others approached the Court challenging legality of the notices and assessment orders issued to the petitioners in connection with the assessment under the Kerala Value Added Tax Act.
The notices and orders are impugned, inter alia, on the ground that the authorities concerned did not have the jurisdiction to issue them since the amendments introduced to Section 25 (1) of the KVAT Act, through the Kerala Finance Acts of 2017 and 2018, notified through gazette notifications dated 19.06.2017 and 31.03.2018 respectively, did not contemplate a retrospective operation of the amended provisions.
Section 25 (1) of the KVAT Act was amended through the Kerala Finance Act, 2017 with effect from 01.04.2017 when the period of limitation under Section 25 (1) for proceeding to determine the escaped turnover was changed from “five years” to “six years from the end of the year to which the assessment relates”.
Kerala Legislature by Finance Act 2018, amended section 25(1) of KVAT act extending the period of limitation up to 31-03-2019. The challenge was that as KVAT Act was already repealed, no amendment can be made in KVAT Act when the act is not in existence.
The Petitioners contended that, when under the provisions of Section 25 (1) of the KVAT Act, as it stood prior to its amendment with effect from 01.04.2017, the limitation period for reopening an assessment under the Act was five years from the end of the relevant assessment year, and no notices had been served on the assessees within the said period, the subsequent amendment that increased the period of limitation to six years would not confer a jurisdiction on the assessing authorities to re-open an assessment that had become final by 31.03.2017.
Justice A.K Jayasankaran Nambiar observed that, the assessment in respect of which period of limitation for reopening the assessment under section 25 of the KVAT Act was to expire by 31-03-2017 can be reopened up to 31-03-2018 by virtue of an amendment to the third proviso to section 25(1) of KVAT Act.
The Court also observed that, the assessment in respect of which the period of limitation for reopening under section 25 of KVAT Act was to expire on 31-03-2018, cannot be reopened up to 31-03-2019 or thereafter by relying on third proviso to section 25(1) amendments introduced through Kerala Finance Act 2018 since state legislature did not have power to amend KVAT after Constitution Amendment Act 2016 and repeal of the KVAT Act.
Senior Advocate Venkitaraman, Advocates KP Abdul Azeez, Akhil Suresh, Archana T appeared in the leading case for Calicut Landmark.
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