Kerala High Court
R Vijayan vs The Intelligence Officer on 15 July, 2025
2025:KER:52478
W.P.(C).No.39595 of 2015
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE S.MANU
TUESDAY, THE 15TH DAY OF JULY 2025 / 24TH ASHADHA, 1947
WP(C) NO. 39595 OF 2015
PETITIONER:
R VIJAYAN
PROPRIETOR, VIJAYAKRISHNA JEWELLERS,
NEAR K.S.R.T.C. BUS STAND, PUNALUR,
KOLLAM DISTRICT, PIN-691305.
BY ADVS.
SMT.SREEDEVI KYLASANATH
SRI.ACHUTH KYLAS
SRI.R.MAHESH MENON
SRI.C.R.SYAMMOHAN
SRI.AKHIL SURESH
SMT.KALLIYANI KRISHNA B.
RESPONDENTS:
1 THE INTELLIGENCE OFFICER
SQUAD NO.II, COMMERCIAL TAXES,
KOLLAM AT KOTTARAKKARA, PIN-691506.
2 THE STATE OF KERALA
REPRESENTED BY THE SECRETARY, TAXES DEPARTMENT,
GOVERNMENT SECRETARIAT, TRIVANDRUM, PIN-695001.
OTHER PRESENT:
ADV SAYED M THANGAL, GP-TAX
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY
HEARD ON 15.07.2025, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
2025:KER:52478
W.P.(C).No.39595 of 2015
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S.MANU, J.
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W.P.(C).No.39595 of 2015
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Dated this the 15th day of July, 2025
JUDGMENT
Petitioner was a registered dealer under the Kerala Value Added Tax Act, 2003 (KVAT) on the rolls of the Commercial Tax Officer, Punalur. Business places of the petitioner were inspected on 24.3.2012. Some documents and two non-re-writable CDs were recovered during the inspection. On 23.4.2012, summons was issued for production of books of accounts of the business. Ext.P1 notice under Section 67(1) of the KVAT Act, 2003 was issued on 12.11.2012 with respect to the year 2010-11 proposing to impose penalty. Ext.P2 notice dated 28.11.2012 was issued with respect to the year 2011-12.
2. Petitioner filed Exts.P3 and P4 objections to the notices. Exts.P5 and P6 are two additional replies submitted by the petitioner explaining the defence. Petitioner raised a 2025:KER:52478 W.P.(C).No.39595 of 2015 3 contention that the non-re-writable CDs recovered during the inspection were demo CDs supplied by a software development company showing details of transaction entered by them for various gold merchants from 2004-05. Petitioner contended that he started the business only on 5.5.2010 after getting relieved from Government service. Petitioner further contended that the transactions recorded in the CDs were with respect to periods during which he was a Government servant and was not involved in business then. Affidavit of a person, who according to the petitioner had supplied the CD, was produced before the Intelligence Officer and the said person was sought to be cross- examined. According to the petitioner, sufficient opportunity was not afforded for examining the said person and the Intelligence Officer thus denied adequate opportunity to adduce evidence. Regarding various other aspects also petitioner raised different contentions in defence.
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3. By Exts.P12 and P13 orders dated 5.11.2015, the 1st respondent Intelligence Officer imposed penalty on the petitioner for the years 2010-11 and 2011-12. Petitioner thereafter approached this Court seeking to quash Exts.P12 and P13 orders imposing penalty. Counter affidavit was filed on behalf of the 1st respondent and the petitioner filed a reply affidavit.
4. I heard Mr.Akhil Suresh, learned counsel appearing for the petitioner and Mr.Sayed M.Thangal, learned Government Pleader.
5. Learned counsel for the petitioner mainly raised two contentions. He submitted that Exts.P12 and P13 were issued beyond the period of limitation of three years under the proviso to Section 67(1) as it stood during the relevant business years. He submitted that it is well settled that the law in force in the assessment year is to be applied unless there is an amendment having retrospective operation. He pointed out that the proviso 2025:KER:52478 W.P.(C).No.39595 of 2015 5 to Section 67(1) was amended by Kerala Finance Act, 2014, but with only prospective effect from 1.4.2014. He contended that the date of detection of offence was taken as the date of issue of the notice under Section 67(1) and that the time to complete the proceedings, in so far as the penalty proceedings for the year 2010-11 concerned, elapsed on 11.11.2015. Similarly, the time limit elapsed for the year 2011-12 on 27.11.2015. However, Exts.P12 and P13 were communicated only on 9.12.2015 and hence were hit by the limitation under the proviso to Section 67(1). He therefore contended that the impugned orders are liable to be set aside as they were issued beyond the statutory time limit. He placed reliance on the judgment of a Division Bench of this Court in W.A.No.344/2017 in support of his contention regarding limitation.
6. The learned counsel for the petitioner raised another contention that the petitioner was not provided sufficient opportunity to defend. He contended that the person who had 2025:KER:52478 W.P.(C).No.39595 of 2015 6 supplied the CDs was sought to be cross-examined by the petitioner and the Intelligence Officer did not provide adequate opportunity. He further contended that though the inspection was conducted allegedly on the basis of a complaint, copy of the said complaint was not provided to the petitioner. The learned counsel further submitted that the request for examining a witness was lightly brushed aside by the Intelligence Officer stating that the affidavit of the said person seemed to be a concocted document to the said authority. The learned counsel relied on the judgment of the Hon'ble Supreme Court in M/s.Andaman Timber Industries v. Commissioner of Central Excise, Kolkata - II [(2016) 15 SCC 785]. In the said judgment the Hon'ble Supreme Court observed that the adjudicating authority did not grant opportunity to the assessee for cross-examination and the Appellate Tribunal ignored the same by stating that cross-examination of some dealers sought in the said case could not have brought out any relevant 2025:KER:52478 W.P.(C).No.39595 of 2015 7 material which would not be in the possession of the appellant. The Hon'ble Supreme Court held that it was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine the dealers. The learned counsel relied on another judgment of the Hon'ble Supreme Court in Anvar.P.V. v. P.K.Basheer & others [(2014) 10 SCC 473] to contend that the Intelligence Officer went wrong in relying on the CDs which were not properly proved as provided under Section 65B of the Information Technology Act. He submitted that the proceeding of the Intelligence Officer was vitiated on account of violation of the principles of natural justice and non-compliance with the statutory requirements. The learned counsel therefore asserted that Exts.P12 and P13 are liable to be set aside.
7. The learned Government Pleader submitted that the contentions of the petitioner are without any merits. Regarding the prime contention of the petitioner that the impugned orders were issued beyond the time limit stipulated in the proviso to 2025:KER:52478 W.P.(C).No.39595 of 2015 8 Section 67(1) as it stood during the relevant years, the learned Government Pleader submitted that the petitioner has calculated the period of limitation from the date of Exts.P1 and P2 and the same is apparently incorrect for the reason that the time limit will start running only from the date of detection of the offence. He submitted that dates of issuance of Exts.P1 and P2 cannot be considered as date of detection, as the offence was detected much later. He submitted that the offence if any would be detected in a proceeding under Section 67 of the Act after scrutiny of relevant materials including the books of accounts. He pointed out judgment of a Division Bench of this Court in W.A.No.1046/2018 wherein the Bench had observed that the detection in the said case was on verification of the books of accounts. He hence submitted that issuance of Exts.P1 and P2 were at early stages of the proceedings under Section 67 and hence those dates cannot be considered as the starting points for calculating the limitation. He hence contended that Exts.P12 2025:KER:52478 W.P.(C).No.39595 of 2015 9 and P13 were issued well within the time limit. By referring to paragraph 8 of the counter affidavit wherein it has been asserted that detection was only on 20.10.2015, the learned Government Pleader submitted that the contention regarding limitation is therefore liable to be rejected.
8. With regard to the contention of the petitioner that proper opportunity was not provided to adduce evidence and to cross-examine the witness who had submitted an affidavit, the learned Government Pleader invited the attention of the Court to the observations in Exts.P12 and P13 in this regard. Relevant paragraphs of Ext.P12 reads as under:-
"The dealer again filed a lengthy reply on 24-5-2014. Opportunity for personal hearing on 14-9-2015 was afforded by notice dtd.26-8-2015. But the dealer prayed for adjournment for 2 months on medical ground which was granted. Along with the adjournment a representation was also made stating that the recovered CDs are not related to his business and it contained only items prepared by Sri.Rathishkumar.R, Vairavathuveedu, 2025:KER:52478 W.P.(C).No.39595 of 2015 10 Erathuvadakku, Pattazhy.P.O, Kollam District for demonstration purpose of computerising his business and the person may be examined for which a notarised affidavit had already been submitted on 15-3-2013. In fact a summons was issued to Sri.Ratheeshkumar but he has not appeared before the Intelligence officer. The dealer has also not taken any initiative to produce his witness before the Intelligence officer. Moreover the stamp paper in which the affidavit was prepared is seen purchased by Sri.Vijayan the dealer on 19-3-2015 and the sworn affidavit is seen signed, verified and notarised on 15-3-2014, which is a date falling prior to the date of purchase of the stamp paper. So it is very clear that it is concocted document which is not admissible in evidence. Further on the day of inspection itself it was stated before the Intelligence Officer in writing that the software for billing in his business were prepared by one Mr.Shaji, Mobile Nos.9447554558, 9349916916 which is part of the crime file and therefore the claim that the software was developed by Mr.Rathishkumar.R is prima facie not acceptable and hence discarded. Instead of availing the opportunity for personal hearing the dealer has 2025:KER:52478 W.P.(C).No.39595 of 2015 11 resorted to delaying in tactics by filing adjournment requests on medical ground in several times. Therefore there is no meaning in waiting any further, till the dealer turns up to make use of the opportunity for personal hearing."
9. He hence submitted that the said contention lacks any bonafides and hence the same is also liable to be rejected. He relied on judgment of a Full Bench of this Court in N.K.Thomas v. State of Kerala [(1977) 40 STC 278]. Full Bench, in the said case, rejected a similar contention. The learned Government Pleader relying on the judgment of the Hon'ble Supreme Court in State of Kerala v. Shaduli [(1977) 2 SCC 777] contended that the authorities under the tax laws are not strictly bound by the rules of evidence and they only need to consider the probative value of the materials produced before them. He hence submitted that there was nothing wrong on the part of Intelligence Officer in relying on the contends of the CDs recovered and there was no requirement to prove the 2025:KER:52478 W.P.(C).No.39595 of 2015 12 same as provided under the Information Technology Act. The learned Government Pleader hence submitted that the impugned orders are only to be upheld.
10. It is not disputed that the time limit stipulated in the proviso to Section 67(1) of the Act was three years during the relevant years. It is also not disputed that though the said provision was amended in 2014, the amendment was without any retrospective effect. Hence the question is as to whether Exts.P12 and P13 were issued within the time limit. A learned Single Judge of this Court in St.Mary's Hotels (P) Ltd. v. Intelligence Officer, Squad No.1, Kottayam and others [(2010) SCC OnLine Kerala 5159] held that the limitation in the proviso to Section 67(1) starts only from the date of detection of offence and not from the date of inspection by the authorities concerned. It is only after verification of the books and accounts in the light of incriminating circumstances brought out in the course of inspection that the offence if any can be detected. The 2025:KER:52478 W.P.(C).No.39595 of 2015 13 same view was followed by another learned Single Judge in a common judgment rendered in W.P.(C)No.10979/2014 and connected cases. By the said common judgment W.P.(C)No. 12066/2015 was allowed by the learned Single Judge wherein the imposition of penalty was challenged on the ground of limitation under proviso to Section 67(1). Judgment in W.A.No.344/2017 relied on by the learned counsel for the petitioner arose from the said judgment of the learned Single Judge. The Division Bench in the said judgment observed thus:-
"7. We bow to the binding precedent of the Hon'ble Supreme Court in Bhatinda District Coop. Milk P.Union Ltd. (supra) and we accept the submission of the learned Senior Counsel that even if no limitation period is provided in the statute, the proceedings should be completed within a reasonable period. The authorities cannot be left to their sweet will to sit idle after an inspection or after verification of records and initiate proceedings at their own pleasure; to manufacture a ground only of the detection of offence having been made on a later date. We also see from the KGST Act 2025:KER:52478 W.P.(C).No.39595 of 2015 14 that for re-assessment proceedings; Section 19 provides for a limitation period of five years. Though there is no reference to detection of offence under Section 45A of the KGST Act, for computing the reasonable period, definitely the proceedings could be said to have commenced only on the date of detection of offence as has been held by the Division Bench of this Court in W.A.No.385 of 2009. However, what is the date of detection of offence is a matter for adjudication on facts by looking into the proceedings, the manner in which it was dealt with and the specific offence alleged against the assessee in the majority of instances; except when the facts are explicit and the exact date require no judicious determination.
8. Ordinarily a notice proposing penalty is a sure sign of detection of offence. But after inspection of offence if there is a requirement to verify the books of accounts, then the summons for production of any records should be issued within a reasonable period; not the reasonable time we earlier referred to for completion, but immediately or reasonably proximate to the inspection. The further notice, indicating a detection of offence should also be 2025:KER:52478 W.P.(C).No.39595 of 2015 15 proximate to the verification of the books. Then necessarily; the detection of offence would be taken as the date on which the notice of penalty is first issued. However this reasonable period for summons or notice will have no relevance if the final order itself is issued within the reasonable period for completion or the period of limitation, as prescribed under the statute. If the finalisation is carried out within the period of limitation, provided for finalisation; from the date of inspection or verification; there can be no allegation raised of the notice of penalty, the sure sign of detection of offence being not proximate to the inspection or verification of accounts. The purpose for making such prescriptions of reasonable period; on judicial intervention, when there is no limitation provided in the statute shall not create road blocks at every twist and turn, resulting in the penal provisions being rendered nugatory."
11. Careful reading of Exts.P1 and P2 would show that they were issued after verification of various records including the books of accounts. Pointing out the fact that the offence was 2025:KER:52478 W.P.(C).No.39595 of 2015 16 admitted by the dealer and was compounded even before issuance of Exts.P1 and P2 the learned counsel for the petitioner had contended that in the facts of the case at hand, detection of the offence definitely occurred before issuance of Exts.P1 and P2. On the other hand, assertion of the 1 st respondent is that the detection was only on 20.10.2015 as the officer detected the offence on the basis of available materials on that date. Therefore, there is factual dispute as to when detection of the offence happened in the case. It is also noted that Exts.P12 and P13 orders are dated 5.11.2015. Petitioner has a contention that the same were served on him only on 9.12.2015 and the said date alone can be relevant as the proceedings would conclude only by communicating the order to the assessee. The date of communication as asserted by the petitioner is not disputed by the 1st respondent in his counter affidavit. Any how, when the actual detection of the offence had happened in the case at hand remains as a disputed factual issue.
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12. I note that the Division Bench, in W.A.No.344/2017, in the facts of the said case, observed that the issue of limitation is a mixed question of law and fact. The Division Bench set aside the judgment of the learned Single Judge in W.P.(C)No.12066/2015 by which the learned Single Judge had set aside the imposition of penalty by accepting the contention that the same was issued in breach of the time limit stipulated in the proviso to Section 67(1). The Division Bench relegated the assessee to raise the issue of limitation before the first Appellate Authority. In the facts of the present case also wherein the petitioner has raised limitation as the prime contention and factual analysis which is not normally within the purview of judicial review under Article 226 of the Constitution is required, I am of the view that the course adopted by the Division Bench in W.A.No.344/2017 can be followed in the case at hand also.
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13. As I proceed to relegate the petitioner to approach the first Appellate Authority as was done in WA 344/2017, I refrain from analysing the contentions of the petitioner regarding failure to provide ample opportunity to adduce evidence, to cross-examine the witness who filed affidavit, non- compliance with the requirements of natural justice, etc. and to enter into any findings on those aspects. All such contentions can also be considered by the Appellate Authority.
14. Hence, this writ petition is disposed of with the following directions:-
1. The petitioner shall file appeals against the impugned orders before the first Appellate Authority within a period of thirty days from the date of issuance of certified copy of this judgment.
2. If the appeals are filed within thirty days as directed above, the same shall be considered by the Appellate Authority as filed within time.
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3. The Appellate Authority shall consider the appeals, provide opportunity of hearing to the petitioner and the authority concerned and decide the appeals as expeditiously as possible.
4. Interim order granted by this Court will continue to remain in force for a period of 6 weeks from the date of issuance of a certified copy of this judgment.
Sd/-
S.MANU JUDGE skj 2025:KER:52478 W.P.(C).No.39595 of 2015 20 APPENDIX OF WP(C) 39595/2015 PETITIONER'S EXHIBITS:
EXT.P1: THE TRUE COPY OF THE NOTICE NO.CR.41/2012-13 ISSUED BY THE 1ST RESPONDENT UNDER SECTION 67(1) OF THE KVAT ACT, 2003 RELATING TO THE YEAR 2010-11.
EXT.P2: THE TRUE COPY OF THE NOTICE NO.CR.41/2011-12 ISSUED BY THE 1ST RESPONDENT UNDER SECTION 67(1) OF THE KVAT ACT, 2003 RELATING TO THE YEAR 2011-12.
EXT.P3: THE TRUE COPY OF THE OBJECTION FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT UNDER SECTION 67(1) OF THE KVAT ACT, 2003 FOR THE YEAR 2010-11.
EXT.P4: THE TRUE COPY OF THE OBJECTION FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT UNDER SECTION 67(1) OF THE KVAT ACT, 2003 FOR THE YEAR 2011-12.
EXT.P5: THE TRUE COPY OF THE DETAILED REPLY DATED 15.03.2013 FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT.
EXT.P6: THE TRUE COPY OF THE ADDITIONAL REPLY DATED 19.5.2014 FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT.
EXT.P7: THE TRUE COPY OF THE NOTICE NO.CR.NO.41/2011-12 DATED 26.8.2015 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER.
EXT.P8: THE TRUE COPY OF THE REPRESENTATION DATED NIL SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT.
EXT.P9: THE TRUE COPY OF THE ADJOURNMENT REQUEST DATED 14.09.2015 FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT.
EXT.P10: THE TRUE COPY OF THE NOTICE NO.CR.NO.41/11-12 DATED 9.10.2015 ISSUED BY THE PETITIONER TO THE PETITIONER.
2025:KER:52478 W.P.(C).No.39595 of 2015 21 EXT.P11: THE TRUE COPY OF THE REPRESENTATION DATED 19.10.2015 SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT.
EXT.P12: THE TRUE COPY OF THE ORDER NO.CR 41/11-12(2010-
11) DATED 5.11.2015 IMPOSING PENALTY UNDER SECTION 67(1) OF THE ACT FOR THE YEARS 2010-11. EXT.P13: THE TRUE COPY OF THE ORDER NO.CR 41/11-12 DATED 5.11.2015 IMPOSING PENALTY UNDER SECTION 67(1) OF THE ACT FOR THE YEARS 2011-12.