Kerala High Court
Cheriyan J.Puthiyadam vs State Of Kerala on 4 March, 2021
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
THURSDAY, THE 04TH DAY OF MARCH 2021 / 13TH PHALGUNA, 1942
WP(C).No.1760 OF 2010(T)
PETITIONER:
CHERIYAN J.PUTHIYADAM,
S/O.JOHN, AGED 75 YEARS,
PUTHIYADAM HOUSE, ANTHINAD,
LALAM VILLAGE,
PALAI,
KOTTAYAM DISTRICT.
BY ADVS.
SRI.KURIAN GEORGE KANNANTHANAM (SR.)
SRI.TONY GEORGE KANNANTHANAM
SRI.THOMAS GEORGE
RESPONDENTS:
1 STATE OF KERALA,
REP. BY ITS SECRETARY TO GOVERNMENT,
DEPT. OF REVENUE,
GOVT. SECRETARIAT,
THIRUVANANTHAPURAM.
2 THE DISTRICT COLLECTOR,
COLLECTORATE,
KOTTAYAM.
3 THE TAHSILDAR,
MEENACHIL TALUK,
MEENACHIL,
KOTTAYAM DISTRICT.
4 THE VILLAGE OFFICER,
KONDOOR VILLAGE,
MEENACHIL TALUK,
KOTTAYAM DISTRICT.
5 SOUTH INDIAN BANK REP. BY ITS BRANCH
MANAGER, KANJIRAPPALLY BRANCH,
KOTTAYAM DISTRICT.
WP(C) No.1760/2010
:2 :
6 THOMAS MATHEW,
KAROTTEMBRAYIL HOUSE,
SANTHAMPARA P.O.,
IDUKKI DISTRICT.
7 K.S.SCARIA,
POTTAMKULAM HOUSE,
KALAKETTY P.O.,
KOTTAYAM DISTRICT.
8 THE LAND REVENUE COMMISSIONER,
GOVERNMENT OF KERALA,
LAND REVENUE COMMISSIONERATE,
THIRUVANANTHAPURAM.
R1 BY GOVERNMENT PLEADER
R7 BY ADV. SMT.R.BINDU
R5 BY ADV. SRI.K.S.CHACKOCHAN
R7 BY ADV. SRI.HARISH GOPINATH
R7 BY ADV. SRI.R.S.KALKURA
R1 BY ADV. SRI.M.S.KALESH
R7 BY ADV. SRI.K.KURIAN KOSHY
R5 BY ADV. SRI.P.R.MILTON
R1 BY ADV. SMT.A.V.PRIYA
R6 BY ADV. SMT.PREETHY R. NAIR
R6 BY ADV. SRI.M.RAMASWAMY PILLAI
R7 BY ADV. SRI.SANIL KUNJACHAN
R5 BY ADV. SRI.GEORGE VARGHESE,SC, SOUTH
INDIAN BANK
SPL. GOVERNMENT PLEADER FOR REVENUE
ADV M.L. SAJEEVAN
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 04-03-2021, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
WP(C) No.1760/2010
:3 :
[CR]
JUDGMENT
~~~~~~~~~
Dated this the 4th day of March, 2021
The petitioner is before this Court seeking to quash
Exts.P15 and P21 proceedings of the 8 th and 1st respondents
respectively and to command the 1st respondent and its
instrumentalities including respondents 2 to 4 not to interfere
with the free possession and enjoyment of the property of the
petitioner purchased as per Ext.P9 deed from the 5 th
respondent and cultivated with rubber and pineapple.
2. Events leading to the filing of this writ petition,
chronologically, are as follows:-
The Rubber Board granted to the 6 th respondent Ext.P1
Dealers licence dated 20.02.1985. On 02.01.1986, the 6 th
respondent gave a Power of Attorney to the 7 th respondent to
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carry out certain transactions under the licence. At that time,
the 7th respondent was indebted to the 5 th respondent-South
Indian Bank in his personal capacity. The 5 th respondent-Bank
had filed OS No.403/1986 in the Principal Sub Court,
Kottayam, against the 7th respondent in the year 1986.
3. The Rubber Board cancelled the licence issued to
the 6th respondent on 09.01.1987 as per Ext.P2, with effect
from 15.01.1987. Subsequently, the Rubber Board, as per
Ext.P3, granted Dealers licence to the 6 th respondent again on
12.04.1989 for the period ending on 31.03.1992. The 6 th
respondent had cancelled the Power of Attorney given to the
7th respondent as per Ext.P4 revocation letter dated
02.07.1989. Thereupon, the 7th respondent returned all
documents including the Rubber Board licence to the 6 th
respondent on 15.07.1989, which was acknowledged by the
6th respondent as per Ext.P5. The 7 th respondent himself
obtained Dealers licence from the Rubber Board on
10.07.1989, the validity of which was later extended upto
31.03.1990.
WP(C) No.1760/2010
4. In the meanwhile, the Principal Sub Court,
Kottayam passed Ext.P7 money decree in OS No.403/1986 in
favour of the 5th respondent-Bank and against the 7 th
respondent.
5. The State of Kerala amended the Kerala General
Sales Tax Act,1963 inserting Section 19C, as per Act 3 of
1990. Section 19C provided for protective assessment and
enabled the Assessing Authority to recover sales tax from any
person carrying on business as agent, employee, manager,
power of attorney holder, guarantor or in any other capacity, in
the name or in association with a registered dealer. Section
19C inserted in the year 1990 was given retrospective effect
from 29.08.1989. In exercise of Section 19C, the Sales Tax
authorities served a notice of recovery dated 27.08.1991 on
the 7th respondent under Section 34 of the Revenue Recovery
Act for realising defaulted sales tax dues of the 6 th respondent.
The land of the 7th respondent in Survey No.1921/1 of
Kondoor Village was attached on 30.12.1991 and was notified
for sale. On 11.02.1992, the Government of Kerala itself
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bought the property in auction.
6. Before the said bought-in-auction was confirmed in
favour of the Government, on 22.12.1994, the Principle Sub
Court Court, Kottayam auctioned the very same property of
the 7th respondent in execution of Ext.P7 decree. The 5 th
respondent-Bank purchased the property in auction. The sale
in favour of the 5th respondent-Bank was confirmed on
21.02.1995. Subsequently, on 31.05.1995, the land purchase
made by the State by way of buy-in, was confirmed. The Court
issued an Auction Certificate to the Bank on 31.01.1996 and
the Bank took possession of the property on 27.11.1996. The
Bank remitted land tax and submitted an application for
transfer of registry in February,1998. The learned Government
Pleader contends that the Government took custody of the
property on 05.09.2000.
7. On 18.09.2001, the 5 th respondent-Bank sold the
property to the petitioner by way of Ext.P9 sale deed
registered in SRO, Erattupetta. The Revenue Authorities
refused to effect transfer of registry in favour of the petitioner,
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in view of the auction conducted by the Sales Tax authorities.
The petitioner hence filed W.P.(C) No.10661 of 2002 before
this Court. A learned Single Judge dismissed the writ petition
as per Ext.P12, holding that the petitioner will have to
establish his rights through a properly constituted civil suit.
The petitioner filed W.A. No.2728 of 2007 against Ext.P12
judgment. A Division Bench of this Court, by Ext.P13
judgment, held that the petitioner can establish his rights
through appropriate Forum.
8. The petitioner thereupon filed a revision petition
against the auction sale conducted by the Sales Tax
authorities on 11.02.1992, in which the State had bought the
property in auction. The Commissioner of Land Revenue by
Ext.P15 order dated 04.06.2008 dismissed the revision
petition filed by the petitioner. The petitioner preferred
Ext.P16 appeal dated 01.07.2008 to the Government. By
Ext.P21 order dated 10.09.2009, the Government rejected the
appeal filed by the petitioner. The petitioner is before this
Court challenging Ext.P15 order of the Land Revenue
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Commissioner and Ext.P21 order of the Government of
Kerala.
9. Respondents 2 to 4 filed counter affidavit denying
the contention of the petitioner that the Power of Attorney
given by the 6th respondent in favour of the 7 th respondent was
cancelled on 01.07.1989. According to respondents 2 to 4,
the 7th respondent operated the bank account of the 6 th
respondent till 13.03.1990 on the basis of the Power of
Attorney given by the 6th respondent. The 7th respondent
closed the Current Account only on 05.04.1990. Ext.R2(c)
Notice was issued to respondents 6 and 7 to produce books of
accounts for the period 1985-'86 to 1989-'90, which was not
done. Hence, Ext.R2(d) Assessment Order was passed.
According to the respondents, Section 19C is retroactive and
termination of Power of Attorney on a subsequent date will not
absolve the liability of the Power of Attorney holder. The
property of the 7th respondent was therefore rightly taken over
by the Government. The petitioner allegedly purchased the
property much later, from the Bank. The said sale has no legal
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validity. The petitioner is trying to evade payment using a
pre-dated document, Ext.P7.
10. The 5th respondent-Bank in their counter affidavit
stated that the decree obtained by the Bank on 30.09.1987
against the 7th respondent is valid. In execution of the said
decree, the property was auctioned and the 5 th respondent-
Bank bid the same in auction. Ext.P8 Sale Certificate was
issued in favour of the Bank. The property was given delivery
to the Bank on 27.11.1996 by the Court Amin. The priority to
recover sales tax arrears was introduced in the KGST Act by
Section 26B, which came into force with effect from
01.04.1999. On that day, the 7 th respondent had no title over
the property. The decree of the court which was made prior to
introduction of Section 26B of the KGST Act, is legal and valid.
11. The 6th respondent filed a counter affidavit. The 6 th
respondent stated that the 7 th respondent was misusing the
Power of Attorney given by him and hence the Power of
Attorney was cancelled on 02.07.1989 as per Ext.P4. In his
counter affidavit, the 7th respondent also stated that the Power
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of Attorney was terminated on 02.07.1989.
12. Learned counsel for the petitioner argued that
Section 19C of the KGST Act enabling protective assessment
came into the statute book in 1990, with effect only from
29.08.1989. As on the said date, the 7 th respondent was not
Power of Attorney holder of the 6 th respondent. Hence, the 7 th
respondent could not have been mulcted with any liability on
the basis of a Power of Attorney earlier held by him. Assuming
without conceding that Section 19C applies, even then an
independent tax assessment on the 7th respondent ought to
have been made before proceeding against the properties of
the 7th respondent under the Revenue Recovery Act, 1968 as
Section 19C of the KGST Act, 1963 contemplates assessment
of "such other person".
13. The learned Senior Counsel further pointed out that
even going by the definition of defaulter contained in Section
2(e) of the Revenue Recovery Act and Section 34 thereof,
assessment of the defaulter and fixation of liability is
indispensable. There was no such assessment or fixation of
WP(C) No.1760/2010
liability on the 7th respondent under the Revenue Recovery
Act. Therefore, attachment and sale of the property of the 7 th
respondent are invalid.
14. The learned Government Pleader representing
respondents 1 to 4 and 8, vehemently opposed the petition
and contended that the Government had taken possession of
the property and the usufructs were auctioned by the
Government. The petitioner had earlier filed OP No.32424 of
2001, which was withdrawn. Going by the language of Section
19C of the KGST Act, past liability can also be fastened on the
Power of Attorney Holder of a Dealer.
15. The Government Pleader pointed out that the
liability being towards tax and state revenue, the State will
have an overriding first charge over the property of the 7 th
respondent. The learned Government Pleader emphatically
denied the claim of the petitioner that the Power of Attorney of
the 7th respondent was terminated on 02.07.1989. The said
cancellation of Power of Attorney is found to be incorrect
based on the bank account transactions made by the Seventh
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respondent even after 02.07.1989. At any rate, the issues
involved are disputed questions of fact, which this Court
cannot adjudicate under Article 226 of the Constitution of
India, contended the learned Government Pleader.
16. Relying on the judgments of this Court in
K. P. Hamsa and others v. Assistant Commissioner of
Sales Tax and others [2008 (3) KLT 180] and Lucy Vincent
v. District Collector [2008 (4) KLT 876], the learned
Government Pleader argued that where during the pendency
of any proceedings under the KGST Act any assessee creates
a charge on any of his assets, such charge shall be void as
against any claim in respect of any tax payable by the
assessee. It is not necessary that the assessment should be
completed. It is also not necessary that a demand should be
made to the assessee, contended the learned Government
Pleader.
17. Relying on the judgment of a Division Bench of this
Court in South Indian Bank Ltd. v. State of Kerala [2006 (1)
KLT 65], the Government Pleader argued that the decree
WP(C) No.1760/2010
obtained by Bank will not have precedence over the first
charge created in favour of the State.
18. Learned Government Pleader pointed out that in
Jaya v. State of Kerala [2005 (2) KLT 543], a Division Bench
of this Court has held that even if the transfer of property is
effected much before service of demand on defaulter, still if
the transfer is effected with an intent to defeat or delay the
creditors, such transfer will be invalid. A Division Bench of this
Court has held in State of Kerala v. Rajmohan Cashew (P)
Ltd. [2005 (2) KLT 131] that in the matter of recovery of sales
tax from defaulters, the State will have priority over equitable
mortgages created in favour of banks and financial
institutions, contended the learned Government Pleader.
19. Learned Government Pleader urged that statutory
creation of such first charge in favour of the State, is
eo-instanti, as held by this Court in P.S. Basheer and others
v. Pearl Food Products and others [2006 (2) KLT 346]. The
liability to pay tax is automatic and depends only upon the
charging section. It does not depend upon the adjudication as
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to the liability to tax, followed by the issuance of any
assessment order and demand, and it was so held by this
Court in Noushad Abbas and others v. Commissioner of
Commercial Taxes, Thiruvananthapuram and others [2013
(3) KLJ 773].
20. The learned Government Pleader, relying on the
judgment of the Apex Court in Orissa Agro Industries
Corporation Limited and others v. Bharati Industries and
others [(2005) 12 SCC 725], argued that writ petition is not
maintainable in view of the disputed questions of fact involved
in this case.
21. I have heard learned Senior Counsel assisted by
the counsel appearing for the petitioner, learned Government
Pleader representing respondents 1 to 4, learned Standing
Counsel appearing for the 5 th respondent-Bank and the
learned counsel appearing for respondents 6 and 7.
22. On appreciation of the pleadings in the case and
arguments of the counsel on either side, this Court finds that
the following questions arise for consideration:-
WP(C) No.1760/2010
1. Whether Section 19C of the Kerala
General Sales Tax Act would take in within its
fold transactions made by a Power of Attorney
holder, prior to coming into the force of the
provision?
2. Whether Sales Tax dues is a first charge
on the land of the 7th respondent and whether
State has a superior right over the property, in
spite of attachment and sale of the property
through Court proceedings?
3. Whether the 7th respondent's property
can be appropriated towards Sales Tax dues
of the 6th respondent, without an independent
tax assessment on the 7th respondent?
4. Whether take over of the land by the
State without assessment of dues under
Section 34 of the Revenue Recovery Act, is
justified?
5. Whether this writ petition is maintainable
in the facts of the case and if so, is it barred by
res judicata and whether there is delay or
laches on the part of the petitioner?
23. As regards maintainability of the writ petition in the
context of res judicata, it may be noted that the petitioner had
approached this Court earlier filing O.P. No.10661 of 2002.
The said writ petition was filed by the petitioner seeking to
direct the respondents to accept land tax from the petitioner,
WP(C) No.1760/2010
change Thandaper in favour of the petitioner and issue
possession certificate to the petitioner. A learned Single
Judge of this Court, as per Ext.P12 judgment, held that as the
issue involves disputed questions of fact, the petitioner has to
establish his rights in a properly constituted civil suit. The
petitioner filed W.A. No.2728 of 2007 and a Division Bench of
this Court modified the order passed by the learned Single
Judge and permitted the petitioner to establish his rights in
appropriate forum following appropriate proceedings.
24. The petitioner thereafter filed revision petition
before the Land Revenue Commissioner invoking Section 83
of the Kerala Revenue Recovery Act, 1968. On dismissal of
the said revision petition, the petitioner filed a further revision
before the Secretary to Government, Department of Taxes.
This Court, by Ext.P14 judgment in W.P.(C) No.2316 of 2009,
directed the State to consider the said revision petition. The
Government thereupon passed Ext.P21 order dated
10.09.2009. It is the said Ext.P21 order which is under
challenge in this writ petition. As a Division Bench of this
WP(C) No.1760/2010
Court modified Ext.P12 judgment of the learned Single Judge
and permitted the petitioner to avail remedies available to him,
Ext.P12 judgment of the learned Single Judge cannot be
treated as one deciding the issue involved finally, so as to
constitute res judicata.
25. As regards delay and laches, it may be noted that
the auction certificate in respect of the property in question
was issued to the 5th respondent-Bank through court
proceedings on 31.01.1996. The petitioner purchased the
said property as per Ext.P9 sale deed dated 18.09.2001. The
petitioner thereafter approached the authorities to remit land
tax and to effect transfer of registry. The petitioner
approached this Court for that purpose filing O.P.
No.10661/2002 which was dismissed as per Ext.P12, on
19.05.2005. The petitioner promptly challenged the said
judgment of the learned Single Judge and obtained liberty to
prosecute his statutory remedies, as per Ext.P13 judgment
dated 21.11.2007 of a Division Bench of this Court. Ext.P21
order dated 10.09.2009 impugned in this writ petition was
WP(C) No.1760/2010
passed in continuation of the said Ext.P13 judgment. The writ
petition was filed on 18.01.2010. In the circumstances, it
cannot be said that the petitioner is guilty of delay or laches in
filing this writ petition.
26. The next question to be answered is whether
Section 19C of the Kerala General Sales Tax Act, 1963 would
have retroactivity so as to take in transactions entered into by
the 7th respondent as a Power of Attorney holder of the 6 th
respondent, much prior to the coming into force of Section
19C. If the answer is in the negative, the action of the
Government in proceeding against the 7 th respondent under
the Revenue Recovery Act for sales tax dues, of auctioning
his property and subsequent purchase of the said property as
bought-in-land, will have to be held as invalid and the
questions at Serial Nos.2 to 4 will loose significance.
27. The 6th respondent appointed the 7 th respondent as
Power of Attorney holder on 02.01.1986. The Power of
Attorney was to carry out certain transactions under the
dealer licence held by the 6 th respondent. Ext.P2 press
WP(C) No.1760/2010
release issued by the Rubber Board would show that the
Rubber Board suspended the licence issued to the 6 th
respondent soon thereafter with effect from 15.01.1987 until
further notice. The 6th respondent was issued licence again
only on 12.04.1989, as per Ext.P3. The 6 th respondent
cancelled the Power of Attorney given to the 7 th respondent on
02.07.1989 as per Ext.P4. Respondents 1 to 4 would not
admit the cancellation of the Power of Attorney by the 6 th
respondent as per Ext.P4. However, the 6 th respondent, who
issued the Power of Attorney, has sworn to an affidavit before
this Court that he cancelled the Power of Attorney given to the
7th respondent on 02.07.1989. Ext.P6 would show that the 7 th
respondent was given a separate Dealer licence on
10.07.1989. In the circumstances, this Court finds no reason
to disbelieve the statements made by respondents 6 and 7
that the 6th respondent had cancelled the Power of Attorney
issued to the 7th respondent as per Ext.P4, on 02.07.1989.
28. The next question is, when the 7 th respondent
ceased to be a Power of Attorney holder of the 6 th respondent
WP(C) No.1760/2010
with effect from 02.07.1989, whether Section 19C of the
KGST Act which was brought into the statute book only with
effect from 29.08.1989 can be invoked against the 7 th
respondent for recovery of sales tax dues of the 6 th
respondent.
29. Section 19C provides for Protective Assessment
and enables Assessing Authorities to recover tax dues from
agents, employees, managers, power of attorney holders,
guarantees or persons who in any other capacity carrying on
the business, in the name of a registered dealer. Section 19C
of the KGST Act reads as follows:-
"19C. Protective assessment:-
Notwithstanding anything to the contrary
contained in any judgment, decree, order, direction or
decision of any Court, Tribunal or other Authority,
where the assessing authority has reason to believe
that any person is, or was carrying on business in the
name of, or in association with any other person, either
directly, or indirectly, whether as agent, employee,
manager, power of attorney holder, guarantor or in any
other capacity, such person and the person in whose
name the registration certificate, if any, is taken, shall
jointly and severally, be liable for the payment of the
taxes penalty or other amount due under this Act
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which shall be assessed, levied and recovered from all
or any of such person or persons as if such person or
persons are dealers:
Provided that before taking action under this
Section, the persons concerned shall be given a
reasonable opportunity of being heard."
Section 19C was inserted in the Kerala General Sales Tax
Act, 1963 as per Act 3 of 1990 and has been given
retrospective effect from 29.08.1989. The object of Section
19C is to prevent evasion of tax by dealers indulging in
dealing in Benami names i.e., transacting in the names of
their nominees, henchmen or others, from whom no amount
could be recovered. Section 19C is intended to strike at such
transactions by making the real dealer liable for the tax along
with the ostensible dealer.
30. The constitutional validity of Section 19C was
challenged before this Court in Keyemyes Trading Agency
v. State of Kerala [1994 (2) KLT 361]. This Court observed
that the legislature has to match its wits with such measures
to counter the devices adopted by unscrupulous dealers to
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avoid payment of the tax lawfully due to the state and Section
19C is intended to achieve this object. This Court rejected
the plea that the Section is beyond the competence of the
State legislature.
31. The question arising in this case is whether Section
19C can be retrospectively invoked to recover amounts from
such persons who have been doing business during periods
anterior to 29.08.1989 and who have ceased to do such
business before the said date.
32. Retrospective effect of law means giving effect to
or applying amendments in the existing law to transactions
anterior to the date in which the amendment was brought in.
The Hon'ble Apex Court in Hitendra Vishnu Thakur v. State
of Maharashtra [(1994) 4 SCC 602] explained the principles
for amending an act retrospectively and held as follows:-
"(i) A statute which affects substantive rights is
presumed to be prospective in operation unless made
retrospective, either expressly or by necessary
intendment, whereas a statute which merely affects
procedure, unless such a construction is textually
impossible, is presumed to be retrospective in its
application, should not be given an extended meaning
and should be strictly confined to its clearly defined
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limits.
(ii) Law relating to forum and limitation is
procedural in nature, whereas law relating to right of
action and right of appeal even though remedial is
substantive in nature.
(iii) Every litigant has a vested right in substantive
law but no such right exists in procedural law.
(iv) A procedural statute should not generally
speaking be applied retrospectively where the result
would be to create new disabilities or obligations or to
impose new duties in respect of transactions already
accomplished.
(v) A statute which not only changes the procedure
but also creates new rights and liabilities shall be
construed to be prospective in operation, unless
otherwise provided, either expressly or by necessary
implication."
33. Section 19C of the KGST Act may, at the first
blush, appear to be procedural in nature inasmuch as it does
not create any new tax liability but only provides for recovery
of tax already fell due. But, as far as persons like Power of
Attorney holders and others enunciated in Section 19C are
concerned, it affects their substantive property rights, since
they are made liable for tax dues of a registered dealer. It
may be noted that running the business of a registered dealer
as his Agent or as his Power of Attorney holder is not per se
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an offence under any Indian law. It is for the first time that
such persons have been made liable to be subjected to
recovery proceedings for tax unpaid by the registered dealer.
Section 19C indeed affects the substantive rights of persons
like the petitioner.
34. Section 19C therefore creates new obligation on
persons like the petitioner. As held by the Hon'ble Apex
Court, even a procedural law should not be generally applied
retrospectively where the result would be to create new
disabilities or obligations or to impose new duties in respect of
transactions already accomplished.
35. The Hon'ble Apex Court further held in Hitendra
Vishnu Thakur (supra) that a statute which not only changes
the procedure but also creates new rights and liabilities shall
be construed to be prospective in operation unless otherwise
provided either expressly or by necessary implication. In the
case of Section 19C, it may be noted that though the
amendment was effected in the year 1990, it has been
brought into force retrospectively only from 29.08.1989.
WP(C) No.1760/2010
36. The judgment in Hitendra Vishnu Thakur (supra)
was in relation to issues arising from the Terrorist and
Disruptive Activities (Prevention) Act, 1987. In the judgment
in Assistant Commissioner of Urban Land Tax and others
v. The Buckingham & Carnatic Co. Ltd. [AIR 1970 SC 169]
a Constitution Bench of the Apex Court, in the context of a
taxation law, held that it is not right to say as a general
proposition that the imposition of tax with retrospective effect
per se renders the law unconstitutional. In applying the test of
reasonableness to a taxing statute it is of course a relevant
consideration that the tax is being enforced with retrospective
effect but that is not conclusive in itself. Therefore, it is open
for the petitioner to contend that retrospective operation of
Section 19C creates a situation which can be described as an
unreasonable restriction which violates the right of the
petitioner to hold his property. In the writ petition, the
petitioner has made a specific prayer to declare that no
revenue recovery proceeding was liable to be initiated against
the property purchased by the petitioner.
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37. A statute affecting vested rights is prima facie
prospective unless the statute expressly or by necessary
implication indicates a contrary intention. As per general
rules, procedural amendments are applied retrospectively
whereas substantive amendments are applied prospectively.
The legislature has plenary power to and can make even
substantive amendments retrospectively. If an enactment is
expressed in a language which is fairly capable of either
interpretation, it should be construed as prospective.
38. A reading of Section 19C would show that
realisation of tax dues from persons like the petitioner
contemplates assessment of tax dues. Therefore, it is clear
that Section 19C is not procedural in nature, but on the other
hand, creates a new liability on persons controlling business
on behalf of registered dealers.
39. In the judgment in Mohammed Harid v. District
Collector [2014 (2) KLT 102], the retroactive operation of
Section 26C of the KGST Act came up for consideration
before a Division Bench of this Court. By introduction of
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Section 26C with effect from 01.04.1999, the Directors of
Private Companies were made jointly and severally liable for
payment of sales tax, in cases where tax cannot be recovered
from a Company. In the said judgment, this Court held that
tax dues of a Private Company in respect of any assessment
years prior to 01.04.1999 can be recovered from the Directors
and if such recovery is made, it cannot be said that Section
26C is operated retrospectively.
40. The said judgment cannot have application on
Section 19C for more than one reason. Firstly, who are
brought under liability as per Section 26C, are Directors of a
Private Company and it is for the liabilities of the Private
Company. Even under the Companies Act, the Directors of a
Private Company are liable and responsible for the running of
the affairs of a Company. For that reason, Section 26C does
not contemplate a separate assessment of Directors of a
Private Company before effecting recovery of tax dues of the
Company. In the case of Section 19C, the provision itself
contemplates an independent tax assessment of Agents,
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Power of Attorney holders, etc. before effecting recovery.
41. When a statute newly subjects persons to recovery
of tax, which tax till then was neither assessed on them nor
was made recoverable from them, such subjugation cannot
have retrospective operation. It cannot be used to dig out
business transactions commenced and concluded long back
prior to the creation of the tax liability on such persons. As
the 7th respondent ceased to be a Power of Attorney holder of
the 6th respondent prior to the coming into force of Section
19C, this Court is of the considered view that protective
assessment proceedings under Section 19C could not have
been legally invoked against the 7th respondent.
42. Therefore, revenue recovery proceedings initiated
by respondents 1 to 4 against the 7 th respondent for recovery
of tax dues of the 6 th respondent is illegal. All proceedings
against the 7th respondent including the attachment of his
property for recovery of such dues, are therefore illegal.
Exts.P15 and P21 are hence set aside. Consequently, it is
declared that the petitioner would be entitled to pay land tax
WP(C) No.1760/2010
and to apply for transfer of registry, if he is otherwise eligible.
Writ petition is allowed as above.
Sd/-
N. NAGARESH, JUDGE
aks/23.02.2021
WP(C) No.1760/2010
APPENDIX
PETITIONER'S EXHIBITS:
EXHIBIT P1 TRUE COPY OF THE LICENCE NO.1606/85-
86, CORRESPONDING TO REGISTRATION
NO.D-7716 DATED 20.02.1985 ISSUED TO
6TH RESPONDENT BY THE RUBBER BROAD.
EXHIBIT P2 TRUE COPY OF THE PROCEEDING BEARING
REFERENCE NO.D-7716/MIS/87 DATED
09.01.2987 OF THE RUBBER BOARD.
EXHIBIT P3 TRUE COPY OF THE PROCEEDING BEARING
REFERENCE NO.22/D-7716/89 DATED
12.04.1989 OF THE RUBBER BOARD.
EXHIBIT P4 TRUE COPY OF THE REVOCATION OF POWER
OF ATTORNEY DEED DATED 02.07.1989.
EXHIBIT P5 TRUE COPY OF THE RECEIPT DATED
15.07.1989 ISSUED TO THE 7TH
RESPONDENT BY THE 6TH RESPONDENT.
EXHIBIT P6 TRUE COPY OF THE PROCEEDING BEARING
REFERENCE NO.22-D-12876/89/MSW DATED
16.08.1989 OF THE RUBBER BOARD.
EXHIBIT P7 TRUE COPY OF THE DECREE DATED 30.09.87
IN OS NO.403/86 OF THE SUBORDINATE
JUDGE'S COURT, KOTTAYAM.
EXHIBIT P8 TRUE COPY OF THE AUCTION CERTIFICATE
DATED 31.01.96 OBTAINED BY THE 5TH
RESPONDENT.
EXHIBIT P8 A TRUE COPY OF THE ORDER DATED
27.11.1996 IN EP NO.71/96 OF THE
LEARNED PRINCIPAL SUB COURT, KOTTAYAM.
EXHIBIT P8 B TRUE COPY OF THE PROCEEDING BEARING
NO.PV:19/98A (NIL CASE) DATED
02.02.1998 OF THE 5TH RESPONDENT.
EXHIBIT P8 C TRUE COPY OF THE RECEIPT NO.46 OF BOOK
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NO.892 DATED 07.02.98 ISSUED TO THE
5TH RESPONDENT BY THE 4TH RESPONDENT.
EXHIBIT P8 D TRUE COPY OF ENCUMBRANCE CERTIFICATE
DATED 20.02.2001 BEARING NO.562/01
ISSUED BY THE SUB REGISTRAR OFFICE,
ERATTUPETTA.
EXHIBIT P9 TRUE COPY OF THE DEED NO.1837/01 DATED
18.09.2001 OF THE SUB REGISTRY,
ERATTUPETTA.
EXHIBIT P10 TRUE COPY OF THE REPRESENTATION DATED
03.04.2002 FILED BY THE PETITIONER
BEFORE THE 4TH RESPONDENT.
EXHIBIT P11 TRUE COPY OF THE REPRESENTATION DATED
08.04.2002, FILED BY THE PETITIONER
BEFORE THE 2ND RESPONDENT.
EXHIBIT P12 TRUE COPY OF JUDGMENT DATED 19.05.2005
IN OP NO.10661 OF 2002 OF THIS
HONOURABLE COURT.
EXHIBIT P13 TRUE COPY OF JUDGMENT DATED 21.11.2007
IN WA NO.2728 OF 2007 OF THIS HON'BLE
COURT.
EXHIBIT P14 TRUE COPY OF REVISION PETITION DATED
25.12.2007 FILED BY PETITIONER BEFORE
THE 8TH RESPONDENT.
EXHIBIT P14 A TRUE COPY OF JUDGMENT DATED 22.02.2008
IN WPC NO.5089/2008 OF THIS HON'BLE
COURT.
EXHIBIT P15 TRUE COPY OF ORDER BEARING NO.LR.B7-
7120/2008 DATED 04.06.2008 ISSUED BY
THE 8TH RESPONDENT.
EXHIBIT P16 TRUE COPY OF REPRESENTATION DATED
01.07.2008 FILED BY THE PETITIONER
BEFORE THE 1ST RESPONDENT.
EXHIBIT P17 TRUE COPY OF THE JUDGMENT DATED
22.01.2009 IN WPC NO.2316/2009 OF THIS
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HON'BLE COURT.
EXHIBIT P18 TRUE COPY OF THE NOTICE
NO.24575/H3/09/RD DATED 20.06.2009
ISSUED BY THE 1ST RESPONDENT.
EXHIBIT P19 TRUE COPY OF THE PETITION DATED
29.06.2009 FILED BY THE 6TH RESPONDENT
BEFORE THE 1ST RESPONDENT.
EXHIBIT P20 TRUE COPY OF THE REPRESENTATION DATED
29.06.2009 FILED BY THE 7TH RESPONDENT
BEFORE THE 1ST RESPONDENT.
EXHIBIT P21 TRUE COPY OF GO(MS) NO.358/09/RD DATED
10.09.2009 ISSUED BY THE GOVERNMENT.
RESPONDENTS' EXHIBITS:
EXHIBIT R2(a) A TRUE PHOTOCOPY OF THE ACCOUNT OF NEW
INDIA RUBBERS OBTAINED FROM THE STATE
BANK OF TRAVANCORE, KOTTAYAM MAIN
BRACNH
EXHIBIT R2(b) A TRUE PHOTOCOPY OF THE LETTER DATED
24.05.1990 ISSUED FROM THE STATE BANK
OF TRAVANCORE, KOTTAYAM MAIN BRANCH
EXHIBIT R2(c) A TRUE PHOTOCOPY OF THE NOTICE ISSUED
UNDER SEC.17(3) R/W SEC.19C OF THE
KGST ACT, 1963 DATED 06.09.1990
EXHIBIT R2(d) A TRUE PHOTOCOPY OF THE ASSESSMENT
ORDER DATED 30.10.1990
EXHIBIT R3 A A TRUE COPY OF THE MAHAZAR DATED
25.02.1992.
EXHIBIT R3 B TRUE COPY OF THE PROCEEDINGS OF THE
DISTRICT COLLECTOR.
EXHIBIT R3 C TRUE COPY OF THE JUDGMENT IN OP
NO.32424/2001.
EXHIBIT R3 D TRUE COPY OF THE STOP MEMO.
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EXHIBIT R3 E TRUE COPY OF THE AGREEMENT.
EXHIBIT R7 A TRUE COPY OF THE FORM F DECLARATION
BEARING SERIAL NO.P670002 DATED
29/10/1988 ISSUED BY THE 6TH
RESPONDENT.
SR
