Kerala High Court
R Vijayan vs The Intelligence Officer on 15 July, 2025
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W.P.(C).No.39595 of 2015
1
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:
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W.P.(C).No.39595 of 2015
2
S.MANU, J.
---------------------------------------------
W.P.(C).No.39595 of 2015
---------------------------------------------
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
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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
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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
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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
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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
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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
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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,
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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
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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
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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
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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
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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
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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
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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
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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.
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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.
