Case Law Details
URC Construction Pvt Ltd Vs Assistant Commissioner of State Tax (Kerala High Court)
In this case, URC Construction Pvt Ltd (hereinafter referred to as “the appellant”) appealed against an interim order dated 21.02.2024 issued by a learned Single Judge of the Kerala High Court in W.P(C) No.2715 of 2024. The interim order directed the appellant to deposit 25% of the assessed tax dues under Ext.P2 assessment order within two weeks as a condition for staying the recovery of the remaining tax, interest, and penalty pending the disposal of the writ petition.
The appellant, represented by Smt. K. Krishna, was unable to comply with the deposit requirement within the stipulated time. Subsequently, another Single Judge vacated the stay on recovery on 13.03.2024, and the writ petition was adjourned to allow the Government Pleader to file a counter affidavit.
Upon hearing arguments from both parties—the appellant represented by Smt. K. Krishna and the respondents represented by Sri. V. K. Shamsudheen—the Division Bench of the Kerala High Court deliberated on the core issue raised in the writ petition. The crux of the dispute pertained to the legality of the assessment order (Ext.P2), which the appellant argued was issued beyond the statutory limitation period prescribed under Section 25(1) of the Kerala Value Added Tax (KVAT) Act.
The appellant contended that the assessment order was initiated based on an audit objection under Section 25A of the KVAT Act, which purportedly overrides the limitation period prescribed under Section 25(1). However, this interpretation was under scrutiny before another Single Judge of the High Court, specifically regarding whether an audit objection could indeed extend the limitation period for assessment.
The Division Bench noted that the appellant had raised a prima facie case regarding the applicability of the limitation provision under Section 25(1) of the KVAT Act. Section 25(1) stipulates a six-year limitation period for completing assessments from the end of the relevant assessment year. It was undisputed that Ext.P2 assessment order was issued beyond this prescribed period, relating to the assessment year 2016-17.
Based on these considerations, the Division Bench concluded that the appellant had established a prima facie case warranting a stay on the recovery of taxes, interest, and penalties pending the disposal of the writ petition. They further emphasized that the interim order directing the appellant to deposit 25% of the assessed tax dues within two weeks as a condition for staying recovery was not justified under the circumstances.
Consequently, the Division Bench allowed the writ appeal, setting aside the portion of the interim order that mandated the deposit of 25% of the tax dues. They remitted the writ petition back to the learned Single Judge for a substantive consideration on its merits. Importantly, pending the disposal of the writ petition, the Division Bench directed that recovery proceedings against the appellant, based on the amounts confirmed under Ext.P2 order, should be kept in abeyance.
Conclusion:
In summary, the Division Bench of the Kerala High Court, in the case of URC Construction Pvt Ltd vs Assistant Commissioner of State Tax, set aside the interim order requiring the appellant to deposit 25% of the assessed tax dues pending the disposal of the writ petition challenging the legality of the assessment order (Ext.P2). The Court found that the appellant had raised a prima facie case regarding the violation of the limitation period under Section 25(1) of the KVAT Act. As a result, the Division Bench allowed the writ appeal, remitting the matter back to the Single Judge for further consideration on merits and directing a stay on recovery proceedings until the final adjudication of the writ petition. This decision ensured procedural fairness and upheld the statutory rights of the appellant pending a definitive judicial determination on the legality of the assessment order.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
This Writ Appeal has been preferred against the interim order dated 21.02.2024 of a learned Single Judge in W.P(C) No.2715 of 2024. By the said interim order, the learned Single Judge while adjourning the writ petition to a later date so as to enable the Government Pleader to file counter affidavit in the matter, further directed the appellant herein to make a deposit of 25% of the dues of tax assessed under Ext.P2 assessment order within a period of two weeks as a condition for grant of stay of recovery of balance tax, interest and penalty pending disposal of the writ petition.
2. We are informed by the learned counsel for the appellant that since the appellant could not deposit the 25% as directed by the learned Single Judge within the time granted in the writ petition, the said stay was vacated subsequently by another Single Judge by the order dated 13.03.2024 and the writ petition was posted in due course to enable the Government Pleader to file a counter affidavit.
3. We have heard Smt. K. Krishna, the learned counsel for the appellant and Sri. V. K. Shamsudheen, the learned Government Pleader for the respondents.
4. On a consideration of the rival contentions, we find that the issue urged in the writ petition was essentially with regard to the legality of Ext.P2 order of assessment, which according to the learned counsel had been passed beyond the period of limitation prescribed under the statute (KVAT Act). The assessing authority appears to have ignored the said contention on limitation apparently, because the assessment order was passed pursuant to an audit objection raised in terms of Section 25A of the KVAT Act. We are informed that the issue as to whether an audit objection under Section 25A of the KVAT Act would have the effect of overriding the limitation period prescribed under Section 25(1) of the said Act is pending consideration before another Single Judge of this Court. At any rate, since the issue of applicability of the limitation provision under Section 25(1) on the facts of the instant case is under consideration before this Court, we are of the view that the appellant herein had established a prima facie case for the grant of a stay pending disposal of the writ petition. This is more so because the express provisions of Section 25(1) of the KVAT Act clearly indicate that the limitation period for completion of assessment is six years from the end of the relevant assessment year. It is not in dispute that Ext.P2 order was passed beyond the said period since the assessment year in question is 2016-17.
5. We therefore, deem it appropriate to allow this writ appeal by setting aside that part of the impugned order of the learned Single Judge that directs the appellant to deposit 25% of the dues of tax assessed within a period of two weeks as a condition for grant of stay of recovery of balance tax, interest and penalty pending disposal of the writ petition.
6. Resultantly, while the writ petition is remitted back to the learned Single Judge for consideration on merits, we make it clear that pending disposal of the writ petition, recovery proceedings for recovery of the amounts confirmed against the appellant by Ext.P2 order shall be kept in abeyance.
The writ appeal is allowed as above.
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