KVAT: Kerala HC Dismisses Writ petition for Lack of Merit

Aji Thomas Vs State Tax Officer (Kerala High Court)

Introduction: In a recent case before the Kerala High Court, Aji Thomas challenged an order (Ext.P5) passed by the State Tax Officer under the provisions of the Kerala Value Added Tax (KVAT) Act. Thomas alleged that the order erroneously imposed a significant tax liability on him, relying on financial documents of another company he was associated with. However, the High Court dismissed the writ appeal, citing lack of merit.

Detailed Analysis: Aji Thomas, the proprietor of M/s. Blue Seven Star Constructions Private Limited, contested the assessment order for the year 2016-17, arguing that he was unfairly burdened with tax liability based on financial data from M/s Blue Seven Star Constructions Private Limited, a company where he held a managerial position. Thomas claimed that since his construction business did not involve material supply and had minimal activity, registration under the KVAT Act was unnecessary.

The State Tax Officer initiated an enquiry under Section 47(6) of the KVAT Act after suspecting suppression of total turnover and tax evasion by Thomas’s proprietorship. Despite being served a notice and given an opportunity to respond, Thomas failed to produce the requested documents or submit a reply. Consequently, the assessment order was passed, adhering to statutory formalities.

While Thomas challenged the order in a writ petition, the High Court ruled that the matter involved disputed questions of fact, unsuitable for adjudication via writ petition. Additionally, despite the order being passed in February 2020, Thomas had not filed an appeal against it. The court found no merit in Thomas’s appeal and dismissed it accordingly.

Conclusion: The Kerala High Court’s dismissal of Aji Thomas’s writ appeal highlights the importance of complying with statutory procedures and addressing tax disputes through appropriate legal channels. The decision underscores the need for taxpayers to diligently respond to tax assessments and exercise their right to appeal within the prescribed timelines.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The appellant is the petitioner in WP(C) No.9011/2023 which was filed challenging Ext.P5 order passed by the 1^st respondent under the provisions of the KVAT Act. The learned Single Judge dismissed the writ petition holding that the appellant may avail any other statutory remedy as may be available under law. It is challenging the said judgment; the appellant is before us.

2. We have heard Sri. S. Anil Kumar, the learned counsel for the appellant and Sri. V.K. Shamsudheen, the learned Senior Government Pleader.

3. The appellant is the proprietor of M/s. Blue Seven Star Constructions Private Limited which is engaged in undertaking labour construction contract work. According to the appellant, since there was not much work, and even the meager work done did not involve the supply of materials, there was no necessity to take registration under the KVAT Act. The appellant was also the managing partner of a private limited company M/s Blue Seven Star Construction Private Limited engaged in the labour contract work in construction business. The wife of the appellant was another Director of the said company. It has GST registration. The grievance of the appellant is that Ext.P5 assessment order for the year 2016-17 was passed by the 1^st respondent erroneously saddling him with huge liability relying on the income tax return and profit and loss statement of M/s Blue Seven Star Constructions Private Limited. The records would show that before passing the impugned order, the intelligence officer of commercial taxes after conducting enquiry under Section 47(6) of the KVAT Act found that the proprietorship concern of the appellant had suppressed a total turn over and had evaded the payment of tax. The appellant was issued a notice in Form 17 under Section 25(1) of the KVAT Act. Despite service of notice, the appellant did not produce the books of account, nor did he file any reply. Thereafter, the assessment under section 25(1) of the KVAT Act was proposed and the copy of the order was given to the appellant for filing objection, if any. An opportunity of hearing was also given to him. He did not file any reply or avail himself of the opportunity to hear. Thus, the impugned order was passed after complying with the statutory formalities. The question whether the 1^st respondent fixed the turnover of the appellant’s proprietorship concern by relying on the income tax return and profit and loss statement of M/s Blue Seven Star Constructions Private Limited of which he was only a managing partner is a disputed question of fact which cannot be adjudicated in a writ petition. Even though Ext.P5 order was passed way back in 29/2/2020, the appellant so far has not preferred any appeal against the said order.

We find no merit in the appeal and accordingly it is dismissed.