IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM WEDNESDAY, THE 6TH OCTOBER 2010 / 14TH ASWINA 1932 WP(C).No. 28463 of 2010(G) -------------------------- PETITIONER(S): --------------- SRI.RAJESH KUMAR,PROPRIETOR, VIDYALAKSHMI POULTRY,VARIKUNDU, KANAKKANNUR,PALAKKAD DISTRICT. BY ADV. SRI.E.P.GOVINDAN SMT.G.DEEPA RESPONDENT(S): --------------- 1. THE COMMERCIAL TAX OFFICER, COMMERCIAL TAXES,ALATHUR. 2. THE ASST.COMMISSIONER (APPEALS), COMMERCIAL TAXES, PALAKKAD. 3. THE STATE OF KERALA REPRESENTED BY THE SECRETARY,TAXES DEPARTMENT,GOVERNMENT SECRETARIAT, TRIVANDRUM. SR. GOVT. PLEADER SRI.C.K.GOVINDAN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 06/10/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.K.ABDUL REHIM, J. ------------------------------------------- W.P.(C).No.28463 of 2010 ------------------------------------------- Dated this the 6th day of October, 2010 J U D G M E N T ---------------------- Challenge in this writ petition is against Exts.P1 to P3 notices of demand, issued in Form No.12, with respect to the assessment years 2007-08, 2008-09 and 2009-10. Contention of the petitioner is that those demands were issued without rejecting Ext.P4 to P6 returns filed by the petitioner for the relevant periods. It is contended that issuance of demand notices without resorting to procedure for assessment contemplated under Section 22 of the Kerala Value Added Tax Act, 2003 (KVAT Act), is totally unsustainable. 2. It is further stated that, with respect to the year 2006-07, assessment was completed as per Ext.P7 order, rejecting return filed by the petitioner showing turnover below the assessable limits prescribed under the Act. By virtue of that order it was found that the petitioner has got turnover of more than Rs.10 lakhs for that particular year and that he will fall within the assessable limits. It is further stated that, the petitioner had already preferred Ext.P8 W.P.(C).28463/10-G -2- appeal against Ext.P7 order of assessment before the first appellate authority, the 2nd respondent herein. Along with appeal the petitioner had also filed Ext.P10 stay petition and an early hearing petition as per Ext.P9. According to the petitioner, the appeal and the accompanying petitions are pending consideration and disposal. 3. Heard, learned Government Pleader appearing for respondents. It is vehemently contended that Ext.P1 to P3 demands are legal and sustainable, in view of the provisions contained in sub-rule 7 of Rule 22 of the KVAT Rules, 2005 and also in view of the provisions contained in the 3rd proviso to Section 6(1) of the KVAT Act. 4. On a perusal of Rule 22(7) it is revealed that if the return is submitted without proof regarding payment of full amount of tax, the assessing authority is entitled to serve a notice of demand in Form No:12, and in such case the dealer will be liable for payment of the amounts demanded, along with interest. It is pertinent to note that Rule 22 under Chapter V of the KVAT Rules deals with, 'submission of returns, assessment and collection of tax and penalty'. “The full amount of tax payable” referred to in sub-rule 7 can only denote the tax payable in accordance with the return. So also the 3rd proviso W.P.(C).28463/10-G -3- to Section 6(1) of the Act stipulates that if the total turnover of a dealer exceeds Rs.10 lakhs for the first time during the course of an year, such dealer shall be liable to pay tax, only on the turnover in excess of Rs.10 lakhs. In the case at hand, the petitioner has not conceded through returns that the turnover had exceeded Rs.10 lakhs in any of the years concerned, including the previous year for which the assessment has now been completed. If the petitioner has not conceded turnover above the limit of Rs.10 lakhs during any one of the years and if the authority is of the opinion that the turnover shown or conceded in the return is not true and correct, it is obligatory on the part of the authority to finalise the assessment resorting to the procedure contemplated under Section 22, treating the return as one filed with incorrect particulars. 5. In the case at hand, contention of the respondent is that since the turnover had exceeded the limit of Rs.10 lakhs during the year 2006-07, the assessee is not entitled for claiming exemption with respect to the subsequent years. But it is pertinent to note that the assessee has not conceded that the turnover had exceeded the limit during the year 2006-07. On the other hand, it is by virtue of assessment completed as per Ext.P7 that it is held that the turnover had exceeded the W.P.(C).28463/10-G -4- limit. At any rate, going by Section 22 of the Act it is clear and evident that even if the assessing authority is of the opinion that the return filed is incorrect in any respect, a demand can be raised only after completing the assessment under Section 22. 6. On the basis of the above findings, I am of the opinion that Ext.P1 to P3 are liable to be quashed. Hence I do so. The assessing authority is directed to finalise the assessment, after affording an opportunity of hearing to the petitioner, at the earliest possible. 7. With respect to Ext.P7 assessment the 2nd respondent appellate authority is directed to consider and pass orders on Ext.P10 stay petition, after affording an opportunity of hearing to the petitioner, at the earliest possible, at any rate within a period of one month from the date of receipt of a copy of this judgment. 8. Till such time orders are passed the amount covered under Ext.P7 shall not be recovered from the petitioner. C.K.ABDUL REHIM, JUDGE. okb