Reasonable time for tax proceedings: unexplained delay after inspection rendered the Kerala VAT action time-barred.

Proceedings under the Kerala Value Added Tax Act were held time-barred where detection of the alleged offence and consequential action were not taken with reasonable promptitude after inspection. The Court applied the principle that, even where no express limitation is stated, tax proceedings must be completed within a reasonable or applicable statutory period, and unexplained delay cannot be saved by repeated summons. Because inspection occurred in 2011 but meaningful action was not pursued until 2016, with no satisfactory explanation for the lapse, the proceedings were barred by limitation and the impugned order was set aside in favour of the assessee.

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Issues: Whether proceedings initiated under Section 67 of the Kerala Value Added Tax Act, 2003 were barred by limitation because the alleged detection of offence and subsequent action were taken after an inordinate delay.

Analysis: The proceedings under Section 67, though not always subject to an express limitation, had to be completed within a reasonable period. The Court applied the principle that detection of offence must also occur within a proximate time from inspection or verification of accounts, and that repeated summons cannot justify indefinite delay. As the inspection was in 2011, a summons was issued immediately thereafter, yet no meaningful action was taken until 2016, with no satisfactory explanation for the lapse. The Court also noted that a three-year limitation for completion of proceedings existed at the relevant time, and the matter could have been finalised much earlier on the materials already available.

Conclusion: The proceedings were barred by limitation and the impugned order was set aside in favour of the assessee.

Ratio Decidendi: Where tax proceedings must be completed within a statutory or reasonable period, the detection of offence and consequential action must be taken with reasonable promptitude from the date of inspection or verification, and unexplained delay will render the proceedings time-barred.

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