Reasonable time for tax enforcement under KVAT Act upheld where delay in detection and notice was satisfactorily explained

Proceedings under Section 67 of the Kerala Value Added Tax Act were challenged as time-barred. The Court held that, where no specific limitation then applied, action had to be initiated and concluded within a reasonable time, applying the earlier Division Bench principle that detection of the offence must be proximate to inspection or verification and that five years could serve as a reasonable period by analogy to reassessment. On the facts, the summons, record verification, detection on 30.09.2014, and orders on 18.03.2017 were supported by the volume of records and the linkage with the selling dealer's proceedings, so the delay was satisfactorily explained and the limitation objection failed.

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Issues: Whether proceedings initiated under Section 67 of the Kerala Value Added Tax Act, 2003 were barred by limitation.

Analysis: The period of limitation under Section 67 had undergone changes and, where no specific limitation was then available, the proceedings were required to be initiated and concluded within a reasonable time. The Court applied the earlier Division Bench principle that detection of offence must be proximate to inspection or verification of accounts, and that the reasonable period for finalisation could be taken as five years by analogy to reassessment. On the facts, summons were issued in 2012-13, records of multiple dealers were verified, the offence was detected on 30.09.2014, and the impugned orders were passed on 18.03.2017. The delay in issuing notice was held to be satisfactorily explained in the context of the volume of records and the linkage with the selling dealer's proceedings.

Conclusion: The proceedings were not time-barred, and the limitation objection failed.

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