Euro Business System vs. State Of Kerala - Kerala High Court, 10 March 2021

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE A.M.BADAR WEDNE AY, THE 10TH DAY OF MARCH 2021 / 19TH PHALGUNA, 1942 WP(C).No.6200 OF 2021(Y) PETITIONER: M/S.EURO BUSINESS SYSTEM ROOM NO.A381, 4TH FLOOR, BLOCK 1, NEW BUS STAND, THAVAKKARA, KANNUR-670 001, REPRESENTED BY ITS PARTNER-MR.PRAKSH.T. BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM SRI.RAJA KANNAN RESPONDENTS: 1 STATE OF KERALA REPRESENTED BY ITS SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695 001. 2 STATE TAX OFFICER, 3RD CIRCLE, KERALA STATE GST DEPARTMENT, 4TH FLOOR, BSNL BHAVAN, SOUTH BAZAR, KANNUR-670 012. OTHER PRESENT: SMT. THUSHARA JAMES, GOVT. PLEADER THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 10.03.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

W.P.(C) No.6200/2021 2 JUDGMENT Dated this the 10th day of March 2021 By this writ petition, the petitioner seeks the following reliefs:

I) Call for the records leading to Ext.P4 order of assessment and P8 order in rectification petition, issued by the 2nd respondent and to quash the same by the issuance of a writ of certiorari or such other writ, order or direction. ii) Issue a writ of mandamus, or such other order, writ or direction, commanding the 2nd respondent to re-consider the issue afresh after considering the issues raised by the petitioner in Ext. P3 reply, and after providing the materials sought for by the petitioner, and after considering the further

replies to be filed, prior to finalization of the assessment proceedings.

Heard the learned counsel appearing for the petitioner. Learned counsel for the petitioner drew my attention to the pre- assessment notice issued under Section 25(1) of the Kerala Value Added Tax Act, 2003 (KVAT Act, for short) and argued that in pursuant to the opportunity of hearing granted by this pre- assessment notice, Ext.P1, the petitioner appeared before the State Tax Officer on 29.09.2020. Learned counsel for the petitioner further submitted that on 29.09.2020, hearing pursuant to the pre assessment notice for the assessment years 2014-15 and 2015-16 was also scheduled and therefore, the petitioner filed objection to the pre-assessment notice for those years. However, the petitioner sought time for reply to the pre-assessment notice

W.P.(C) No.6200/2021 3 at Ext.P1 for the assessment year 2016-17. With this, it is argued that the petitioner has tendered its reply/objection to the pre-assessment notice, Ext.P1 on 22.10.2020 vide communication at Ext.P3. Learned counsel for the petitioner further argued that the petitioner has received assessment order for the year 2016-17 allegedly passed on 30.09.2020, (Ext.P4), on 10.12.2020 i.e. after a gap of 70 days. By drawing my attention to the tracking report, Ext.P6, it is argued that the cover under which the assessment order at Ext.P4 was sent came to be despatched by the 2nd respondent on 04.12.2020. This delay of 64 days in despatching Ext.P4 order is dubious and in all probability, the assessment order is pre-dated and therefore, non consideration of reply at Ext.P3 submitted by the petitioner on 22.10.2020 amounts to violation of the principles of natural justice and the conduct in issuing the order as passed on 30.09.2020 makes the assessment order malicious, arbitrary, unreasonable and illegal. It is argued by the learned counsel for the petitioner that when the petitioner had approached the respondent-State Tax Officer on 22.10.2020 for submitting its reply/objection to the then pre-assessment notice, the assessment order dated 30.09.2020 ought to have been served on the petitioner in natural and normal

W.P.(C) No.6200/2021 4 circumstances. This was not done and this by itself shows that the assessment order is pre-dated and reply tendered by the petitioner on 22.10.2020 is deliberately kept out of consideration.

Learned counsel for the petitioner further argued that the petitioner filed an application for rectification under Section 66 of the KVAT Act and pointed out all these circumstances. However, the said application for rectification was also rejected by order at Ext.P8 by the State Tax Officer. According to the learned counsel for the petitioner, non-consideration of the reply/objection of the petitioner while passing the assessment order amounts to error apparent on the face of the record.

The petitioner has relied on the following observations of the Hon'ble Madras High Court in Roots Multiclean Ltd. vs. Customs Excise & Service Tax Appellate Tribunal reported in Manu/TN/4233/2015 to buttress this contention that the impugned order at Ext.P8 rejecting the rectification application suffers from error of law. It was held therein by the Hon'ble Madras High Court that 'it is settled law that, when the mistakes are on account of : (a) palpable mistakes, (b) orders passed on inapplicable statutory provisions (c) points raised in appeal, but not considered and (d) wrong application of the

W.P.(C) No.6200/2021 5 judgment of the High Court, are mistakes that could be rectified by the Tribunal (as mistakes being apparent on the face of the record). The facts of these cases and the orders passed by the CESTAT would clearly go to show that the orders have been passed, without understanding the provisions of Section 35B of the Act'.

To substantiate the contention that the assessee must have a reasonable opportunity of stating his case, reliance is placed by the petitioner on the following observations of the Hon'ble Apex Court in the matter of Tin Box Company, New Delhi vs. CIT, New Delhi, reported in (2001) 9 SCC 725:

“2. That the assessee could have placed evidence before the First appellate authority or before the Tribunal if really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of setting out his case. We, therefore, do not agree with the Tribunal and the High Court that it was not necessary to set aside the order of assessment and remand the matter to the assessing authority for fresh assessment after giving to the assessee a proper opportunity of being heard.”

In order to demonstrate that the assessing officer could have considered the reply/objection submitted by the petitioner, (1988) 69 STC 62:

W.P.(C) No.6200/2021 6

“14. The order of any authority cannot be said to be passed, unless it is in some way pronounced or published or the party affected has the means of knowing it. It is not enough if the order is made, signed, and kept in the file, because such order may be liable to change at the hands of the authority who may modify it or even destroy it, before it is made known, based on subsequent information, thinking or change of opinion. To make the order complete and effective, it should be issued, so as to be beyond the control of the authority concerned, for any possible change or modification therein. This should be done within the prescribed period, though the actual service of the order may be beyond that period.”

At this juncture, it is relevant to quote Section 66 of the KVAT Act, 2003 as the petitioner is challenging the order at Ext.P8 rejecting its application for rectification. “66. Power to rectify any error apparent on the face of record. (1)Any authority, including Appellate Tribunal and Settlement Commission issuing any or proceedings under this Act may, on application or otherwise, at any time within four years from the year in which the order is passed by it, rectify any error apparent on face of the record. Provided that no such rectification which has the effect of enhancing an assessment or penalty, shall be made, unless such authority has given notice to the person affected and has allowed him a reasonable opportunity of being heard. (2) Where such rectification has the effect of reducing an assessment or penalty, the Assessing Authority shall make any refund to the person entitled thereto. (3) Where any such rectification has the effect of enhancing an assessment or penalty, the Assessing Authority shall give the dealer or other person, a revised notice of assessment or penalty and there upon the provisions of this Act and the Rules made thereunder shall apply as if such notice has been given in the first instance.

Explanation: - The liability to pay the tax or other amount shall arise only from the date specified in the revised notice”.

W.P.(C) No.6200/2021 7 8. I have considered the submissions so advanced. The contention of the petitioner that when the petitioner approached the State Tax Officer for tendering its reply/objection to the pre- assessment notice at Ext.P1 on 22.10.2020, the petitioner should have been served with the assessment order dated 30.09.2020, cannot be accepted as Government office works with the help of different officers and employees. The reply cum objection at Ext.P3 to the pre-assessment notice for the year 2016-2017 does not bear any endorsement or acknowledgment which shows that it was the State Tax Officer who himself has personally accepted or received the said objection. That is not even the contention of the petitioner. The same appears to have been received by some inward clerk from the office of the State Tax Officer and as such, it cannot be said that the petitioner ought to have been served with the assessment order dated 30.09.2020, Ext.P4, on 22.10.2020 itself. Every staff member of the office is not expected to know all developments in all official matters. The petitioner had a remedy to raise all these contentions to ventilate its grievance in the statutory appeal by pointing out that the assessment order is an erroneous order. Statute prescribes appellate remedy for challenging erroneous orders passed by the assessing officer.

W.P.(C) No.6200/2021 8 9. So far as rectification application and the order passed therein is concerned, it needs to be made clear that rectification can be done in respect of the error apparent on the face of record. If the error is not self evident and has to be detected by the process of reasoning, then the error cannot be said to be an error apparent on the face of record. In the case in hand, the assessment order is dated 30.09.2020 and the reply/objection allegedly filed by the petitioner to the pre-assessment notice is dated 22.10.2020. Hence this cannot be a case of error apparent on the face of record. For exercising the powers under Section 66 of the KVAT Act, it is to be an imminent error, an error which would strike on a mere looking at the record and would not require any process of reasoning on the point that may conceivably have two opinions. It must be an error so manifest and clear that no court permits such error to remain on record. In this view of the matter, the impugned order (Ext.P8) passed on rectification application cannot be faulted. It is not permissible for this Court to interfere in such matters particularly when appellate remedy is prescribed under the statute.

10.

No doubt, the assessee had right of reasonable opportunity of setting his case. In the instant case, even according

W.P.(C) No.6200/2021 9 to the learned counsel for the petitioner, the petitioner was called upon for hearing vide communication at Ext.P2 dated 22.09.2020. However, the assessment order seems to be passed on 30.09.2020, after appearance of the petitioner before the assessing officer on 29.09.2020. The reply/objection submitted by the petitioner, as per its case was on 22.10.2020, ie, after passing of the order dated 30.09.2020. The question whether the assessing officer ought to have considered the reply/objection submitted subsequently needs to be considered by the appellate authority by calling for the records and proceedings of the assessment order and the petitioner has remedy of approaching the appellate authority in that regard.

11.

The observations of this Court in Government Wood Works' case (supra) are in respect of issue of limitation. While W.P.(C) No.6200/2021 10 any authority cannot be said to be passed unless it is in some way pronounced or published or the party affected has the means of knowing it. Case in hand is not on the issue of limitation. Similarly, I have already held that the assessment order came to be passed in September, 2020, whereas the petitioner has tendered its reply/objection in October, 2020. The question, therefore was not that of rectification, but the petitioner could at the most have impugned the assessment order by preferring an appeal by stating it to be an erroneous order. This writ petition as such is devoid of merit and the same is accordingly dismissed. A.M.BADAR JUDGE smp

W.P.(C) No.6200/2021 11 APPENDIX PETITIONER'S EXHIBITS: EXHIBIT P1 THEOF THE PRE- ASSESSMENT NOTICE DATED 10.08.2020 ISSUED BY THE 2ND RESPONDENT UNDER SECTION 25((1) OF THE ACT, FOR THE YEAR 2014-15. EXHIBIT P2 THEOF THE HEARING NOTICE DATED 22.09.2020 ISSUED BY THE 2ND RESPONDENT. EXHIBIT P3 THEOF THE REPLY DATED 16.10.2020 (WITHOUT ANNEXURES) SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXHIBIT P4 THEOF THE ORDER OF ASSESSMENT DATED 30.09.2020 ISSUED BY THE 2ND RESPONDENT FOR THE YEAR 2016-17 (KVAT). EXHIBIT P5 THEOF THE POSTAL ENVELOPE WHICH ACCOMPANIED EXT. P4 ORDER. EXHIBIT P6 THEOF THE TRACK CONSIGNMENT OF EXT. P4 ORDER OBTAINED FROM THE WEBSITE OF THE INDIA POST. EXHIBIT P7 THEOF THE RECTIFICATION PETITION (WITHOUT ANNEXURS) DATED 25.12.2020 SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXHIBIT P8 THEOF THE ORDER DATED 04.01.2021 ISSUED BY THE 2ND RESPONDENT REJECTING THE RECTIFICATION PETITION FILED BY THE PETITIONER. RESPONDENTS' EXHIBITS: NIL.P.S to Judge smp