Selvam Broilers (P) Ltd. vs The Assistant Commissioner (Assmt.)-II

A.K. Jayasankaran Nambiar, J.—The petitioner is aggrieved by Ext. P7 notice, issued to him under Section 17D of the Kerala General Sales Tax Act, 1963, hereinafter referred to as the ''KGST Act'', proposing to finalise an assessment for the year 2001-02 by rejecting his request for exemption of a substantial portion of his turnover, and also Ext. P8 notice, issued under Section 45A of the KGST Act proposing the imposition of a penalty in an amount which is double the amount of tax allegedly sought to be evaded for the assessment year 2001-02.

The petitioner is a Private Limited Company and a registered dealer on the files of the 1st respondent for the purposes of the KGST Act as also the KVAT Act. It owns a hatchery on owned land, and poultry farms on leased lands, within the State of Kerala. The issue involved in the instant case revolves around the availability of an exemption to hatcheries and poultry farms, within the State, for the period from 1.4.2000 to 4.1.2002, which is the period covered by Exts. P7 and P8 notices issued to the petitioner. It is pointed out that by S.R. O. 291/2000, which was introduced with effect from 1.4.2000, there was an exemption to the turnover of sale of poultry and chicks hatched and reared within the State with the exemption in respect of hatcheries being for the sale of poultry chicks and meat hatched and reared within the State and the exemption for poultry farmers being for the sale of poultry and meat reared in own farms within the State. By a later notification, namely, S.R. O. 877/2000 effective from 23.9.2000, the exemption granted under the earlier notification to hatcheries was confined to the sale of chicks only. Thereafter, by yet another notification S.R. O. 7/2002 dated 4.1.2002, made applicable with retrospective effect from 1.4.2000, the exemption for turnover of sale of chicks and chicken was confined to those farmers who owned farms in land over which they have full ownership. Insofar as the retrospective operation of S.R. O. 7/2002 with effect from 1.4.2000 had the effect of depriving the petitioner of the benefit of an exemption that he had already enjoyed by virtue of S.R. O. 291/2000, S.R. O. 7/2002 was challenged by the petitioner in O.P. No. 2371/2002. By Ext. P2 judgment, this Court declared that the retrospective operation of the said notification was illegal and unconstitutional and therefore upheld only the prospective operation of that notification. The fallout of the said judgment was that the eligibility for exemption, for the period from 1.4.2000 to 4.1.2002, as far as the petitioner was concerned, had to be determined in terms of S.R. O. 291/2000, as modified by S.R. O. 877/2000. In Exts. P7 and P8 notices that have been issued to the petitioner by the 2nd and 1st respondents respectively, the basis for the issuance of the said notices appears to be the contention that the petitioner is not rearing chicken within the State but is actually engaged in contract farming by utilising poultry farmers in the State. This, according to the respondents, would not entitle the petitioner to the benefit of the notification S.R. O. 291/2000 as modified by S.R. O. 877/2000. No doubt, the petitioner would contend that the said assumption of facts by the respondents is wholly misplaced in view of the orders already passed by the appellate Tribunal and other authorities under the Act in respect of the earlier assessment years as also by the Assessing Authority in the provisional monthly assessments for the same year. It is the contention of the petitioner that Exts. P7 and P8 notices tantamount to an abuse of the process of law and are wholly without jurisdiction and therefore liable to be impugned by this Court in exercise of its powers under Article 226 of the Constitution of India.

A counter affidavit has been filed on behalf of the respondents wherein they seek to justify the issuance of Exts. P7 and P8 notices on the ground that the notices have been pursuant to the discovery of facts that showed that the petitioner was not entitled to the benefit of the notification claimed by him. It is also pointed out that Exts. P7 and P8 are only notices and without replying to the same, it was not open to the petitioner to invoke the discretionary jurisdiction of this Court under Article 226 of the Constitution of India.

I have heard Sri. K. Srikumar, the learned senior counsel appearing on behalf of the petitioner and Sri. George Mecheril, learned Special Government Pleader appearing on behalf of the respondents.

On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I am of the view that Exts. P7 and P8, being notices issued by the respondents in terms of the KGST Act, cannot be interfered with by this Court in proceedings under Article 226 of the Constitution of India except, in exceptional circumstances such as when it is established that the notices have been issued by authorities acting without any jurisdiction or in excess of their jurisdiction. Admittedly, in the instant case, the petitioner does not have a contention that the notices are vitiated by any jurisdictional error. The only contention of the petitioner is that, in view of the fact that earlier assessments pertaining to the petitioner were already completed and finalised on the basis of certain findings of facts, which have not changed even in the year under consideration, there was no justification for the respondents to issue repeated notices to the petitioner, in a mechanical manner. It is also pointed out that, insofar as there is no change in facts necessitating a reassessment, there was no justification for issuing any notice proposing a penalty since it was apparent that there was clearly no mens rea on the part of the petitioner while claiming the exemption. Learned senior counsel would also point out that, at any rate, the turnover, in respect of which exemption was claimed, was clearly indicated to the respondents in the return filed by the petitioner and in that view of the matter, even if the exemption claimed was proposed to be rejected, the imposition of a penalty could not be legally sustainable. He would vehemently urge that in view of the futility of the entire exercise that is proposed to be carried out by the respondents, it was necessary and in the interests of justice that this Court interdicted further proceedings in the matter.

In this case, while taking note of the submissions of the learned senior counsel that there has been no change in circumstances necessitating a different view in assessment proceedings for the year under consideration, I have to remind myself that Exts. P7 and P8, that are impugned in the writ petition, are but notices issued by statutory authorities in exercise of their powers under the Statute. It is not in dispute that the notices have been issued pursuant to a valid exercise of jurisdiction by the authorities concerned. A dispute with regard to the existence of facts, that would entitle an assessee for the exemption under a notification, is one that has to be resolved by the statutory authorities, at first instance, after perusing the materials produced by the assessee to substantiate his contentions regarding the existence of those facts. That is not an exercise that can be done by the High Court in proceedings under Article 226 of the Constitution of India. I am therefore not persuaded to interfere with Exts. P7 and P8 notices that are impugned by the petitioner in the present writ petition. While on the subject, I might note that the apprehension of the petitioner is only with regard to a possible delay, that may result from a prolonged agitation of the dispute, which, according to the petitioner, has already been resolved in his favour in the previous assessment years. This, in my view cannot be a justification for the petitioner to by-pass the statutory remedies available to him under the Act. I am of the view, therefore, that it would be in the interests of justice to relegate the assessment proceedings pursuant to Ext. P7 notice to the 1st respondent Assessing Authority for completing the same in accordance with the provisions of Section 17(3) of the KGST Act. This is notwithstanding that the notice contemplates a summary procedure of assessment in terms of Section 17D of the KGST Act. The 1st respondent shall, therefore, complete the assessment proceedings pursuant to Ext. P7 notice, under Section 17(3) of the KGST Act, within a period of three months from the date of receipt of a copy of this judgment, after considering the materials produced by the petitioner to substantiate his claims. Similarly, the 1st respondent shall also finalise the proceedings pursuant to Ext. P8 notice within the said period of three months, after considering the objections of the petitioner against the proposal for imposition of penalty. In both cases, the 1st respondent shall pass orders only after affording an opportunity of hearing to the petitioner.

With these directions, the writ petition is disposed.