Kerala High Court Dismisses State’s Appeal and Holds Fast-Track Tax Assessments Under Section 17D Must Be Completed Within a Reasonable Time
Sanchayita Lahkar
The High Court of Kerala Division Bench of Justice A. Muhamed Mustaque and Justice Harisankar V. Menon dismissed the State’s appeal, affirming the quashing of delayed assessments under Section 17D of the Kerala General Sales Tax Act, 1963. The Bench held that although Section 17D contains no express limitation period, the assessing authority must complete assessments within a reasonable timeframe, guided by the statutory context—particularly the five-year period under Section 17(6). The Court stated that the power to assess cannot be exercised indefinitely and ruled that the belated assessments for 2003-04 and 2004-05 were invalid for having been initiated beyond a reasonable period.
The dispute arose under the Kerala General Sales Tax Act, 1963 concerning the finalisation of assessments for the assessment years 2003-04 and 2004-05. The original dealer, father of the writ petitioner, had duly filed returns under Section 17(1) of the Act. Following his death in 2006, the writ petitioner became the legal representative.
In February 2012, the departmental authorities comprising a Fast Track Team under Section 17D of the Act issued notices proposing to finalise the assessments for the relevant years. The petitioner objected, contending that the proposed assessments were barred by limitation since, under Section 17(6) of the Act, assessments were required to be completed within a fixed period—initially four years and subsequently extended to five years. The petitioner maintained that the assessments ought to have been completed by March 31, 2009 and March 31, 2010 for the respective years.
Despite the objections, the authorities proceeded to issue assessment orders finalising the assessments for both years. The petitioner challenged these orders before the High Court, asserting that the initiation of proceedings was time-barred and that the extension of limitation introduced by the Finance Act, 2011 could not apply because the assessments were not pending as of March 31, 2011.
The State and departmental authorities defended the assessments by arguing that Section 17D of the Act, being a special provision for “fast-track” assessments, contained a non obstante clause that excluded the limitation in Section 17(6). They contended that once returns were filed, the assessments should be considered pending until concluded and, therefore, the extended time limits provided by subsequent Finance Acts applied. They also relied on judicial precedents to argue that no vested right accrued to the assessee from the expiry of limitation.
The writ petitioner countered that limitation constituted a valuable right and that the Department could not indefinitely delay the completion of assessments. He argued that even in the absence of an explicit limitation in Section 17D, assessments had to be finalised within a reasonable time by reference to the statutory scheme.
The Court noted: “The provisions of Section 17D, as rightly contended by the learned Senior Government Pleader, start with a non obstante clause. The provisions do not speak about the initiation of assessment proceedings within a particular time or finalisation thereof. By virtue of the non obstante clause, there cannot be any reference made to the provisions of Section 17(6) of the Act also.”
The Court referred to Betty Sebastian v. Assistant Commissioner and ST.Rev.No.11 of 2021, which held that limitation provisions are inconsistent with the scheme of Section 17D. However, the Bench stressed that assessments cannot be left indefinitely open. It recorded: “Even on the basis of the afore finding, the question arises as to whether the Department would be entitled to finalise the assessment at its sweet will.”
Citing State of Punjab v. Bhatinda District Cooperative Milk Producers Union Ltd. [(2007) 11 SCC 363], the Court recalled: “It is trite that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period.” Similarly, in Union of India v. City Bank [2022 LiveLaw (SC) 704], it was held that statutory actions must be initiated within reasonable time if no period is prescribed.
The Division Bench further considered its own judgement in W.A. No.1700 of 2021, which stated: “To condone a delay of 14 years in issuing a notice under Section 17D, on the specious plea that Section 17D does not prescribe for a period of limitation, would tantamount to doing violence to the language used in the statutory provision, which deals with ‘fast track assessments’, and also run contrary to its inherent scheme.”
The Court also cited Parisons Foods (P) Ltd. v. State of Kerala and Fijo Joseph, where it was held that assessments must be completed within a reasonable time, often equated to five years by reference to Section 17(6). The Bench concluded: “We are of the opinion that it is trite law that even when the statute does not provide for an outer time limit, the authority has to exercise jurisdiction within a reasonable time.”
The Court stated: “In such circumstances, we are of the opinion that the initiation and finalisation of the assessment were barred by limitation.” Accordingly, the writ appeal filed by the State and its officers was dismissed.
“The reasonable period of time for such assessment has to be fixed with reference to the other provisions of the statute. In that view of the matter, we are of the opinion that the assessment has to be initiated at least with reference to 5 years as prescribed under Section 17(6) of the Act.”
“Therefore, we find no merit in this appeal, and the same would stand dismissed.” As a result, the judgment of the Single Judge quashing the assessment orders, Exts.P8 and P9, stood affirmed.
Advocates Representing the Parties
For the Appellants: Senior Government Pleader Sri. V.K. Shamsudheen
For the Respondents: Sri. V.V. Asokan (Senior Advocate), Shri. K.I. Mayankutty Mather (Senior Advocate), Smt. S. Parvathi, and Sri. Abraham K.J.
Case Title: Deputy Commissioner, Commercial Taxes & Others v. Hakeem K.
Neutral Citation: 2025: KER:70576
Case Number: W.A. No. 1543 of 2016
Bench: Justice A. Muhamed Mustaque, Justice Harisankar V. Menon
