Penalty U/S 45A KGST Act Cannot Be Initiated Beyond 'Reasonable Time' Despite No Prescribed Limitation Period: Kerala High Court

The Kerala High Court held that even though Section 45A of the Kerala General Sales Tax Act, 1963 (KGST Act) does not prescribe any limitation period, penalty proceedings must be initiated within a reasonable time. Justices A. Muhamed Mustaque and Harisankar V. Menon stated that since the notice was issued with reference to the assessment year 2011-12, the period of five years had come to an end on 31.03.2017. The notice was issued admittedly only on 20.12.2018. The above notice is beyond the reasonable period of time of five years, under such circumstances. In the case at hand, the appellant was an assessee under the Kerala General Sales Tax Act, 1963, engaged in the sale of Indian Made Foreign Liquor (IMFL) and Foreign Made Foreign Liquor (FMFL). A show-cause notice was issued to the assessee proposing the imposition of a penalty under the provisions of Section 45A of the Kerala General Sales Tax Act, 1963. The assessee challenged the show cause notice before the Kerala High Court, contending that the proceedings were time-barred. The Single bench dismissed the petition, directing the assessee to approach the statutory authority. The case of the assessee was that, though no period of limitation has been prescribed with reference to the provisions of Section 45A of the Act, such proceedings have to be initiated/finalised at least within a reasonable period of time. The bench noted that the provisions of Section 45A of the Act provide for the imposition of a penalty when the tax is sought to be evaded by an assessee. The provisions do not provide the time period within which proceedings have to be taken under the statute. The bench stated that even assuming for a moment that there was no non-cooperation on the part of the assessee pursuant to the notices issued, the Department was under an obligation to proceed in accordance with law within a reasonable period of time. The State Tax Officer cannot take refuge under the afore-mentioned notices to save the limitation, in such circumstances, added the bench. In view of the above, the bench allowed the appeal. Case Title: M/s Taj Garden Retreat v. State of Kerala Case Number: WA NO. 2110 OF 2025 Counsel for Appellant/Assessee: Sreelekshmi Ben, Jose Jacob, Jazil Dev Ferdinanto, Anne Maria Mathew, Anjaly Ann Joseph Counsel for Respondent/Department: Thushara James Click Here To Read/Download Order

Penalty U/S 45A KGST Act Cannot Be Initiated Beyond 'Reasonable Time' Despite No Prescribed Limitation Period: Kerala High Court

Mehak Dhiman

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