Kerala General Sales Tax Act | Once Limitation Lapses, Assessment Cannot Be Revived: Kerala High Court

The Kerala High Court has held that assessment proceedings initiated beyond the statutory limitation period under the Kerala General Sales Tax Act, 1963 (KGST Act), are unsustainable in law and liable to be set aside.

Justice Harisankar V. Menon noted that the pre-assessment notice under Section 17(3) of the KGST Act was issued against Bharat Petroleum Corporation Ltd. for the assessment year 2007–08 only on August 25, 2017. The assessment order was passed later, on January 28, 2019. This was beyond the 4-year limitation prescribed under the Act.

“The limitation for the first time was introduced by the Finance Act, 1993, through the insertion of sub-section (6) with effect from 01.04.1993, originally providing for a four-year period and later a five-year period with effect from 31.03.2002.Therefore, applying the afore period of four years/five years, there is no dispute that the assessment for the year 2007-08 cannot be sustained, since the pre-assessment notice was issued only on 25.08.2017,” the Court held.

The bench further noted that the “pre-assessment notice was issued only on 25.08.2017", on the basis of which the assessment was completed in January 2019.

In these circumstances, the court held that the department "may not be justified in placing reliance on the amendments carried out by the Finance Acts of 2009 and 2010.”

The petitions were filed by Bharat Petroleum Corporation Ltd. and Kochi Refineries Ltd., now amalgamated with BPCL. They challenged multiple assessment orders passed for different assessment years under the KGST Act. The assessments were completed long after the relevant assessment years, primarily on the basis of belated pre-assessment notices.

The petitioners argued that the assessments were barred by the limitation prescribed under Section 17(6) of the KGST Act. They also pointed out that they had paid amounts to civil courts pursuant to garnishee orders towards their tax dues, but proper credit was not given by the department. It was further alleged that concessional rates of tax on sales made to NTPC and similar institutions were wrongly denied.

The court identified limitation as the core issue. It observed that Section 17(3) of the KGST Act, in its initial form, did not prescribe any period of limitation either for initiation or completion of assessments.

The limitation was introduced only by the Finance Act, 1993, and later extended.

Applying the law, the court held that the impugned assessments in all the connected writ petitions were passed beyond the period prescribed under Section 17(3) read with Section 17(6) of the KGST Act. The assessment orders were accordingly set aside.

Since the issue of limitation was decided in favour of the assessees, the Court expressly declined to examine the other contentions raised in the petitions.

Citation: 2026 LLBiz HC (KER) 7

Case Title: Bharat Petroleum Corporation Ltd. v. State of Kerala

Case Number: WP(C) NO. 7697 OF 2019

Counsel for Petitioner: K. I. Mayankutty Mather, R. Jaikrishna, Kum. Narayani Harikrishnan

Counsel for Respondent: Government Pleader Alan Priyadarshi Dev and Senior Panel Counsel T.C. Krishna, CGC P.R. Ajith Kumar