NIL GST Returns Insufficient to Establish Permanent Place of Business: Kerala HC

The appellant, M/s T.P. Trading Company, is engaged in plywood manufacturing and operates branches across India, including one at Karaikal, Puducherry. A car purchased by the firm was registered in Puducherry. The Kerala Motor Vehicles Department issued a demand notice seeking tax under the Kerala Motor Vehicles Taxation Act, asserting that the vehicle was being used within Kerala.

The firm responded by asserting that the car was permanently used in Puducherry, relying on the Puducherry registration certificate, tax invoice, and its GST registration and returns filed from Puducherry. Pursuant to earlier directions of the High Court, the Sub-Regional Transport Officer reconsidered the issue and issued a fresh notice demanding Rs. 15,37,660 toward tax. Recovery proceedings followed through the District Collector and Tahsildar.

The firm challenged these actions in a writ petition, which was dismissed. Aggrieved, the firm filed the present writ appeal, claiming no tax liability in Kerala as the car was allegedly based and used in Puducherry.

Issue Before HC: Whether the Kerala authorities were justified in demanding motor vehicle tax on a Puducherry-registered car, based on evidence of its use within the State.

HC’s Verdict: The Division Bench upheld the findings of the learned Single Judge and dismissed the appeal. The Court noted that the GST returns filed from Puducherry were all NIL, indicating no actual business activity there. The Notices sent to the firm’s Puducherry address were returned marked “no such address”, while notices sent to the Kerala address were duly served. The court noticed that the car’s insurance was obtained from a Perumbavoor (Kerala) insurer, and six overspeeding violations were recorded by the Kerala Motor Vehicles Department. An enquiry report showed that during a surprise inspection on 17.03.2018, the vehicle was found parked at the partner’s Kerala residence. No rebuttal to this was offered through a reply affidavit.

“Though considerable reliance has been placed by Sri.Subramanyan on the registration obtained by the appellant from Puducherry under the GST Scheme, also relying on the returns filed under the afore statute in Puducherry, we notice that the returns were only NIL returns. Such NIL returns do not reflect any business being carried out by the appellant from Puducherry. This can only be used to show that the appellant is in the habit of complying with the statutory provisions by filing periodical returns.”

The Court emphasised that once such evidence is produced, the burden shifts to the vehicle owner to show that the vehicle was not ordinarily used in Kerala. The appellant failed to discharge that burden.

Relying on Transport Dept. v. Shibumon P.V., the Bench observed that use of the vehicle within Kerala attracts tax liability, irrespective of the place of registration, and that the State also retains power to initiate cancellation proceedings in such circumstances. The Court held that the tax demand and recovery proceedings were perfectly valid.

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