Tax Authorities Must Return Title Deed Given As Security Or Certify Its Loss: Kerala High Court

The Kerala High Court has clarified that where an assessee furnishes an original title deed to the tax Department as security, the authorities are duty-bound either to trace and return the document or to formally certify that it has been irretrievably lost.

Justice Ziyad Rahman A.A., by a judgment delivered on 16 January, was deciding a writ petition filed by M/s Bash-P-International, a partnership firm earlier registered under the Kerala Value Added Tax Act, 2003 (KVAT Act).

The Court observed:

“The documents available before this Court would lead to a definite conclusion that the petitioner had furnished the original title deed before the authority concerned. Therefore, it is the duty of the respondents to trace out the said file and release the same,”

The dispute arose from the Department's failure to return an original title deed submitted by the petitioner in 2012 pursuant to a conditional stay granted in a VAT appeal. Under the stay order passed by the First Appellate Authority, the petitioner was required to remit 25% of the disputed tax demand and furnish security for the balance amount in a manner prescribed under the KVAT Act and Rules.

The petitioner complied by paying the stipulated amount, executing security bonds and submitting its original title deed before the assessing authority. An appeal was subsequently allowed in favour of the petitioner, and the Department's challenge before the Tribunal was dismissed.

Despite the conclusion of proceedings, the original title deed was not returned. On repeated requests, the assessing authority stated that the document could not be traced from the records.

The Department denied receipt of the title deed, contending that the inward register did not reflect its receipt and that the endorsement on the covering letter referred only to custody of the bond.

After examining the record, the High Court found that the material placed before it clearly established that the original title deed had in fact been furnished to the authorities. The Court noted that the official reply merely stated that the title deed and bond were “unable to be traced” and did not deny that the document had been submitted. It said:

“In the reply given by the officer concerned, it is only stated that they are unable to trace out the original title deed and the bond furnished by the petitioner, and thus it does not contain any denial of the fact that the original title deed was never submitted before the authorities concerned,”

Accordingly, the Court held that the responsibility squarely lay on the tax authorities to trace the file and return the original title deed and directed the Department to make all efforts to locate and release the document within a stipulated time.

The Court further ordered that if the document could not be traced despite such efforts, the authorities must issue a formal certificate stating that the title deed is irretrievably lost from Departmental custody to enable the petitioner to take appropriate alternative steps.

For Petitioner: P.S. Soman, T. Radhamony, S. Veena 

For Respondent: Reshmitha R Chandran