Enhanced Court Fee Applies To Tax Disputes Initiated On Or After April 1, 2016: Kerala High Court

The Kerala High Court has held that the enhanced additional court fee of 1% of the amount involved in a dispute applies to tax appeals and revision petitions only when the underlying dispute commenced on or after April 1, 2016.

“Thus, the lis, in matters of taxation, commences when the taxing authority being not satisfied with the correctness of the return filed by the assessee, calls for materials or evidence to justify the claim of the assessee. If a notice has been issued by the assessing officer pursuant to the return filed by the assessee, a lis can be held to have commenced and the right of appeal, including the obligation to pay the court fee in the appeal, as existing on that date when the lis commenced, becomes vested right.” Justice Bechu Kurian Thomas ruled.

The court clarified that the date of filing an appeal or revision does not, by itself, determine the applicable court fee. Instead, the relevant date is when the tax authority questions the return and calls for supporting materials or evidence.

The ruling came in a batch of petitions challenging the increase in additional court fees payable to the Kerala Legal Benefit Fund under the Kerala Court Fees and Suits Valuation Act, 1959. A government notification dated April 7, 2016, raised the fee from 0.5% to 1% of the amount involved in the dispute, with effect from April 1, 2016.

The petitioners argued that the higher fee could not apply to tax disputes that had commenced before the notification, as the right of appeal was already vested. The State contended that the revised fee applied to appeals and revisions filed after the notification.

Examining earlier Supreme Court decisions on the right of appeal and retrospective changes to court fees, the court held that the applicable fee depends on when the underlying dispute began.

It explained that filing a tax return does not, by itself, give rise to a dispute. The dispute commences when the tax authority questions the correctness of the return and calls for evidence or materials to justify the assessee's claim.

Applying this principle, the court held that the enhanced fee was payable in cases where the tax dispute commenced after April 1, 2016, while it was not payable in certain cases where the proceedings had begun earlier. In some petitions, the records did not establish when the disputes commenced, leaving the respective appellate authorities or tribunal to determine the issue.

In one petition concerning a penalty under the State GST regime, the court held that the enhanced fee was payable because, although a shop inspection took place in March 2015, the books of account were called for only in August 2018.

In one other petition, the court recorded that the dispute had commenced before the notification but nevertheless held that the enhanced fee was payable.

For Petitioner: Senior Advocate A. Kumar, instructed by Advocate G. Mini, along with Advocates Krishna, K.N. Sreekumaran, S. Anilkumar, N. Muraleedharan Nair and Rahul A.

For Respondent: Special Government Pleader Harima Hariharan