Karnataka High Court
Swathi Traders vs Commercial Tax Officer, Xii Circle, ... on 21 October, 1989
Equivalent citations: ILR1990KAR425
JUDGMENT S.R. Rajasekhara Murthy, J.
1. In these writ petitions the petitioners who are dealers registered under the Karnataka Sales Tax Act, 1957, and the Central Sales Tax Act, 1956, have challenged the validity of the amendment to section 22 of the Karnataka Sales Tax Act by the Karnataka Act No. 15 of 1988. The amendment, taking away the power of the Appellate Tribunal to grant stay of payment of tax or penalty or any other amount payable, during the pendency of the appeals filed against any order passed by the Assistant Commissioner of Commercial Taxes (A.C.) or the Deputy Commissioner of Commercial Taxes (D.C.) under section 20 of the Karnataka Sales Tax Act, impugned in these writ petitions as inserted by Act No. 15 of 1988, is reproduced below :
"Section 22(3A). Notwithstanding that an appeal has been preferred under sub-section (1), the payment of tax or penalty or any other amount, payable, in accordance with any order passed by the Assistant Commissioner or the Deputy Commissioner under section 20 shall not, pending disposal of the appeal, be stayed by the Appellate Tribunal."
2. However, the power to grant stay is retained in so far as the appeals filed against an order passed by the A.C. or the D.C., under section 21 of the Act, is reproduced below :
"Section 11(3)(i). In sub-section (5), in the first proviso, after the words 'Appellate Tribunal may', the words and figures 'except in case of an appeal against an order passed by the Assistant Commissioner or Deputy Commissioner under section 20', shall be inserted,
(ii) second proviso shall be omitted."
3. The main contention of the petitioners is that the Tribunal had power to grant stay in all matters filed under section 22(1) of the Act before the amendment, in exercise of its discretion to make an order of stay in regard to payment of tax during the pendency of the appeals as provided under sub-section (5). It is argued that by virtue of the amendment, the power to grant stay even on imposing conditions, is taken away, thus seriously affecting the rights of the assessees-appellants and defeating in many fit cases the very right of appeal and the purpose of contesting the orders of lower authorities, on merits.
4. It is argued with reference to the facts of each case in which the matter is pending before the Appellate Tribunal that even though the petitioners have a prima facie case for grant of stay of recovery during the pendency of the appeals, they are deprived of the stay orders by virtue of the amendment referred to above. All the petitioners have approached this Court when steps were taken by the department against each of the petitioners to recover the disputed tax through revenue recovery, through Magistrate's courts and the issue of notice to their bankers under section 14 or were facing imminent threat of coercive steps being taken for recovery and have obtained conditional order of stay in each case in this Court.
5. Before adverting to the legal aspects and challenge made to the amendment, it is necessary to refer, in brief, to the facts involved and the contentions urged in the appeals in each of the cases (writ petitions) before the Appellate Tribunal.
6. Writ Petitions Nos. 4089 and 4090 of 1989.
7. The assessments completed for the years 1983-84 and 1984-85, both under the Karnataka Sales Tax Act and Central Sales Tax Act, are the subject-matter of the appeals before the Appellate Tribunal. The main contention urged before the Appellate Tribunal. The main contention urged before the Appellate Tribunal, among other grounds, is that the first appellate authority erred in not accepting the declarations in C form, which were produced before him. The total amount of tax and penalty which are the subject-matter of appeals before the Appellate Tribunal is Rs. 19,959.64.
8. It is argued by Sri Indra Kumar, learned counsel for the petitioners, that it is the well-accepted position that C forms are accepted by the appellate authorities under the Act and even at the state of revision petition before this Court, if their non-production is satisfactorily explained and on the acceptance of which the assessments are bound to result in reduction of tax. It is argued, that the first appellate authority, unfortunately, did not accept C forms when produced before him and rejected the appeal on the ground that they were not produced before the assessment.
9. It is argued that in these circumstances even though the petitioner has, prima facie, good case on merits, he is not able to get a stay of the recovery of the disputed tax during the pendency of the appeals, before the Appellate Tribunal by virtue of the amendment taking away the power of stay and the petitioner is faced with imminent recovery by coercive process.
10. Writ Petitions Nos. 3651 to 3653 of 1989 connected with Writ Petitions Nos. 4089 and 4090 of 1989.
11. The contentions urged before the Appellate Tribunal in appeals before it are :
(i) that the assessments on the dissolved firms completed without notice to the other partners, are bad in law;
(ii) that the assessments were completed beyond the period of limitation;
(iii) that the petitioner is not liable to pay tax on the sale of certain seeds, which is exempt under the Act; and
(iv) financial hardship to pay the tax by the petitioner-firm having regard to the fact that the firm is dissolved and none of the erstwhile partners, is in a position to deposit the disputed tax during the pendency of the appeals and are faced with coercive recovery by issue of notice to the tenants of the partners under section 14 of the Act. It is also argued that the petitioners have a prima facie case on merits and, therefore, it is a fit case for stay of the recovery on various grounds urged before the the Tribunal.
12. Writ Petitions Nos. 13559 and 13569 of 1989.
13. The total tax and penalty of Rs. 2,11,623.77 due for the years 1974-75 and 1976-77, is the subject-matter of the appeals filed by the petitioner before the Appellate Tribunal. The main ground urged before the Tribunal is the ground of limitation, viz., that the assessments were completed beyond the period of three years and, therefore, the assessments are void in law. It is argued that even though the assessment are liable to be set aside on the sole ground of limitation, the petitioner is not in a position to obtain stay of a huge sum of Rs. 2,11,623.77 by virtue of the amendment to section 22 and the petitioner has to deposit the entire amount during the pendency of the appeals, notwithstanding the prima facie case about the limitation.
14. Sri Indra Kumar, learned counsel for the petitioners, who addressed the leading arguments in this batch of cases, has urged the following contentions :
(i) that the amendment to section 22 of the Karnataka Sales Tax Act by Act No. 15 of 1988 by inserting section (3A) to section 22, taking away the power to grant stay by the Tribunal in appeals filed against an order made under section 20 of the Karnataka Sales Tax Act, is unconstitutional, arbitrary and unreasonable, and is, therefore, liable to be struck down;
(ii) there is no rationale in taking away the power to grant stay in appeals filed against the orders made under section 20, whereas such a power is retained in appeals filed against the orders passed under section 21 and other sections, and the amendment is, therefore, liable to be struck down as discriminatory; and
(iii) lastly, it is argued that the impugned amendment is violative of article 19(1)(g) of the Constitution, and hence is liable to be struck down.
15. I Since the legal aspects raised in these writ petitions are to be decided on the basis of the decided cases, I deem it appropriate to advert to the case law relied upon by the petitioners first :
16. Sri Indra Kumar, the learned counsel, has relied upon the following decisions rendered by the Supreme Court in similar matters. They are :
(i) Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh [1953] 4 STC 114.
(ii) Garikapati Veeraya v. N. Subbiah Choudhry .
(iii) Collector of Customs and Excise v. A. S. Bava .
17. The earliest of the decisions cited by the learned counsel for the petitioners is that of the Supreme Court in Hoosein Kasam Dada v. State of Madhya Pradesh [1953] 4 STC 114. The settle position in regard to the nature of the right of appeal and other incidents of such right, as stated above, in points (i) and (ii) is the ratio of the said decision.
18. It is necessary to refer, in this connection, to the leading case on the subject referred to by the Supreme Court in Hoosein Kasam Dada's case [1953] 4 STC 114, viz., the decision of the Judicial Committee in Colonial Sugar Refining Co. Ltd. v. Irving [1905] AC 369. They have also referred to and followed, with approval, the enunciation of the law by Sir John Rankin, C.J., in Kirpa Singh v. Risalldar Ajaipal Singh AIR 1928 Lah. 627 (FB).
19. The dispute in Hoosein Kasam Dada's case [1953] 4 STC 114 (SC) arose under the proviso to section 22(1) of the C.P. and Berar Sales Tax Act, 1947, as it stood prior to its amendment in 1949. An aggrieved assessee was entitled to file an appeal provided he paid such amount of tax as he might admit to be due from him. Under the proviso to section 22(1), after amendment, the appeal had to be accompanied by satisfactory proof of payment of tax in respect of which the appeal had been preferred. The assessee contended that as the amendment has not been made retrospective, its right of appeal under the original section 22(1) remained unaffected and that as it did not admit anything to be due, it was not liable to deposit any sum along with its appeal to the Sales Tax Commissioner.
20. The Supreme Court held that the imposition of the restriction by the amendment of the provision could not affect the assessee's right of appeal from a decision in proceedings which commenced prior to such amendment and which right of appeal was free from such restriction under the section as it stood at the time of the commencement of the proceedings. It was further held that the new requirement in the proviso to section 22(1) could not be said merely to regulate the exercise of the assessee's pre-existing right, but in truth, whittled down the right itself and could not be regarded as a mere rule of procedure.
21. The next decision in the series, is the decision of the Supreme Court in Garikapati Veeraya v. Subbiah Choudhry .
22. The question that came up for decision in that case was : Whether the right of appeal which accrued to the litigant on the date of institution of the suit, is preserved to the parties thereto till the rest of the career of the suit ? The Supreme Court held, on the facts of that case, that the right of the plaintiff was governed by the law as it prevailed on the date of institution of the suit in the year 1949, which provided for a final appeal to the Federal Court and it was a vested right which accrued to the litigant.
23. The Supreme Court, while deciding in favour of the applicant, referred to its decision in Hoosein Kasam Dada's case [1953] 4 STC 114 (SC), and also largely relied upon the principles laid down in Colonial Sugar Refining Co.'s case [1905] AC 369.
24. The next important decision is the decision of the Supreme Court in Collector of Customs and Excise v. A. S. Bava . The Supreme Court held, that the requirement to make a deposit of the disputed duty along with the appeal filed under the Customs Act, cannot be made applicable to appeals filed under section 35 of the Central Excise Act, under which there was no statutory obligation to make such a deposit. The Supreme Court followed the ratio of the decision in Hoosein Kasam Dada's case [1953] 4 STC 114 (SC), and, held that the appellant under the Central Excise Act had an unfettered right of appeal and that right cannot be whittled down by adopting the provisions relating to the procedure laid down under section 129 of the Customs Act. Applying the observations made by Sri S. R. Das, J. (as he then was) in Hoosein Kasam Dada's case [1953] 4 STC 114, the Supreme Court reiterated at a provision which is calculated to deprive the appellant of the unfettered right of appeal, cannot be regarded as mere procedure.
25. II. The next class of cases that were relied upon by the petitioners is about the scope of the power vested in the Appellate Tribunal, quite apart from the right of the assessee dealt with in the cases referred to above.
(i) The first of the cases on this point is the case decided by the Supreme Court in Income-tax Officer v. M. K. Mohammed Kunhi [1969] 71 ITR 815. The Supreme Court was dealing with the powers of the Appellate Tribunal under section 254 of the Income-tax Act. Though there as no specific conferment of power to stay the recovery of the disputed tax during the pendency of the appeal under section 254 of the Income-tax Act, the Supreme Court held that the powers conferred on the Appellate Tribunal with widest possible amplitude must carry with them, by necessary implication, all the powers and duties incidental and necessary to make the exercise of those powers fully effective. It was further held that the Appellate Tribunal must be held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction.
26. It was observed in this context that the legislature while conferring appellate jurisdiction on the Tribunal under section 254, it impliedly grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution and that the statutory power carries with it the duty in the proper cases, to make such orders for staying proceeding as will prevent the appeal, if successful, from being rendered nugatory.
27. The Supreme Court also cited with approval the principle of interpretation from Sutherland's Statutory Construction (Third-edition - articles 5401 and 5402) that it is a firmly established rule that an express grant of statutory power carries with it, by necessary implication, the authority to use all reasonable means to make such grant effective.
28. Allaying fears about the arbitrary exercise of such power by the Tribunal, the Tribunal Act observed at the concluding paragraph at page 822 thus :
"A certain apprehension may legitimately arise in the minds of the authorities administering the Act that, if the Appellate Tribunal proceed to stay recovery of taxes or penalties to payable by or imposed on the assessees as a matter of course, the Revenue will be put to great loss because of the inordinate delay in the disposal of appeals by the Appellate Tribunal. It is needless to point out that the power of stay by the Tribunal is not likely to be exercised in a routine way or as a matter of course in view of the special nature of taxation and revenue laws. It will only be when a strong prima facie case is made out that the Tribunal will consider whether to stay the recovery proceedings and on what conditions, and the stay will be granted in most deserving and appropriate cases where the Tribunal is satisfied that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue during the pendency of the appeal."
29. One other passage, extracted and relied upon by the Supreme Court, from the decision of the Court of Appeal in Polini v. Gray [1879] 12 Ch D 438, and the observations made by Jessel M. R. about the powers of the Court of Appeal to grant stay, is reproduced below :
"It appears to me on principle that the court ought to possess that jurisdiction, because the principle which underlies all order for the preservation of property pending litigation is this, that the successful party in the litigation, that is, the ultimately successful party, is to reap the fruits of that litigation, and not obtain merely barren success. That principle, as it appears to me, applies as much to the court of first instance before the first trial, and to the Court of Appeal before the second trial, as to the court of last instance before the hearing of the final appeal."
(ii) The recent decision of the Supreme Court dealing with the powers of the Appellate Tribunal under the Income-tax Act is the one (Commissioner of Income-tax v. Bansi Dhar & Sons).
30. It was held in that case that the High Court cannot exercise its inherent power under section 151 or constitutional power under article 226 to grant stay of recovery of the disputed tax in a reference pending before it under the Income-tax Act. But the Supreme Court observed that, in appropriate cases the assessee is entitled to apply before the Income-tax Appellate Tribunal to grant stay of recovery until the disposal of the reference by the High Court. It was further observed by Sri Sabyasachi Mukharji, J., that the High Court can always interfere in appropriate cases under articles 226 and 227 of the Constitution where the appellate authority acted without jurisdiction or in excessive jurisdiction or in improper exercise of the jurisdiction even in the matter of granting stay or refusing stay by the Appellate Tribunal.
31. Next it was argued by Sriyuths Indra Kumar, Ramabhadran and B. P. Gandhi, that having regard to the powers of the Appellate Tribunal constituted under the Karnataka Appellate Tribunal Act, the Tribunal is vested with powers to grant say orders during the pendency of the appeal, under section 6 of the said Act and that the procedure to grant stay orders is also regulated under the Karnataka Appellate Tribunal Regulations in Chapter IV. (See regulation Nos. 13 and 14).
32. The argument that is developed placing reliance on the provisions of the Karnataka Appellate Tribunal Act is, notwithstanding the amendment brought about by Act No. 15 of 1988 to section 22 of the Karnataka Sales Tax Act taking away the power of the Appellate Tribunal to grant stay in certain matters, the power vested in the Appellate Tribunal under the Karnataka Sales Tax Act still exists, since there is no corresponding amendment to section 5 of the Karnataka Appellate Tribunal Act. This anomaly, it is argued, should go to the benefit of the assessee-appellants who file appeals before the Appellate Tribunal and seek order of stay. But it is submitted at the Bar that no stay application is being entertained by the Appellate Tribunal consequent on the passing of Act No. 15 of 1988, notwithstanding their power to grant stay under the Karnataka Act No. 10 of 1976 under which the Karnataka Appellate Tribunal is constituted to deal with appeal arising under the Karnataka Sales Tax Act.
33. It is also demonstrated that apart from the unconstitutionality of the amendment to section 22 and as a consequence of taking away the power of stay, the assessee is exposed to all the risks of recovery such as facing prosecution before the Magistrate's court, recovery of tax from the assessees' creditors and bankers by freezing their bank account and by distraint and sale of movables and immovables through revenue recovery.
34. It is also point out that by the amendment to section 22 by inserting the proviso to sub-section (4), the assessee cannot claim any interest on any amount refunded to him as a result of the appeal, whereas, the assessee has to pay exorbitant interest on the tax withheld as required under section 13(2) of the Act which works out to nearly 30 per cent for each month depending upon the delay. It is, therefore, demonstrated that even if the assessee succeeds in the appeal, he is not entitled to any interest on the amount refunded.
35. In support of the arguments of Sri Indra Kumar, Sri Ramabhadran, learned counsel appearing for some of the petitioners, submitted that there is clear discrimination brought about in the amending Act and the amendment is, therefore, arbitrary and unconstitutional. It was argued that the power to grant stay by the Tribunal was taken away with effect from 1st April, 1988. This amendment was brought about in order to implement the Finance Minister's speech, viz., that the amendment is necessary in order to ensure better recovery of taxes :
"It is being proposed that the power of the Karnataka Appellate Tribunal to grant stay of the recovery of taxes or penalty arising out of the orders of the first appellate authority be taken away by amending the provisions of the Karnataka Sales Tax Act, 1957, and the Karnataka Appellate Tribunal Act, 1976. These amendments are being made to ensure better recovery of taxes."
36. It is also argued by the learned counsel that the Appellate Tribunal has all the powers of the Karnataka Sales Tax Appellate Tribunal in the matter of granting stay. His argument is that the power of the Tribunal still exists to grant stay in appropriate cases and for sufficient reasons and the said exercise of power is regulated by regulations 13 and 14 and that therefore this Court should issue mandamus to the Appellate Tribunal to exercise its powers of stay vested in it under the Karnataka Sales Tax Act, notwithstanding the amendment to section 22 of the Karnataka Sales Tax Act.
37. It is argued by Sri Katageri, one of the learned counsel for the petitioners, that the amendment is contrary to article 265 inasmuch as that even in cases where assessments are illegal and the matter is pending in appeal, the assessee is exposed to recovery of such illegal taxes notwithstanding filing of an appeal. He has relied upon the following decisions :
(a) [1959] 10 STC 345 (Mad.) (Rayalseema Constructions v. Deputy Commercial Tax Officer) for the proposition that levy and collection used in article 265 of the Constitution must be understood as a levy in accordance with law.
(b) (1965) 1 Mys LJ 153 (Hanumanthappa v. Mysore Revenue Appellate Tribunal).
This case has no bearing on the issues arising in the case.
(c) (1983) Kar LJ (SN), Item No. 38, wherein this Court held that the power to grant or refuse stay is incidental to the very power to entertain an appeal under the Karnataka Entertainments Tax Act.
(d) (Indira Nehru Gandhi v. Raj Narain). This also has no direct bearing for the purpose of this case.
38. Sri B. P. Gandhi, one of the counsel appearing for some of the petitioners, argued that distinction made under sub-section (3A) as inserted in section 22 by the Amendment Act, discrimination is brought about between the two sets of appeals filed by the assessees under the Act, viz., appeals preferred against orders under sections 20 and 21. It is demonstrated with reference to the provisions of section 20, sub-section (5) that the Deputy Commissioner can confirm, reduce or annul the assessment, but he is also empowered to enhance assessment, and thus, he has all the powers of an assessing authority under the Act. Therefore, in case of an order enhancing the assessment, it becomes a first appeal to the Appellate Tribunal and that, therefore, there is no reason or rationale to exclude the power of stay by the Tribunal even in such cases. It is also further argued that there is no rationale or nexus so far as the distinction made between the appeals against orders made under sections 20 and 21 under which it is provided power to revise in cases where prejudice to the interests of Revenue has resulted. It was, therefore, argued by Sri Gandhi, with some emphasis, that the amendment which is brought about without appreciating and without keeping in view of the implications of such an amendment, should be struck down as arbitrary, irrational and unconstitutional.
39. The learned counsel has also supported the arguments of the other learned counsel that by virtue of section 5 of the Karnataka Appellate Tribunal Act of 1976, the Appellate Tribunal does continue to have all the powers to grant stay in appropriate cases as provided under section 5 of the Act and regulation 13.
40. On an application of the above principles of law laid down by the Supreme Court has regards the inherent powers of an appellate authority, the question that arises for decision in these cases is :
"Whether the discretionary power to grant stay on certain conditions by the Appellate Tribunal constituted under section 22 of the Karnataka Sales Tax Act can be taken away by the legislature by an amendment and whether it is sustainable in law ?"
41. In reply to the arguments of the several counsel appearing for the petitioners, Sri Dattu, the learned High Court Government Pleader, supported the amendment on several grounds. His first contention is that the Appellate Tribunal which is a body constituted under the Karnataka Appellate Tribunal Act has to function in accordance with the provisions of the Act and the powers conferred by the legislature under the Act. It was, therefore, argued that the legislature is competent to confer powers of stay in certain matters and take away the powers of stay in certain matters.
42. One of the arguments in support of the amendment is that the power to grant stay is conferred on the Tribunal in cases of appeals filed against the orders of revision made under section 21, viz., in case of first appeals and in case of second appeals such as from the orders made by the Assistant Commissioner or the Deputy Commissioner under section 20 which are second appeals to the Tribunal, the power of stay is taken away. The argument constructed on the basis of this provision is, that the assessment orders made under the Act are subject to scrutiny by one appellate authority and, therefore, the legislature thought it fit to confine the powers of the Tribunal to grant say in one class of appeals only.
43. The learned Government Pleader has relied upon the following decisions in support of his arguments :
(1) [1965] 6 STC 222 (Nag) (Nemkumar Kesrimal v. Commissioner of Sales Tax).
The High Court held, dealing with the right of appeal under section 22(1) of the C.P. and Berar Sales Tax Act that the right of appeal is not an inherent right and it cannot come under the category of fundamental rights. It was further held that it was, therefore, open to the legislature to impose limitations on the right of appeal such as imposing conditions of payment of tax before an appeal is admitted.
(2) [1979] 44 STC 331 (P & H) (Subhash Chander & Co. v. State of Punjab).
Dealing with the right of appeal and constitutionality of sub-section (5) of section 20 of the Punjab General Sales Tax Act, it was held by the High Court that the right of appeal is a mere creature of the statute and it is open to the legislature which confers such a right, equally to take away the same if necessary. These observations were made in the context of the provisions of sub-section (5) of section 20 under which it was obligatory for the appellant to produce proof of payment of tax.
However, it has to be observed under the proviso to the said provision, the appellate authority, if satisfied that the dealer is unable to pay the tax assessed could entertain the appeal without the tax or penalty or permit him to pay part of the tax. This decision does not assist the respondent's case.
(3) (Anant Mills Co. Ltd. v. State of Gujarat).
The observation made by Khanna, J., in paragraph 40 of the judgment is relied upon. The supreme Court was dealing with the constitutionality of the provisions of the Bombay Provincial Municipal Corporations Act and with particular reference to section 406(2)(e) under which it was obligatory for the appellant to deposit the property tax assessed under the Act before filing the appeal. His Lordship, while upholding the condition precedent to the entertainment of an appeal also noted that the appellate Judges had the discretion vested in him to dispense with the compliance of the requirement to deposit in any particular case of undue hardship. Therefore, this decision does not squarely help the department's contention.
(4) [1983] 53 STC 112 (P & H) (Haryana Spun Pipe Construction Co. v. State of Haryana).
Dealing with section 65(1) of the Haryana General Sales Tax Act, the High Court observed that right or appeal is a mere creature of the statute and the legislature which confers such a right can equally take it away or prescribe conditions for the exercise of the right which may be onerous or otherwise. This decision ignores the principle laid down by the Supreme Court that by imposing onerous and unreasonable conditions on the right of appeal renders the appeal nugatory and such a provision may be struck down as unreasonable [See Mohammed Kunhi's case [1969] 71 ITR 815 (SC)].
(5) (Hardeodas Jagannath v. State of Assam).
The Supreme Court was dealing with the scope of section 30 of the Assam Sales Tax Act which provided for payment of the assessed tax or other reduced amount as directed by the appellate authority who was vested with the discretion to give direction either to waive the deposit or to make such payment as directed. This was, therefore, not a case where payment of the disputed tax was made as a condition precedent.
(6) [1971] 28 STC 481 (All.) (Commissioner of Sales Tax, Uttar Pradesh, Lucknow v. Chandra Oil Mills) The court held that where the power of stay of recovery of tax given to an appellate authority is taken away by a subsequent amendment, the right of appeal is not taken away or crippled. Their Lordships have distinguished the ratio of the Supreme Court in Mohammed Kunhi's case [1969] 71 ITR 815 (SC), and I am unable to agree with their view.
44. It is also brought to my notice that the provisions similar to section 22(3A) are incorporated in the State Acts of Andhra Pradesh, Madhya Pradesh and Allahabad taking away the power of the Tribunal to grant stay and on the basis of this submission it is argued that the present amendment should also be upheld as valid and constitutional and the writ petitions be dismissed on this sole ground.
45. As stated in the early part of this order, the question that arises in these cases has to be decided on the basis of the principles laid down in various decisions of the Supreme Court, relied upon by the petitioners, vis-a-vis, the effect of the amendment brought about by Act 15 of 1988 to section 22 of the Karnataka Sales Tax Act taking away the power of the Tribunal to grant stay in certain cases.
46. On a review of the case law relied upon by the learned counsel for the petitioners, the settled position that emerges is :
(i) a right of appeal is not mere matter of procedure but is a substantive right;
(ii) that right of appeal is a vested right which is governed by the existing law before amendment;
(iii) such vested right which inheres in a party at the commencement of the proceedings under the Karnataka Sales Tax Act, cannot be destroyed by a subsequent amendment; and
(iv) the impugned amendment taking away the power to grant stay in fit cases, is opposed to the very concept of vesting appellate powers in an authority.
47. In the context of the principles laid down by the Supreme Court in the above cases, the amendment challenged in these cases has to be examined whether it satisfies the tests laid down by the Supreme Court in similar cases ?
48. If the petitioners succeed in proving that under the law which existed at the commencement of the Amendment Act 15 of 1988, i.e., on the 31st March, 1988, they are bound to succeed for the sole reason that the assessee's right to file an appeal before the Appellate Tribunal against an order made by an Assistant Commissioner of Commercial Taxes or a Deputy Commissioner under section 20, includes his right to obtain an order of stay as regards payment of tax disputed in the appeal on such terms the Appellate Tribunal may impose. The law which existed before the amendment also empowered the Tribunal to grant an order of stay, as it thinks fit, and to give directions in regard to the payment of tax disputed in the appeal before it.
49. Applying the ratio of the decisions of the Supreme Court referred to above, the assessee in whose cases the proceedings of assessment were commenced before the amended provisions came into force on 1st April, 1988, and the appeals filed before the Appellate Tribunal before 1st April, 1988, it is the old law that should apply and not the amended provision.
50. In the view I have taken as to the law applicable to the petitioners in these writ petitions, it follows that the Tribunal should entertain the applications for stay in all cases where it has refused to entertain the stay applications and consider them on their merits and make appropriate orders under the old provisions that existed prior to 1st April, 1988.
51. In the light of the principles laid down by the Supreme Court in the decisions, aforementioned, I hold on the next point, that the impugned amendment cannot take away the right vested in an conferred on the Appellate Tribunal by virtue of its very Constitution as an appellate authority under the Karnataka Sales Tax Act and under the provisions of the Karnataka Appellate Tribunal Act, 1976, and sub-section (3A) and sub-section (5) of section 22 as amended by section 11(3) of the amending Act, are liable to be struck down on this ground also.
52. Before I conclude, I am impelled to observe that the impugned amendments brought about by the amending Act 15 of 1988 is a retrograde step taken by the legislature in total disregard of the law that is being developed and interpreted by the Supreme Court on this aspect. It is a legislation passed without application of mind and regardless of the consequences and prejudice it would cause to the valuable rights of the dealers under the Act and at the same time interfering with the discretionary powers vested and conferred upon the Appellate Tribunal under the Act.
53. In the result, for the reasons stated above, the writ petitions are allowed and sub-section (3A) as inserted by section 11 of the amending Act 15 of 1988, is struck down as unconstitutional and ultra vires section 22 of the Karnataka Sales Tax Act.
54. Further, the amendment brought about to sub-section (5) of section 22 by section 11(3) of the amending Act 15 of 1988, is also struck down, as a consequence.
55. In the light of this order, the Appellate Tribunal is directed to entertain stay applications that may be filed by the assessee-appellants against the orders passed under section 20 of the Karnataka Sales Tax Act and pass suitable orders as is deemed fit on the facts of each case.
56. It is also further directed that the Appellate Tribunal shall continue to exercise its powers conferred on it under section 22(5) of the Karnataka Sales Tax Act, as it existed before its amendment by Act 15 of 1988.
57. Writ petitions allowed.