Gujarat High Court
Kavya Marketing vs State Of Gujarat on 10 February, 2022
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
C/SCA/1027/2022 ORDER DATED: 10/02/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 1027 of 2022
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KAVYA MARKETING
Versus
STATE OF GUJARAT
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Appearance:
UCHIT N SHETH(7336) for the Petitioner(s) No. 1
ADVANCE COPY SERVED TO GOVERNMENT PLEADER/PP for the
Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 10/02/2022
ORAL ORDER
(PER : HONOURABLE MS. JUSTICE NISHA M. THAKORE)
1. By this writ application under Article 226 of the Constitution of India, the writ applicant - a partnership firm has prayed for the following reliefs:
"A. This Hon'ble Court may be pleased to issue a writ of certiorari or writ in the nature of certiorari or any other appropriate writ or order quashing and setting aside impugned order dated 22.11.2021 (annexed at Annexure A) passed by the Gujarat Value Added Tax Tribunal in Second Appeal No.784 of 2019 as well as the order passed by the first appellate authority and the matter may please be remanded to the first appellate authority for hearing on merits and stay may please be granted without insisting for any pre-deposit or security;
B. Pending notice, admission and final hearing of this petition, this Hon'ble Court may be pleased to stay cocercive recovery against the Petitioner pursuant to the assessment order which is under challenge in Second Appeal No.784 of 2019 and the Tribunal may please be restrained from proceeding further in adjudication of Second Appeal No.784 of 2019;
C. Ex parte ad interim relief in terms of prayer B may kindly be granted;Page 1 of 9 Downloaded on : Sun Apr 24 12:31:14 IST 2022
C/SCA/1027/2022 ORDER DATED: 10/02/2022
D. Such further relief(s) as deemed fit in the facts and
circumstances of the case may kindly be granted in the interest of justice for which act of kindness your petitioner shall forever pray."
2. The subject matter of challenge in the present writ application is the order dated 22.11.2021 passed by the Gujarat Value Added Tax Tribunal dismissing the Second Appeal No.784 of 2019 preferred by the writ applicant against the order dated 29.07.2019 passed by the Deputy Commissioner State Tax, Appeal - 1, Ahmedabad, as the first appellate authority. The core issue involved in the present writ application is as regards the failure on the part of the writ applicant to pre-deposit at the stage of second appeal. The aforesaid order passed by the Tribunal in the Second Appeal No.784 of 2019 more particularly, directing the writ applicant firm to make a pre-deposit to the tune of Rs.20,00,000/- within a period of one month, is reproduced as under:
"(5) Considering the submission of both the parties and detail pursis and documents submitted by the appellant, it appears that this matter is prolonged from 2019 for decision of pre-
deposit and stay against recovery. Ld. Advocate has relied upon the copy of master agreement. Considering the facts of the case and master agreement copy submitted by the appellant, the submission of Ld. Advocate is not acceptable.
Since the first appeal is summarily dismissed without gone into the merits of the case, therefore, this Tribunal cannot decided the appeal on merits except to decide the amount of pre-deposit in light of the decision of Hon. High Court of Gujarat in the case of M/s. Tudor India Ltd. & A. Anilkumar, therefore, at this juncture appellant is directed to pay Rs.20,00,000/- towards pre- deposit within one month. On payment of aforementioned amount the stay against recovery shall come into operation.
(6) The Registry is directed to place this matter for compliance of order and production of pre-deposit challan on 22/12/2021."
2.1. It appears from the record that the writ applicant having failed to deposit the aforesaid requisite amount towards pre- deposit, the Tribunal vide order dated 22.11.2021 summarily Page 2 of 9 Downloaded on : Sun Apr 24 12:31:14 IST 2022 C/SCA/1027/2022 ORDER DATED: 10/02/2022 rejected the second appeal on the ground of non-compliance of its earlier directions.
2.2. Being aggrieved and dissatisfied with the aforesaid order dated 22.11.2021 passed by the Tribunal summarily dismissing the second appeal for non-compliance of the payment of requisite amount towards pre-deposit, the writ applicant has approached this Court invoking extra ordinary writ jurisdiction under Article 226 of the Constitution of India thereby praying for the reliefs so sought for.
3. We have heard Mr. Uchit N. Sheth, the learned counsel appearing for the writ applicant and Mr. Utkarsh Sharma, the learned AGP appearing for the respondent- State. We have also carefully examined the materials placed on record and have also gone through the impugned orders passed by the Tribunal as well as the first appellate authority.
4. The sole question that arises for the consideration in the present case is as to whether the first appellate authority and the Tribunal were justified in directing the writ applicant firm to make the pre-deposit in terms of the orders passed.
5. It transpires from the record that the writ applicant- partnership firm is engaged in the business of selling electronic goods and is holding valid registration number under the Gujarat Value Added Tax Act, 2003. It is the case of the writ applicant that the writ applicant firm had entered into master dealer agreement with M/s. Jumbo Warranty Services, which is a firm engaged in providing after sales services with regard to warranty cards on the various electronic gadgets sold by the writ applicant firm. It is the case of the writ applicant that Page 3 of 9 Downloaded on : Sun Apr 24 12:31:14 IST 2022 C/SCA/1027/2022 ORDER DATED: 10/02/2022 though the search proceedings were conducted at the premises of the writ applicant, no incriminating material was recovered from the premises and merely on the basis of loose slips discovered from the bag of the staff member, the respondent authority has related the involvement of the writ applicant with regard to evasion of tax. It further appears that based on such alleged loose slips, the Assessing Officer on presumption has computed tax liability of the writ applicant firm to the tune of an amount of Rs.1,80,000/- and has subsequently passed an order of assessment on 29.03.2019 thereby raising total dues to the tune of Rs.4,57,10,778/-, which includes tax of an amount of Rs.98,04,440/-, interest of an amount of Rs.67,65,064/- and penalty to the tune of Rs.2,91,41,274/-. In support of his prima facie case, Mr. Sheth has further relied upon the Judgment of this Court in Tax Appeal No. 229 of 2016, in the case of Jagdish distributors Pvt. Ltd. To contend that additions could have been made only to the extent of turnover determined on the basis of loose slips and further adhoc addition were not legally permissible. Thus, it was submitted that the First Appellate Authority as well as the Tribunal have however ignored aforesaid aspect and has instead insisted for pre-deposit of huge amount of Rs.20,00,000.
6. The writ applicant had drawn aforesaid facts to the notice of the Deputy Commissioner of State Tax, Appeal - 1, Ahmedabad, thereby challenging the aforesaid order of assessment under Section 73 of the Gujarat Value Added Tax Act. However, the Deputy Commissioner of State Tax, summarily rejected the appeal without considering the aforesaid facts only on the ground that no explanation has been tendered by the writ applicant thereby insisting for Page 4 of 9 Downloaded on : Sun Apr 24 12:31:14 IST 2022 C/SCA/1027/2022 ORDER DATED: 10/02/2022 payment of pre-deposit amount in terms of Section 73 of the Act. The writ applicant has further submitted that so far as the issue with regard to levy of tax based on loose papers are concerned, it is well settled that such evidence cannot be taken into consideration for the purpose of computation of tax in absence of any supporting evidence having been recorded in respect thereof. The first appellate authority has therefore committed serious error in summarily rejecting the first appeal under Section 73 of the Act, 2003. It was further submitted that even otherwise, the writ applicant has no liability to provide any service to the purchaser of warranty card. The customer has to directly approach M/s. Jumbo Company as and when such services are availed and therefore, by placing reliance upon the Master Agreement, it was submitted that no fault can be found with the writ applicant with regard to liability as determined by the Assessing Officer.
7. On the other hand, Mr. Utkarsh Sharma, the learned AGP had fairly submitted that appropriate directions may be issued towards the payment of pre-deposit amount as it is within the perview of this Court to examine the issue with regard to pre- deposit before admitting the appeal.
8. Section 73(4) of the VAT Act, 2003 reads as under:
"73(4). No appeal against an order of assessment shall ordinarily be entertained by an appellate authority, unless such appeal is accompanied by satisfactory proof of payment of the tax in respect of which an appeal has been preferred :
[Provided that an appellate authority may, if it thinks fit, for reasons to be recorded in writing, entertain an appeal against such order-
(a) without payment of tax with, penalty (if any) or, as the case may be, of the penalty, or
(b) on proof of payment of such smaller sum as if may consider reasonable, or Page 5 of 9 Downloaded on : Sun Apr 24 12:31:14 IST 2022 C/SCA/1027/2022 ORDER DATED: 10/02/2022
(c) on the appellant furnishing in the prescribed manner, security for such amount as the appellate authority may direct.]"
9. The aforesaid provision apparently makes it clear that ordinarily no appeal against an order of assessment shall be entertained by the appellate authority, unless an appeal is accompanied by satisfactory proof of payment of tax in respect of which an appeal has been preferred. The proviso to clause 4 makes the picture further clear. The said proviso explicitly gives discretion to the appellate authority to entertain an appeal against the orders as provided under clause (a) or (b) or (c) of sub section 4 of section 73 of the act. Thus, the legislation in its wisdom has reposed discretion upon the appellate authority to entertain an appeal without payment of tax with penalty or in appropriate case on proof of the payment of a smaller sum as the appellate authority may consider reasonable or in an appropriate case on furnishing security by the appellant for such an amount which the appellate authority may direct. Obviously, at the stage of deciding the issue of admitting an appeal based on the payment of pre-deposit amount, the Tribunal is expected to venture into the merits of the case, wherein considering prima facie case which may very from case to case, the appellate authority may entertain the appeal accordingly. From the language of the statute, one can carved out in a given situation, the appellate authority may admit the appeal even without insisting for payment of tax with penalty or even a smaller sum or may not even insisting for furnishing of security.
10. In the case on hand, while going through the order dated Page 6 of 9 Downloaded on : Sun Apr 24 12:31:14 IST 2022 C/SCA/1027/2022 ORDER DATED: 10/02/2022 22.11.2021 passed by the Tribunal, the only reason assigned by the Tribunal as recorded in paragraph 5 of the said order is that the hearing of the matter has been prolonged from the year 2019 on the aspect of pre-deposit and stay and the first appeal being summarily dismissed without going into the merits of the case. Thus, the Tribunal deemed it fit to direct the appellant to pay the amount of Rs.20,00,000/- towards the pre-deposit.
11. We find that such an approach of the Tribunal of not addressing prima facie case of the writ applicant at the pre- deposit stage is erroneous. In fact, having gone through the relevant provisions provided under the VAT Act, it is expected that the first appellate authority to exercise its discretion judiciously and should not have insisted for pre-deposit when the appellant has been able to make out strong prima facie case in his favour.
12. This Court on number of occasion has come across the identical facts of the case vis-a-vis admitting of appeal at the stage of payment of pre-deposit. We have noticed that while deciding the admission of appeals on merits, the first appellate authority summarily dismissed the appeal on the ground of non payment of pre-deposit, and when such order is challenged in second appeal before the Tribunal, it is incumbent upon the Tribunal to examine the prima facie case and thereafter, to arrive at the decision with regard to insistence of payment of pre-deposit for entertainment of appeal. This Court has time and again in identical cases has held that Tribunal is obliged to consider a prima facie case, which the appellant may be in position to highlight. It a strong Page 7 of 9 Downloaded on : Sun Apr 24 12:31:14 IST 2022 C/SCA/1027/2022 ORDER DATED: 10/02/2022 prima facie case is made out, then in such circumstances, there should not be any difficulty in entertaining the appeal even without insisting for payment of tax penalty or even smaller amount.
13. In light of the aforesaid facts, we find that the Tribunal committed serious error of law by not taking note of the prima facie case of the writ applicant while examining the aspect of payment of pre-deposit. Therefore, we are of the view that in the facts and circumstances of the case, the order passed by the Tribunal dated 22.11.2021 is hereby quashed and set aside. We further direct the Tribunal to hear the matter on merits so far as the issue of grant of stay pending appeal is concerned, taking into consideration the Circulars issued by the CBDT bearing No.1914, dated 02.02.1993 as modified by instructions dated 29.02.2016, which permits 15% of the disputed demand to be deposited for stay by way of a general condition. Thus, even the instructions issued by the CBDT itself suggests an inbuilt-mechanism to either decrease or increase the percentage of disputed tax demand to be deposited by an assessee to enjoy stay pending the appeal. Indisputably, the instructions are in the nature of guidelines to enable the Assessing Officer and Commissioner to exercise such discretionary powers uniformly.
14. In the result, the present writ application succeeds and is hereby allowed. The impugned order passed by the Tribunal dated 22.11.2021 is hereby quashed and set aside. The second appeal is ordered to be restored its original file before the Tribunal. The Tribunal is further directed to expeditiously hear the appeal within a period of two months from the date of Page 8 of 9 Downloaded on : Sun Apr 24 12:31:14 IST 2022 C/SCA/1027/2022 ORDER DATED: 10/02/2022 receipt of copy of writ of this order. The respondents are hereby directed not to take any coercive actions pending the second appeal before the Tribunal.
15. With the aforesaid, the present writ application stands disposed of.
(J. B. PARDIWALA, J) (NISHA M. THAKORE,J) NEHA Page 9 of 9 Downloaded on : Sun Apr 24 12:31:14 IST 2022