Gujarat High Court
State Of Gujarat vs Shanti Exports Ltd....Opponent(S) on 8 August, 2016
Bench: Akil Kureshi, A.J. Shastri
O/TAXAP/345/2015 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 345 of 2015
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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STATE OF GUJARAT....Appellant(s)
Versus
SHANTI EXPORTS LTD....Opponent(s)
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Appearance:
MR TIRTHRAJ PANDAY AGP for the Appellant(s) No. 1
RULE SERVED for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 8/08/2016
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O/TAXAP/345/2015 JUDGMENT
CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE A.J. SHASTRI)
1. The present Tax Appeal is filed for the purpose of challenging the legality and validity of the consolidated order dated 26.02.2015 passed by the learned Gujarat Value Added Tax Tribunal, at Ahmedabad (for short the "Tribunal) and this appeal is relating to an order of the Tribunal in so far as Second Appeal No. 405 of 2010 is concerned.
2. The background of the facts are that the subject matter property of one M/s. Arunoday Mills Ltd., came to be purchased in auction by the respondent - M/s. Shanti Exports Pvt. Ltd., as the said company could not meet with the financial liability of IDBI Bank. M/s. Arunoday Mills Ltd., was provided a financial assistance by IDBI Bank and the said Company was unable to discharge the loan liability. Resultantly, the Bank had to take recourse to a public auction of the property of the Company by way of issuing a public advertisement. A bid was invited for the purpose of purchase of movable and immovable assets of M/s. Arunoday Mills Ltd., on"as is where is and whatever there is basis". The respondent herein was found to be the highest bidder whose bid came to be accepted and the property of the Company was sold to the respondent herein by executing a deed of sale on 12.07.2007. The terms and conditions of the sale came to be provided by IDBI Bank vide its letter dated 08.02.2007. The case of the appellant - State is that for the financial year 200506 in the case of M/s. Arunoday Mills Ltd., the Assessing Officer had framed an assessment and a demand of Rs.1,16,30,773/ came to be raised vide order dated 30.11.2008. The said assessment order was challenged by the respondent herein as it Page 2 of 13 HC-NIC Page 2 of 13 Created On Tue Aug 09 04:07:40 IST 2016 O/TAXAP/345/2015 JUDGMENT has stepped into the shoes of M/s. Arunoday Mills Ltd., qua the property before the first appellate authority and the first appellate authority without entering into merits of the case vide order dated 29.04.2009 was pleased to dismiss the appeal only on the ground of predeposit requirement having not been satisfied. It appears that against the said order of the first appellate authority dated 29.04.2009, Second Appeal came to be filed bearing Second Appeal No. 405 of 2010. The said Second Appeal along with another Second Appeal No. 406 of 2010 in which also the order assailed was about noncompliance of predeposit and, therefore, the learned Tribunal took up the said Second Appeals along with another Second Appeal No. 407 of 2010 by clubbing together and by consolidated order dated 26.02.2015 has disposed of all the three appeals by common order and all the three appeals came to be partly allowed.
2.1. So far as Second Appeal No. 405 of 2010 is concerned, the order passed by the first appellate authority came to be set aside and the respondent herein i.e. the original appellant is held liable to pay an amount of tax deferred by the erstwhile owner i.e. M/s. Arunoday Mills Ltd. However, the respondent was held not liable to pay any amount of interest or penalty on such amount of tax deferred in certificate of deferment and, therefore, it appears that though the issue pertaining to Second Appeal No. 405 of 2010 is related to noncompliance of pre deposit issue only, the learned Tribunal appears to have travelled beyond the scope and has examined the merit of the case and disposed of of the Second Appeal on merits assuming the power of first appellate authority as it appears and, therefore, since the merit has been examined by the learned Tribunal while dealing with Second Appeal No. Page 3 of 13 HC-NIC Page 3 of 13 Created On Tue Aug 09 04:07:40 IST 2016 O/TAXAP/345/2015 JUDGMENT 405 of 2010, feeling aggrieved by the same, the present appellant - State has preferred the present Tax Appeal against that part of the order whereby the case is not believed by the department. The present Tax Appeal on 09.06.2015 is entertained by this Court and vide said order, the following substantial question of law has been framed for consideration. Initially while admitting the Second Appeal, the said substantial question of law is reproduced herein after : "Whether the Tribunal has erred in adjudicating Second Appeal on merits despite the fact that the first appellate authority has dismissed the appeal solely on the ground of predeposit."
3. Mr. Tirthraj Pandya, learned Assistant Government Pleader has contended that the learned Tribunal has committed error of jurisdiction inasmuch as the scope of original Second Appeal No. 405 of 2010 is circumscribed to consider the issue relating to nonpayment of pre deposit and in the case on hand, the learned Tribunal has dealt with the Second Appeal on merit and, therefore, has contended that it has travelled beyond the scope of jurisdiction. The learned AGP for the appellant - State has submitted that it is a settled proposition of law propounded by series of decisions that if the first appellate authority has dismissed the appeal on the issue of predeposit, the merit of case is not to be examined at all. It has also been contended that qua the merit of the main appeal, no effective adjudication has taken place inasmuch as no proper opportunity to deal with the merit was given, but in essence, the learned AGP for appellant - State has submitted that the learned Tribunal ought not to have proceeded with the merit of the case. While substantiating this submission, the learned AGP for appellant - State has relied upon the decision of this Court delivered by the Division Bench of this Court in Tax Appeal No. 711 of 2013 dated Page 4 of 13 HC-NIC Page 4 of 13 Created On Tue Aug 09 04:07:40 IST 2016 O/TAXAP/345/2015 JUDGMENT 30.08.2013 in the case of State of Gujarat v. Tudor India Ltd., wherein, it has been specifically held that if the Tribunal is confronted with the situation whereby the issue with respect to nonpayment pre deposit under Section 73(4) of the Gujarat Value Added Tax Act is arising, then, it is not open for the learned Tribunal to go into the merits of the case as if a substantive appeal is to be heard. The learned AGP for the appellant - State further relied upon the decision delivered by the Division Bench of this Court in Tax Appeal No. 688 of 2013 dated 30.01.2014, wherein also similar view is taken that while examining the appeal qua nonpayment of predeposit, merit of the main matter is not to be concluded by the learned Tribunal. By submitting this, the learned AGP for the appellant - State requested the Court not to permit such order of the learned Tribunal to be operated upon since this main issue for which Second Appeal is placed under consideration of this Court is regarding nonpayment of predeposit issue. The learned AGP for the appellant - State has as such not drawn attention of the Court to the merit of the matter in so far as it relates to Second Appeal No. 405 of 2010.
4. To meet with the contention, when it has been inquired, the respondent though served has not appeared through their representative and hence the Court is constrained to examine the issues which have been posted before the Court in the context of substantial question of law. As the respondent is served, before diverting ourselves to the contentions raised by the appellant, the scope of Section 73 subsection (4) of the Gujarat Value Added Tax Act deserves to be taken note of and to understand that, the same is reproduced hereinafter : Page 5 of 13 HC-NIC Page 5 of 13 Created On Tue Aug 09 04:07:40 IST 2016 O/TAXAP/345/2015 JUDGMENT "Section 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 penalty 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 it may consider reasonable, or (c ) on the appellant furnishing in the prescribed manner, security for such amount as the appellate authority may direct .]"
4.1. The said statutory provisions deal with the question of pre deposit while entertaining the appeal and the concerned appellate authority is vested with the power to waive predeposit amount while entertaining the appeal. Keeping this provision in mind, if we revert back to the case on hand, we may see that the appellate authority has under an order dated 29.04.2009 disposed of the appeal on the ground that despite having been granted opportunity, partial amount of deposit has been paid and, therefore, vide the said order, the first appellate authority has dismissed the first appeal. If we refer to Second Appeal No. 405 of 2010, the same is essentially against the said order dated 29.04.2009.The said appeal came to be filed in view of the fact that there was a liability crystallized for the assessment period of 200506 Page 6 of 13 HC-NIC Page 6 of 13 Created On Tue Aug 09 04:07:40 IST 2016 O/TAXAP/345/2015 JUDGMENT under the provisions of Gujarat Value Added Tax Act as well as under the Central Sales Tax Act and, therefore, it appears that appeal came to be filed, but nonetheless the issue involved in appeal is related to non payment of predeposit and, therefore, it appears to this Court emerging from the record that the appeal referred to above is essentially against the order of disposal of the First Appeal for want of predeposit payment and, therefore, the scope of inquiry and adjudication of the law thereby was related to this issue only. Now taking the aforesaid situation in mind, if we refer the decision delivered by the Division Bench of this Court in the case of Tudor India Ltd., (supra) dated 30.08.2013, it has been specifically spelt out and held while entertaining the Second Appeal, the scope of inquiry was related to issue of nonpayment of pre deposit and not the merit. The relevant observations contained in the said order are worth to be taken note of and, therefore, reproduced hereinafter : "4. A plea however was taken that the Joint Commissioner of Commercial Tax in the first appeal order made on 4th August 2008 rejected the appeal of the appellant on the ground of nonpayment of 20% of the total demand and when this rejection made on the ground of nonpayment was challenged before the Tribunal, it could not have decided the matter on merit; ignoring the aspect of predeposit.
6.3 As could be noticed from this order, nothing has been stated on merits by the Joint Commissioner of Commercial Tax. What all he did is the rejection of the request made for waiver of predeposit by the opponent herein without touching anywhere the merits of the case. That being the case, when such order came to be challenged before the Tribunal, the Tribunal instead of addressing the issue of predeposit, has chosen to decide the matter on merits.
7. As we have noticed in number of matters, this Page 7 of 13 HC-NIC Page 7 of 13 Created On Tue Aug 09 04:07:40 IST 2016 O/TAXAP/345/2015 JUDGMENT unacceptable trend of deciding the appeals on merit, even when the first appellate authority has rejected the case of assessee on the ground of predeposit, instead of considering the request of deposit of predeposit, such determination of the entire appeal by the Tribunal at the such juncture, in our opinion, is not a desirable approach. We may not choose to interfere in all such cases where the Tribunal has straightway chosen to decide the matter on merit instead of determining issue of predeposit which was at large before it. However, so as to ensure that a dent is made in such practice followed consistently that we have chosen to remand this matter. Once, when assessee chooses not to comply with the requirement of making predeposit or contest the matter on the ground of predeposit and either side approaches the second appellate authority, there does not arise any question of circumventing the very stage and exercise the powers of first appellate authority. We say so as the Statute provides that even on adjudication of the issue on merit by the first appellate authority, either side is entitled to challenge such reasonings before the second appellate authority. Not only the parties and the second appellate authority would be deprived of the reasonings of the first appellate authority but chance of either sides of availing the opportunity of appeal on merit also gets marred by this process. Even if it is felt by the Tribunal that the issue is covered by the decision of the higher forum, it can always direct the parties to agitate these aspects before the concerned authority [first appellate authority here].
8. We also need to take note of the fact that the intent of incorporating the provision of predeposit before proceeding with the appeal is well carved out by the decision of the Apex Court in case of Benara Valves Limited v.
Commissioner of Central Excise, reported in 2006 [204] ELT 513 (SC).
8.1 If either side approaches the Tribunal, being aggrieved by the order of either grant or rejection of requirement of predeposit, it is open for the Tribunal to take into consideration the law on the subject and decide the validity Page 8 of 13 HC-NIC Page 8 of 13 Created On Tue Aug 09 04:07:40 IST 2016 O/TAXAP/345/2015 JUDGMENT of the order of directing or not directing the amount of predeposit. However, that would not ipso facto entitle the Tribunal to give a complete gobye to the well laid down procedures of law as also such requirement of predeposit and decide the matter on merit. We are also backed in our conclusion by another decision of the Apex Court rendered in case of Commissioner of C.Ex., Chandigarh v. Smithkline Beecham Co. Health C. Limited., reported in 2003 [157] ELT 497 (SC), wherein it is observed, thus "
"2. This appeal is filed against an order passed by the Customs, Excise & Gold [Control] Appellate Tribunal dated 19th December 2002. The Tribunal was hearing an appeal against an order dated 23rd April 2002 passed by the Commissioner of Central Excise [Appeals]. By that order, the Commissioner [Appeals] had merely dismissed the appeal because predeposit was not made. The Commissioner [Appeals] had not gone into the merits. Therefore, the only question before the Tribunal was whether predeposit was required or not. The Tribunal has chosen to go into the merits and decided the appeal on merits also. This should not have been done."
8.2 It is not the case of either side that an identical question of law was pending before the Tribunal in some other appeals concerning the very assessee, or identical question of law in respect of very assessee for different assessment year was before the Tribunal, and in such circumstances, with the consent of the parties it chose to conclude on merit.
8.3 In view of the discussion held herein above, we therefore are of the opinion that this appeal deserves to be remanded back to the Tribunal so as to emphasis the requirement of not permitting any such short circuiting of the process at any stage. We have chosen not to enter the arena of merit of the case at all as is apparent from the discussion held herein above.
8.4 With this, the present appeal is directed to be remitted Page 9 of 13 HC-NIC Page 9 of 13 Created On Tue Aug 09 04:07:40 IST 2016 O/TAXAP/345/2015 JUDGMENT back to the Tribunal to decide the issue of predeposit and on deciding the same to the first appellate authority which shall decide the same on merit in accordance with law. Needless to say that the law on the subject shall govern the decisions of these authorities, while deciding both the issues ie., predeposit so also on the question of merit." 4.2. In addition to the aforesaid decision, in yet another decision of the Division Bench of this Court was also confronted with the said situation in respect to the nonpayment of predeposit issue only, wherein also in the case of Tax Appeal No. 688 of 2013, the Court has observed like this in order dated 30.01.2014 which is also in the opinion of this Court worth to be taken note of. Hence, the relevant extract of the said decision contained in para 3 and 4 are reproduced hereinafter : "3. We are of the opinion that the Tribunal committed serious error in examining the appellant's grievances on the merits of the order of assessment. The order of assessment was passed by the adjudicating authority, which was appellable by way of first appeal before the Appellate Commissioner. Section 73(4) of the Gujarat Value Added Tax Act, 2003, requires that no appeal against the order of assessment shall ordinarily be entertained by the Appellate Commissioner, unless such appeal is accompanied by proof of payment of tax in respect of which the appeal has been preferred. Proviso to section 73(4), however, provides that the 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, interest, if any or as the case may be, of the penalty, or (b) on proof of payment of such small sum as it may consider necessary or (c) on the appellant furnishing in the prescribed manner security or such as the appellate authority may direct.
4. In view of section 73(4) of the Act, therefore, such appeal could not have been entertained unless in terms of proviso, Page 10 of 13 HC-NIC Page 10 of 13 Created On Tue Aug 09 04:07:40 IST 2016 O/TAXAP/345/2015 JUDGMENT the appellate authority for reasons recorded in writing relaxed the requirement of full predeposit. In the present case, the Appellate Commissioner exercised such powers and required the appellant to deposit 25% of the amount confirmed by the adjudicating authority. When the appellant failed to fulfill such requirement, his appeal came to be dismissed. It was against this order that the appellant had preferred appeal before the Tribunal. The scope of the appeal before the Tribunal, therefore, had to be limited to the question of finding out whether the order passed by the Commissioner insisting on the appellant depositing certain amount by way of predeposit was valid or not and resultantly, his decision to reject such an appeal for noncompliance with such requirement was correct or not."
4.3. Even in the said decision, case of Tudor India Ltd., (supra) has also been extensively dealt with.
4.4. In another decision delivered by the Division Bench of this Court in Tax Appeal No. 78 of 2014 dated 21.03.2014, similar view has been taken relying upon various other decisions by substituting the order of the learned Tribunal and the appeal was placed back before the learned Tribunal for fresh consideration and disposal on the issue of pre deposit and, therefore, this Court is left with no other alternate but to take the similar view which is found to be sound on the issue and, therefore, the appeal deserves to be allowed.
5. In view of the aforesaid situation, it has been specifically held by the Court that while considering the issue of predeposit, the learned Tribunal cannot travel its scope beyond this issue and cannot decide the case on merits without deciding the question of predeposit. Here in this case, it clearly appears to the Court that the learned Tribunal has Page 11 of 13 HC-NIC Page 11 of 13 Created On Tue Aug 09 04:07:40 IST 2016 O/TAXAP/345/2015 JUDGMENT committed serious error of jurisdiction and on this ground alone, the proposition of law as stated herein above, compels this Court to set aside the impugned order.
6. Since this Court is not called upon to examine the merit of the main issue which is reflected in the order of the learned Tribunal, the Court has not touched the aspect of merit and, therefore, only on this solitary issue of nonpayment of predeposit based upon which the learned Tribunal has exercised jurisdiction which has been examined by this Court in the context of substantial question of law framed and, therefore, considering the set of circumstance, we are of the opinion that the learned Tribunal has committed error in exercising jurisdiction travelling beyond the scope of the proceedings before it.
7. In view of the aforesaid circumstance, the present Tax Appeal is allowed. The order of the learned Tribunal impugned in Second Appeal No. 405 of 2010 is set aside. While disposing of this appeal, it is expected that the since the appeal is placed back before the learned Tribunal for fresh consideration on the issue of predeposit in accordance with law bearing in mind the observations made above by allowing the appellant and the respective parties to be permitted to raise all possible legal contentions on the issue and in the appeal appropriate orders will be passed in accordance with law.
8. With these expectations, the present appeal is disposed of.
(AKIL KURESHI, J.)
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(A.J. SHASTRI, J.)
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