Gujarat High Court
Anilkumar vs State Of Gujarat....Opponent(S) on 30 January, 2014
Author: Akil Kureshi
Bench: Akil Kureshi, Sonia Gokani
O/TAXAP/688/2013 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 688 of 2013
With
CIVIL APPLICATION NO. 422 of 2013
In
TAX APPEAL NO. 688 of 2013
================================================================
ANILKUMAR....Appellant(s)
Versus
STATE OF GUJARAT....Opponent(s)
================================================================
Appearance:
MR HARDIK P MODH, ADVOCATE for the Appellant.
MR JAIMIN GANDHI, LD.ASST.GOVERNMENT PLEADER for the
Respondent.
================================================================
CORAM: HONOURABLE MR.JUSTICE AKIL
KURESHI
and
HONOURABLE MS JUSTICE SONIA
GOKANI
Date : 30/01/2014
COMMON ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The appeal is ADMITTED and taken up for final hearing straight away.
2. The appellant has challenged the judgment dated April 29, 2013 passed by the Gujarat Value Added Tax Appellate Tribunal at Ahmedabad (hereinafter Page 1 of 17 O/TAXAP/688/2013 ORDER referred to as 'the Tribunal') in the following factual background :
2.1 The appellant was awarded a contract by the Western Railways for construction of a minor bridge. In the process of executing such contract, the appellant purchased material. The appellant was otherwise based in Rajasthan and stationed himself in Gujarat only for execution of this work.
2.2 The case of the appellant is that under bona fide belief that he was not required to be registered under the Gujarat Value Added Act, 2003 (hereinafter referred to as 'the Act'), he did not apply for registration. The adjudicating authorities, however, initiated proceedings questioning why he had not obtained registration and denied the tax credits taken by him on the purchases so made.
2.3 The adjudicating authority passed an order against the appellant in January 17, 2010 confirming the tax demand of Rs.41,81,169/ and further imposing penalty of Rs.35,12,927/. He Page 2 of 17 O/TAXAP/688/2013 ORDER also levied interest. This order the appellant challenged before the Appellate Commissioner and prayed for waiver of predeposit pending such appeal. On such application, the Appellate Commissioner passed an order insisting on the appellant depositing 25% of the duty and penalty confirmed by way of predeposit, subject to which there would be stay against the rest of the recovery.
2.4 Since the appellant did not make such deposit within the time permitted, the Appellate Commissioner by an order dated March 31, 2011, dismissed the appellant's appeal only on the ground of noncompliance with the pre deposit requirement.
2.5 This order the appellant challenged before the Tribunal, by filing second Appeal No.461 of 2011. In the appeal memo, the appellant raised several contentions, including those that it was his bona fide belief that he was not required to obtain registration and that the order of assessment had resulted into double Page 3 of 17 O/TAXAP/688/2013 ORDER taxation. In the prayer clause, the appellant prayed as under :
" Prayer
The appellant prays to the
Honourable Tribunal to :
(1) declare the assessment order as without
jurisdiction.
(2) To hold that appellant is entitled to
Input Tax Credit.
(3) To declare that interest levied is
illegal.
(4) To declare that penalties levied is
illegal or to reduce it to the minimum."
2.6 On such appeal, the Tribunal passed an order on July 25, 2011, which reads as under :
"The appellant has filed this appeal u/s.73 of the Gujarat Value Added Tax Act against the order dt.31.3.2011 passed by the Deputy Commissioner of Commercial Tax, Appeal1, Ahmedabad (hereinafter referred to as 'the appellate authority'). The appellate authority was pleased to dismiss the appeal on the ground that the appellant did not pay Page 4 of 17 O/TAXAP/688/2013 ORDER 25% of the predeposit of the demand. The appellate authority thereby was pleased to confirm the assessment order dt.17.01.2010 passed by the Assistant Commissioner of Commercial Tax (2), (Investigation) Appeal2, Ahmedabad (hereinafter referred to as 'the appellate authority'). The appellate authority has held that the appellant is liable to pay Rs.85,55,659/.
2. The appellant has raised contention regarding bona fide case of double taxation as well as Remission of tax, interest and penalty u/s.41(1) of the Act. In view of the same, appeal is required to be admitted.
3. As regard stay application is concerned, the appellant is liable to pay following amount as per assessment order as under :
Tax 41,81,169/
Interest 15,29,805/
Penalty 100% 35,12,927/
Total 82,23,901/
i.e.
Tax 41,81,169/
TDS deducted
at source 6,68,242/
Tax paid by bank
attachment 3,90,000/
Page 5 of 17
O/TAXAP/688/2013 ORDER
2,00,000/
12,58,242/
Tax pending 29,22,927/
4. Mr.G.Z. Alvi, the learned STP for the appellant will take the necessary information from his client about the payment.
5. In view of the same, the matter is kept for hearing on 16.8.2011. The department will not initiate any coercive measures proceeding up to 19.8.2011.
Pronounced in open court on this 25th day of July, 2011."
2.7 Ultimately, on April 29, 2013, the Tribunal passed the impugned order and examined the validity of the assessment order. The Tribunal held that no interest was chargeable from the appellant, who was an unregistered dealer. However, penalty was correctly levied. Under the circumstances, the Tribunal held and observed as order :
"The appellant has filed this appeal against the order passed by the learned Deputy Commissioner of Commercial Tax, Appeal1, Page 6 of 17 O/TAXAP/688/2013 ORDER Ahmedabad on 31/03/2011 whereby the appeal filed before him came to be dismissed for non payment of 25% of the total tax demand by way of predeposit.
2. This Tribunal has passed an order on 25/07/2011 and after considering the fact that an amount of Rs.6,68,242/ was deducted at source and an amount of Rs.5,90,000/ was recovered by way of bank attachment, the stay was granted against recovery of the balance demand. This Tribunal has also after considering the fact and the contention raised by the appellant with regard to double taxation as well as Remission of tax, interest and penalty under Section 41(1) of the Gujarat Sales Tax Act, 1969, observed that the appeal was required to be admitted and hence it was admitted. .. ..
xxx xxx xxx
15. Before concluding, we make it clear that the appellant's application for remission under Section 41(1) of the Act is still pending before the State Government and this will not come in the way of the authority to decide the said application. The same shall be decided on its own merits and in accordance with law.Page 7 of 17
O/TAXAP/688/2013 ORDER
16. Subject to the above, we pass the following order :
ORDER
17. This appeal is partly allowed. Tax demand raised against the appellant is hereby confirmed. Interest charged is deleted. Penalty under Section 34(8) is reduced to Rs.15,29, 805/. There shall be no order as to costs."
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 Page 8 of 17 O/TAXAP/688/2013 ORDER 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, 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 Page 9 of 17 O/TAXAP/688/2013 ORDER 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.
5. Unless and until the answers were given to such questions, the appellant's first appeal before the appellate authority was simply not maintainable and could not have been entertained. If that be so, the Tribunal could not have entered into merits and in the appeal before itself and given a judgment on the validity of the order of assessment. In the process, the Tribunal jettisoned the first appeal before the Appellate Commissioner and also waived the requirement of predeposit without passing any order to that effect. If the Tribunal was of the opinion that the condition imposed by the Appellate Commissioner was too onerous to be fulfilled by the appellant and the facts of the case warranted interference, the Tribunal could as well have done it. In such a scenario, the Tribunal ought to have placed appeal back to the Appellate Commissioner, on such condition that Page 10 of 17 O/TAXAP/688/2013 ORDER the Tribunal thought fit to impose on the appellant. In the present case, without expressing any opinion on the Appellate Commissioner imposing the condition of part pre deposit on the appellant, the Tribunal accepted the appellant's Second Appeal as if there was no intermediary stage of the appeal before the Appellate Commissioner or any requirement of pre deposit under section 73(4) of the Act. We cannot lose sight of the fact that the appellant himself also substantially contributed to this complication. In the appeal, his main grounds were against the assessment order. His prayers pertained only to the issues on merits about the additions made by the Assessing Officer. There was no prayer for setting aside the appellate order of imposing condition and subsequently, dismissing his appeal when he failed to fulfill such condition. Even if it were so, the Tribunal could have either permitted the appellant to suitably amend the prayer or if the appellant was not willing to do so, dismiss his appeal as not maintainable. In our opinion, the Tribunal could Page 11 of 17 O/TAXAP/688/2013 ORDER not have bypassed the first appellate authority and statutory requirement of predeposit, unless it was waived by an order in writing.
6. We are at pains to record our findings since we find that this is not an isolated case, where such order has been passed. This Court has come across such orders of the Tribunal on more than one occasion.
7. In an order dated August 30, 2013 rendered in Tax Appeal No.711 of 2013 in the case of State of Gujarat v. Tudor India Ltd., the Division Bench of this Court had come across one such order of the Tribunal and made the following observations :
"7. As we have noticed in number of matters, this 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 Page 12 of 17 O/TAXAP/688/2013 ORDER 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].Page 13 of 17
O/TAXAP/688/2013 ORDER
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 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 Page 14 of 17 O/TAXAP/688/2013 ORDER 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 hereinabove, 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 Page 15 of 17 O/TAXAP/688/2013 ORDER of the case at all as is apparent from the discussion held hereinabove."
8. The learned Assistant Government Pleader Mr.Jaimin Gandhi, however, relied on the judgment dated September 12, 2013 rendered by the Division Bench of this Court in Tax Appeal No.667 of 2013 and connected appeals, in which when the Tribunal had under similar circumstances entertained the appeal of the assessee on merits, but dismissed it, the Court held that the appellant cannot raise the ground of impropriety on the part of the Tribunal merely because he has lost in appeal on merits. In the present case, however, we have suo motu taken such an objection against the decision of the Tribunal and in fact, the appellant had partially succeeded before the Tribunal.
9. In the circumstances, the order dated April 29, 2013 passed by the Gujarat Value Added Tax Appellate Tribunal at Ahmedabad is quashed. The appeal be placed back before the Tribunal for fresh consideration and disposal in accordance Page 16 of 17 O/TAXAP/688/2013 ORDER with law bearing in mind the observations made above. It would be open for the appellant to amend his appeal before the Tribunal, for which he may make an application latest by February 28, 2014. It is clarified that if the appellant fails to amend the prayer clauses of his appeal before the Tribunal, the remanded appeal shall not be entertained by the Tribunal questioning the merits of the order of assessment. This appeal is disposed of accordingly. In view of the order passed in the main appeal, the connected Civil Application does not survive and the same stands disposed of accordingly.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) Aakar Page 17 of 17