Gujarat High Court
Maniac vs State Of Gujarat on 12 January, 2023
Author: Sonia Gokani
Bench: Sonia Gokani
NEUTRAL CITATION
C/TAXAP/691/2022 ORDER DATED: 12/01/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 691 of 2022
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2022
In R/TAX APPEAL NO. 691 of 2022
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MANIAC
Versus
STATE OF GUJARAT
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Appearance:
UCHIT N SHETH(7336) for the Appellant(s) No. 1
MR. TRUPESH KATHIRIYA, AGP for the Opponent(s) No. 1
NOTICE SERVED for the Opponent(s) No. 1
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CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MR. JUSTICE SANDEEP N. BHATT
Date : 12/01/2023
ORAL ORDER
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)
1. Being aggrieved by the decision of The Gujarat Value Added Tax Tribunal in Second Appeal No. 151 of 2021 under the Central Sales Tax Act, 1956 delivered on 22.3.2022, this Tax Appeal has been preferred under Section 78 of the Gujarat Value Added Tax Act, 2003.
2. The appellant is an HUF having the place of business at Gandhinagar. He was engaged in the business of trading electronic items such as mobiles phones, computers, etc. Page 1 of 10 Downloaded on : Sun Sep 17 20:45:24 IST 2023 NEUTRAL CITATION C/TAXAP/691/2022 ORDER DATED: 12/01/2023 undefined
3. The search proceedings were conducted at the premises of the appellant on 30th October, 2014 which continued till 3.11.2014. No unaccounted stock or sale/purchase was found, according to the appellant. However an issue was raised with respect of classification of sales made through websites as local sales even though the ultimate customer was located outside the State of Gujarat. For inter- State sales, input tax credit was required to be partially reduced because of the notification issued under Section 11(6) of the Vat Act. Therefore, provisional assessment order was passed under Section 9(2) of the CST Act read with Section 33 of the Vat Act for the year 2014-15 raising demand against the Appellant by estimating turnover on the strength of previous year's books of account.
4. The challenge was made to the said provisional assessment order, the First Appeal preferred by the appellant was summarily dismissed. In the Second appeal, the Tribunal demanded combined pre-deposit of Rs.25,00,000/- for the years 2013-14 and 2014-15. Upon payment of such pre-deposit, the matters were remanded to the First Appellate Authority.
5. In the meantime, the case of the appellant was taken up for Page 2 of 10 Downloaded on : Sun Sep 17 20:45:24 IST 2023 NEUTRAL CITATION C/TAXAP/691/2022 ORDER DATED: 12/01/2023 undefined scrutiny assessment under Section 9(2) of CST Act read with Section 34(2) of the Vat Act. The nominal demand was raised under the CST Act which was duly paid by the appellant at the end of audit assessment.
6. The grievance on the part of the petitioner is that despite the finalization of the audit assessment after considering the provisional assessment order and the books of accounts once again the reassessment under Section 9(2) of the CST Act read with Section 35 of the Vat Act had been initiated in case of appellant. The notice has not been received by the appellant. The reassessment order was passed on the basis of estimated figures of provisional assessment. According to the petitioner by ignoring actual turn over is determined the audit account.
7. The First Appeal was preferred challenging the reassessment order. However, the same was summarily dismissed on the ground of non-payment of pre-deposit.
8. The Second Appeal was preferred challenging the first Appellant Order wherein, the Tribunal also had directed the pre- deposit as same amount on 22.3.2022 and hence, the same was Page 3 of 10 Downloaded on : Sun Sep 17 20:45:24 IST 2023 NEUTRAL CITATION C/TAXAP/691/2022 ORDER DATED: 12/01/2023 undefined challenged . Relying on the decision of this Court in case of Kavya Marketing Vs. State of Gujarat passed in Special Civil Application No. 1027 of 2022 decided on 10th February, 2022 .
9. This Court while issuing notice for final disposal on 16.12.2022, passed the following order:-
1. Prayers sought for in the present appeal are as follows:
"A. The questions of law framed in para 19 herein above may please be answered in favour of the Appellantassessee and against the Respondent-department;
B. The impugned order of Tribunal annexed at Annexure A as well as the order of the first appellate authority may please be quashed and set aside and the matter may please be remanded to the first appellate authority for hearing on merits without insisting for any pre-deposit or security and stay against recovery may be granted to the Appellant;
C. 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 appellant shall forever pray."
2. We have heard learned advocate Mr. Uchit N. Sheth for the appellant. He has drawn our attention to the fact that it was during the COVID-19 period and hence the period for competing the assessment was getting over on 31.03.2020 without availing the Page 4 of 10 Downloaded on : Sun Sep 17 20:45:24 IST 2023 NEUTRAL CITATION C/TAXAP/691/2022 ORDER DATED: 12/01/2023 undefined opportunity.
3. Issue Notice, for final disposal, returnable on 22.12.2022
10. We have heard Mr. Uchit Sheth, learned advocate appearing for the petitioner and Mr. Trupesh Kathiriya, learned AGP appearing for the respondent-State.
11. The following are the substantial questions of law raised in the present appeal :-
(a) Whether on the facts and circumstances of the case the Gujarat Value Added Tax Tribunal is justified in demanding pre-
deposit without assigning any reasons or considering prima facie case of the Appellant ?
(b) Whether on the facts and circumstances of the case the Gujarat Value Added Tax Tribunal demanding pre-deposit without assigning any reasons or considering prima facie case of the appellant is perverse in the legla sense of the term ?
(c) Whether on the facts and in the circumstances of the case the Gujarat Value Added Tax Tribunal is justified in demanding pre- deposit even though the original reassessment order was passed ex- parte during lockdown induced by Covid-19 pandemic ?
(d) Whether on the facts and in the circumstances of the case the Gujarat Value Added Tax Tribunal is justified in demanding pre- deposit even though the original reassessment order was based Page 5 of 10 Downloaded on : Sun Sep 17 20:45:24 IST 2023 NEUTRAL CITATION C/TAXAP/691/2022 ORDER DATED: 12/01/2023 undefined upon provisional assessment order by ignoring the subsequent audit assessment order and by considering the same material which was available at the time of assessment ?
(e) Whether on the facts and in the circumstances of the case the Gujarat Value Added Tax Tribunal is justified in demanding pre- deposit even though the Appellant had unutilized imput tax credit balance of Rs.5,86,219 and it had already paid combined pre- deposit of Rs.25,00,000/- against provisional assessment orders for the years 2013-14 and 2014-15 ?
12. The only issue that requires to be considered by this Court that in wake of non-availment of any opportunity of hearing because of the Pandemic due to COVID-19 virus. Whether The Gujarat Value Added Tax Tribunal is justified in demanding pre-deposit without assigning any reasons or by overlooking the prima facie case of the appellant.
13. This Court in case of Kavya Marketing has also needed to deal with the order where the Tribunal had directed to pre-deposit and hearing of the matter was prolonged on the aspect of pre-deposit. It had chosen not to address the prima facie case of the writ applicant at the stage when the directions had been issued for pre-deposit. This Court had frowned upon such approach on the part of the Tribunal Page 6 of 10 Downloaded on : Sun Sep 17 20:45:24 IST 2023 NEUTRAL CITATION C/TAXAP/691/2022 ORDER DATED: 12/01/2023 undefined by holding thus:-
11. We find that such an approach of the Tribunal of not addressing prima facie case of the writ applicant at the predeposit 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 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 Page 7 of 10 Downloaded on : Sun Sep 17 20:45:24 IST 2023 NEUTRAL CITATION C/TAXAP/691/2022 ORDER DATED: 12/01/2023 undefined 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 instant case, as can be noticed from the chronology of events, the original reassessment order which was passed after the provisional attachment order and the audit assessment was placed upon the provisional assessment order and also considering the very material which was taken into consideration during the audit assessment. As per the case of the appellant while passing the reassessment order, no opportunity of hearing has been made available as it was during the lockdown induced by the COVID 19 pandemic, that such an order was passed. It is not disputed by the Page 8 of 10 Downloaded on : Sun Sep 17 20:45:24 IST 2023 NEUTRAL CITATION C/TAXAP/691/2022 ORDER DATED: 12/01/2023 undefined respondent that the appellant was hampered on account of the condition which prevailed at the relevant point of time. The Tribunal ought to have regarded this aspect at the time of directing the pre- deposit to the tune of Rs.12,02,910/-. It had taken notice of the fact that carried forward ITC in case of the present appellant is Rs.5,86,000/- . This also could have acted as sufficient amount for the pre-deposit instead of endorsing to the directions of the First Appellate Authority of depositing Rs.12.02 Lakhs as the pre- deposit. It is not the final reassessment order and the amount quantified is necessary to be looked into. It is essentially the chronology of events, coupled with the fact that there is complete absence of the any opportunity at the time of reassessment which shall need to be regarded. Resultantly, the questions raised before this Court particularly question (C) deserves to be allowed. All other questions are more in the nature of arguments, the Appeal needs to be allowed, quashing and setting aside the order of directions of pre-deposit to the tune of Rs. 12.02 Lakhs.
15. The reference of carried forward input tax credit of Rs.5,86,000/- to the credit of the appellant shall continue to act as Page 9 of 10 Downloaded on : Sun Sep 17 20:45:24 IST 2023 NEUTRAL CITATION C/TAXAP/691/2022 ORDER DATED: 12/01/2023 undefined as pre-deposit. The matter is remanded back to the original authority for passing reassessment order on quashing and setting aside that order.
Let the appellant cooperate. The First Appellate Authority shall pass reassessment order within 12 weeks from the date of passing of this Order. No demand shall be raised by the respondent till the First Appellate Authority determines finally this matter.
16. Very peculiar facts and circumstances exist in this case as mentioned hereinabove while narrating the chronology of events, necessitating this Court to intervene also in the amount of pre- deposit which may not act as a precedent.
Petition is allowed accordingly.
(SONIA GOKANI, J) (SANDEEP N. BHATT,J) BEENA SHAH Page 10 of 10 Downloaded on : Sun Sep 17 20:45:24 IST 2023