2023 (6) TMI 581 - HC - VAT and Sales Tax

Stay - Waiver of pre-deposit - power of Appellate Authority to insist on the assessee paying more than 20% of the disputed tax as a condition for stay of recovery of the balance amount of disputed tax pending disposal of the appeal - HELD THAT - There are force in the submissions of the learned Government Pleader that while on payment of 20% of the disputed amount of tax along with the collected tax, the assessee would be entitled to a stay against recovery of the balance amount of tax confirmed against it pending disposal of the appeal by the First Appellate Authority, the legislature does not prevent the Appellate Authority from insisting on a deposit of more than 20% of the disputed tax amount as a condition for a stay of recovery of balance amount pending disposal of the appeal, from an assessee who has chosen not to pay the 20% of the disputed amount of tax along with the collected tax or at least at the time of filing the appeal before the Appellate Authority. As per the statutory provisions, while the assessee has an option of payment of 20% of the disputed tax along with the collected tax, or at the time of filing the appeal before the Appellate Authority and seeking immunity from recovery proceedings for the balance amount of tax pending disposal of the appeal, he/she virtually takes the risk of losing the benefit of the said proviso, and a stay on deposit of 20% of the disputed tax, if he/she chooses to contest the stay application so as to obtain better terms (payment of less than 20% of the disputed tax) for the grant of stay of the balance disputed tax pending disposal of the appeal. Unless the assessee remits 20% of the disputed amount of tax along with the collected tax or at the time of filing the appeal, he/she will not be entitled to the benefit of the proviso, and he/she runs the risk of losing the benefit of the remittance of the 20% of the disputed amount of tax as a condition for grant of stay of recovery of the balance amount pending disposal of the appeal. This would be the legal position that flows from the main statutory provision, namely, Section 55(4) of the Act, which obliges an assessee to pay the entire amount of tax confirmed against him by the assessing authority as a condition for maintaining an appeal before the First Appellate Authority subject to the discretion to be exercised by the Appellate Authority in terms of First Proviso of Section 55(4). Since these appeals have been pending before this Court since 2017, and it is likely that the statutory appeals which were the subject matter of the Writ Petitions have since been finally disposed by the statutory authority, the findings in this judgment are solely for the purposes of clarifying the scope and ambit of the statutory provision and not to affect the decisions already taken by the Appellate Authorities in the individual appeals. Appeal disposed off.

Summary

Issues involved:
The impact of the proviso inserted in Section 55(4) of the Kerala Value Added Tax Act, 2003 on the power of the Appellate Authority to demand payment of more than 20% of disputed tax for stay of recovery pending appeal.

Issue 1: The impact of the proviso on the power of the Appellate Authority

The writ petitioners challenged the recovery proceedings initiated by the revenue while their appeals against assessment orders under the KVAT Act were pending before the First Appellate Authority. The proviso inserted in Section 55(4) of the KVAT Act mandated remittance of 20% of the disputed tax along with collected tax for a stay on recovery proceedings until the appeal's disposal. The learned Single Judge interpreted that the Appellate Authority cannot demand more than 20% of the disputed tax for stay if the assessee did not pay the required amount. The revenue appealed this finding, arguing that the Appellate Authority can insist on a deposit exceeding 20% if the assessee chooses not to pay the mandated amount.

Issue 1 Details:

The Appellate Authority's power to demand more than 20% of disputed tax:

The High Court held that while an assessee paying 20% of the disputed tax is entitled to a stay on recovery of the remaining tax, the Appellate Authority can require a higher deposit if the assessee opts not to pay the mandated 20%. The court emphasized that the assessee risks losing the benefit of the proviso by contesting the stay application to seek more favorable terms. The legal position under Section 55(4) obliges the assessee to pay the entire confirmed tax amount unless the 20% is remitted, allowing the Appellate Authority discretion in such cases. The court disagreed with the Single Judge's interpretation, clarifying the authority's power to demand additional deposits beyond 20% in certain circumstances.

Separate Judgement:
No separate judgment was delivered by the judges in this case.