2000 (9) TMI 946 - SC - VAT and Sales Tax

What is the ambit and scope of the words unable to pay the whole of the amount of tax assessed used in proviso to sub-section (5) of section 39 of the Haryana General Sales Tax Act, 1973? Held that - In the instant case the prayer was made to grant stay on the ground that the petitioner has not collected any additional tax from the customers and is unable to deposit the amount of additional demand created by patently illegal order . The respondent-company nowhere mentioned to or referred to its inability to pay the amount on account of its alleged financial difficulties or incapacity to make the requisite payment. The legality of the additional demand created could not be made the basis for insisting to entertain the appeal without prior payment, as that would have required the determination on the merits of the appeal. Merely because the Tribunal had insisted upon the payment of the amount in terms of proviso to sub-section (5) of section 39 of the Act, should not have annoyed the court while granting the relief in exercise of its powers under article 226 of the Constitution. The impugned order being contrary to settled principles of law cannot be sustained and is accordingly set aside.

Issues Involved:

1. Scope and interpretation of the phrase "unable to pay the whole of the amount of tax assessed" in the proviso to sub-section (5) of section 39 of the Haryana General Sales Tax Act, 1973.
2. Validity of the orders passed by the Deputy Excise and Taxation Commissioner and the Haryana Sales Tax Tribunal.
3. Jurisdiction and discretion of the High Court under Article 226 of the Constitution of India.
4. Conditions for maintaining an appeal under section 39(5) of the Act.
5. Relief from the deposit of the interest portion of the assessed tax.

Detailed Analysis:

1. Scope and interpretation of "unable to pay the whole of the amount of tax assessed":

The primary issue in this appeal was the interpretation of the phrase "unable to pay the whole of the amount of tax assessed" as used in the proviso to sub-section (5) of section 39 of the Haryana General Sales Tax Act, 1973. The appellant contended that "inability" refers to the financial position of the assessee, while the respondents argued for a broader interpretation.

The court concluded that the inability mentioned in the proviso refers to the paying capacity and financial position of the company. The term "pay" indicates the discharge of an obligation rather than an investment of money, and "unable" means insufficiency of funds. Thus, the inability to pay is related to the financial incapacity of the person concerned, not their legal or actual liability to pay the demanded amount.

2. Validity of the orders by the Deputy Excise and Taxation Commissioner and the Haryana Sales Tax Tribunal:

The company was assessed additional tax demands by the Deputy Excise and Taxation Commissioner, which it challenged before the Haryana Sales Tax Tribunal. The Tribunal initially rejected the company's application for stay of recovery and entertainment of appeal without prior payment of tax and interest, and directed the company to deposit the entire amount.

The High Court quashed the Tribunal's order and directed it to pass a speaking order. However, the Tribunal again rejected the company's application, leading to another writ petition in the High Court, which was allowed, permitting the company to furnish a bank guarantee instead of depositing the amount.

3. Jurisdiction and discretion of the High Court under Article 226 of the Constitution of India:

The court observed that the High Court, in exercising its jurisdiction under Article 226, can grant stay and waive the condition of pre-deposit of tax in rare cases. However, in this instance, the High Court's decision to allow the writ petition and direct the Tribunal to dispose of the appeal on furnishing a bank guarantee was found to be unjustified and contrary to settled principles of law.

4. Conditions for maintaining an appeal under section 39(5) of the Act:

Section 39(5) of the Act mandates that no appeal shall be entertained unless the tax assessed and any penalty and interest recoverable have been paid. The proviso allows the appellate authority to dispense with the deposit if the appellant is unable to pay the amount. The court emphasized that the right of appeal is a statutory creation and must be exercised within the prescribed limits and procedures. The appellate authority has discretion to entertain the appeal if the appellant proves their inability to pay the amount.

5. Relief from the deposit of the interest portion of the assessed tax:

The respondent's counsel requested relief from depositing the interest portion of the assessed tax. The court did not consider this plea as it was not raised before the Appellate Tribunal. However, the court permitted the respondent to make such a plea before the Appellate Tribunal after depositing the entire balance amount within 15 days. The Tribunal was directed to decide on this plea before considering the statutory appeal on its merits.

Conclusion:

The appeal was allowed, and the impugned order of the High Court was set aside. The court emphasized the importance of adhering to statutory requirements for maintaining appeals and the limited scope for judicial intervention under Article 226 in tax matters.

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