1988 (3) TMI 440 - HC - VAT and Sales Tax

Issues Involved: Interference with discretionary orders, application of Section 31(5) of the Tamil Nadu General Sales Tax Act, necessity of speaking orders, judicial exercise of discretion, and balance between public revenue and undue hardship to the assessee.

1. Interference with Discretionary Orders:
The Court emphasized that the High Court should not normally interfere with the discretionary orders passed by the appellate authority constituted under the Tamil Nadu General Sales Tax Act. It was noted that the appellate authority must exercise its discretion judiciously and pass speaking orders. The Court stated, "if once the appellate authority has exercised his discretion in the manner known to law, and passed a speaking order showing application of his mind to the points involved, then, normally, this Court would not interfere with such discretionary orders."

2. Application of Section 31(5) of the Tamil Nadu General Sales Tax Act:
Section 31(5) of the Act was scrutinized, which states that the tax should be paid in accordance with the order of assessment against which the appeal has been preferred, but the Appellate Assistant Commissioner may, in his discretion, give directions regarding the payment of the tax before the disposal of the appeal if sufficient security is furnished. The Court clarified that "an assessee is not entitled to an order of stay as a matter of right" and that the filing of an appeal against assessment is not a ground for granting stay of the collection of taxes. The section does not mention "stay" explicitly but allows for orders to be passed to alleviate hardship on the assessee.

3. Necessity of Speaking Orders:
The Court underscored the importance of speaking orders, stating that the appellate authority's discretion should not be exercised arbitrarily. It is incumbent upon the authority to apply its mind and pass orders that reflect such application. The Court cited previous judgments to emphasize this point, stating, "the appellate authority cannot exercise his discretion in an arbitrary manner and it is incumbent upon him to apply his mind and pass speaking orders."

4. Judicial Exercise of Discretion:
The Court noted that the discretionary power conferred under Section 31(5) should be exercised judiciously. It stated that the appellate authority must scrutinize the grounds on which stay is requested and cannot reject applications without proper consideration. The Court referenced previous decisions, including E. Krishnappa Naicker v. Deputy Commercial Tax Officer and Abdul Guffoor & Co. v. Appellate Assistant Commissioner, to highlight that the discretionary power must be exercised with due consideration and not mechanically.

5. Balance Between Public Revenue and Undue Hardship to the Assessee:
The Court discussed the balance between protecting public revenue and preventing undue hardship to the assessee. It noted that while public revenue is important, the appellate authority must also consider the undue hardship that immediate tax payment might cause to the assessee. The Court outlined factors that the appellate authority should consider, such as whether there is a prima facie case, the amount of tax and penalty involved, the capacity of the assessee to pay, undue hardship, and the nature of security offered. The Court stated, "while considering the above aspects, the authority must have also in mind the adverse effect that would be caused on the public revenue in case of granting an absolute stay."

Conclusion:
The Court found that the Appellate Assistant Commissioners had failed to provide reasons for refusing to grant stay or for not accepting the security, and had mechanically followed the Supreme Court decision. The impugned orders were set aside, and the matters were remitted back to the authorities to pass speaking orders within four weeks. The Court allowed the writ petitions on the limited ground of lack of speaking orders and emphasized that the best way to safeguard public revenue is to dispose of appeals expeditiously. The Court concluded, "Until such orders are passed on the stay applications in all these cases, the collection of tax and penalty shall stand stayed."

← Previous Next →