1991 (3) TMI 373 - HC - VAT and Sales Tax

Summary

Issues:
1. Rejection of waiver application under section 9 of the U.P. Sales Tax Act, 1948.
2. Discretionary power of appellate authority in granting waiver.
3. Consideration of financial position and capacity to pay in waiver applications.

Analysis:
The judgment involves a writ petition challenging the Sales Tax Tribunal's order rejecting the petitioner's appeal against the rejection of a waiver application under section 9 of the U.P. Sales Tax Act, 1948. The petitioner was assessed to sales tax for the year 1985-86, resulting in a substantial tax liability. The petitioner appealed against the assessment order and sought a waiver of the requirement to deposit 20% of the tax assessed before the appeal could be entertained, as mandated by section 9(1-B)(b) of the Act. The appellate authority has discretionary power to waive or relax this requirement for special and adequate reasons, as per the proviso attached to the provision.

The Tribunal refused to interfere, citing that the petitioner had paid mandi fee on certain transactions and had not justified the non-payment of tax on those transactions. It also considered the petitioner's subsequent business activities and financial position, concluding that the discretionary power was correctly exercised by the appellate authority. However, the High Court found the Tribunal's decision flawed as the discretion must be exercised judiciously and objectively, based on relevant material. The purpose of the provision is to alleviate hardship in suitable cases, considering factors such as the disputed tax amount and the assessee's capacity to pay.

The High Court criticized the Tribunal for not delving deeper into the petitioner's financial condition and for being influenced by irrelevant considerations like the merit of the appeal or correctness of the assessment. It emphasized that the Tribunal should have assessed whether the petitioner genuinely lacked the means to make the required deposit, especially considering the substantial tax liability involved. The judgment highlighted that decisions based on irrelevant or partly relevant factors vitiate the outcome, necessitating a fresh consideration of the appeal.

Ultimately, the High Court allowed the writ petition, quashing the Tribunal's order and directing a fresh consideration of the petitioner's appeal, emphasizing the importance of objectively evaluating the financial circumstances and capacity to pay in waiver applications under the U.P. Sales Tax Act.