2005 (7) TMI 609 - HC - VAT and Sales Tax

Pre-deposit - Validity of Order of assessment - tax liability - Tamil Nadu General Sales Tax Act ('Act') - factory was on strike they could not furnish the declaration forms - HELD THAT - In our opinion, there should be such a provision permitting waiver or stay of the pre-deposit amount by the appellate authority in appropriate and genuine cases because there may be cases where the assessee may not be able to deposit the pre-deposit amount for genuine reasons, or there may be a very glaring mistake in the order, or where waiver or stay should be done for some other good and appropriate reason. There may be cases where a huge demand is arbitrarily made by an assessment order although the assessee can clearly satisfy the appellate authority that he is not liable to pay tax at all, or at a far lower amount. Because of the absence of provision for waiver or stay in Section 31 of the Act many cases are coming up directly by way of writ petition in this Court challenging the assessment order. We are not inclined to entertain such writ petitions because there is alternative remedy by way of appeal. However, the appeal may be rendered illusory in many cases because there is no provision for waiver or stay of the pre-deposit amount even in genuine and appropriate cases. Hence we recommend to the State Government to issue an ordinance forthwith amending Section 31 of the Tamil Nadu General Sales Tax Act and making a provision permitting waiver or stay by the appellate authority (in its discretion) of the pre-deposit amount in appropriate and genuine cases so that the assessees may not face hardship, and the alternative remedy of appeal may not become illusory. It may also be pointed out that the second appellate remedy u/s 36 of the Act can only be availed of if the entire tax amount is prepaid vide second proviso (a) to Section 36 of the Act. Hence we recommend that there should be a similar amendment in Section 36 of the Act also. The writ appeals are disposed off.

Issues:
1. Appeal against order of the learned single Judge dated 16.6.2005 in Writ Petition Nos.19370 and 19371 of 2005.
2. Condition imposed by the learned Judge for depositing a sum of Rs.3,00,000/- towards TNGST assessment.
3. Provision for appeal to the Appellate Assistant Commissioner under Section 31 of the Tamil Nadu General Sales Tax Act.
4. Lack of provision for waiver or stay of the pre-deposit amount by the appellate authority in genuine and appropriate cases.
5. Recommendation to the State Government for amending Section 31 of the Act to include a provision for waiver or stay by the appellate authority.

Analysis:

1. The writ appeals were filed against the order of the learned single Judge dated 16.6.2005 in Writ Petition Nos.19370 and 19371 of 2005. The appellant's grievance was due to the factory being on strike, resulting in the inability to furnish declaration forms, leading to an assessment imposing a tax liability of Rs.7,88,440/-. The learned Judge set aside the assessment order but directed the appellant to deposit Rs.3,00,000/- towards TNGST assessment. The High Court modified this, directing the appellant to furnish a personal bond for the entire tax liability imposed by the assessing authority. The order setting aside the assessment and allowing the appellant to produce necessary documents was confirmed. The assessing authority was instructed to pass a fresh assessment order within a month, with the appellant required to furnish the personal bond within two weeks.

2. Section 31 of the Tamil Nadu General Sales Tax Act provides for an appeal to the Appellate Assistant Commissioner. However, the second proviso of this section mandates that in specific cases, including those under various sections of the Act, an appeal cannot be entertained unless accompanied by proof of payment of the tax admitted to be due and 25% of the difference between the tax assessed and admitted by the appellant. This pre-deposit requirement poses challenges as there is no provision for waiver or stay by the appellate authority, even in genuine cases, causing hardship to dealers.

3. The absence of a provision for waiver or stay of the pre-deposit amount in genuine and appropriate cases under Section 31 of the Act is highlighted. The Court notes that such provisions are common in other tax statutes, ensuring fairness to the dealers. The lack of this provision leads to cases being directly challenged through writ petitions in the High Court, bypassing the appellate remedy. The Court recommends amending the Act to include a provision allowing waiver or stay by the appellate authority in suitable cases to prevent the appeal process from becoming illusory.

4. Additionally, the Court recommends that a similar amendment should be made to Section 36 of the Act, which pertains to the second appellate remedy. Currently, under the second proviso (a) to Section 36, the entire tax amount must be prepaid to avail of this remedy. The Court emphasizes the necessity of introducing provisions for waiver or stay in both Sections 31 and 36 to prevent undue hardship to assessees and ensure the effectiveness of the appellate process. The writ appeals were disposed of without costs, and the related matters were closed.

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