1998 (12) TMI 591 - AT - VAT and Sales Tax

Issues Involved:
1. Validity of Section 3 of Tamil Nadu Act No. 11 of 1997.
2. Incidental or ancillary power of the Appellate Tribunal under Section 36 of the TNGST Act.
3. Scope of Section 36(3)(iii) or Sub-section (3) of Section 39-A regarding interim directions.
4. Applicability of amended provisions to cases or disputes commenced prior to May 8, 1997.

Issue-wise Detailed Analysis:

Issue 1: Validity of Section 3 of Tamil Nadu Act No. 11 of 1997
The petitioners argued that Section 3 of Tamil Nadu Act No. 11 of 1997, which restricts the appellate power under Section 36 of the TNGST Act by amending the proviso to Section 36(5), is discriminatory and violates Articles 14 and 19(1)(g) of the Constitution of India. The Tribunal held that the right of appeal is not a fundamental right but a statutory one, and the Legislature has the power to restrict or take it away. The Tribunal cited multiple judgments, including those of the Supreme Court, to support this view. Consequently, the Tribunal concluded that Tamil Nadu Act No. 11 of 1997 does not violate Articles 14 or 19(1)(g) of the Constitution of India, thus holding the first issue in favor of the Revenue.

Issue 2: Incidental or Ancillary Power of the Appellate Tribunal
This issue was crucial as it determined whether the Appellate Tribunal retained incidental or ancillary power to grant stay orders despite the amendment. The Tribunal referred to the Supreme Court's judgment in [1969] 71 ITR 815 (Income-tax Officer v. M.K. Mohammed Kunhi), which held that an appellate authority inherently possesses the power to grant stay as part of its appellate jurisdiction. The Tribunal also cited other judgments, including [1986] 157 ITR 665 (SC) (Commissioner of Income-tax v. Bansi Dhar & Sons), which confirmed that the appellate jurisdiction includes the power to grant interim relief. The Tribunal concluded that the Tamil Nadu Legislature did not explicitly prohibit incidental and ancillary powers in the amendment, thereby preserving these powers for the Appellate Tribunal. Thus, the Tribunal set aside the judgment of the Sales Tax Appellate Tribunal dated July 28, 1997, and held that stay applications are maintainable under the incidental and ancillary power of the Appellate Tribunal.

Issue 3: Scope of Section 36(3)(iii) or Sub-section (3) of Section 39-A
The Tribunal addressed whether the Appellate Tribunal could grant interim directions regarding the collection of tax under Section 36(3)(iii) or Sub-section (3) of Section 39-A. The Tribunal held that the power to "pass such orders as it may think fit" under Section 36(3)(iii) arises only during the final disposal of an appeal and not at any stage during its pendency. The Tribunal was not convinced by the petitioners' argument that this power could be exercised to grant interim relief. Therefore, the Tribunal concluded that the Appellate Tribunal does not have the power to grant stay orders under Section 36(3)(iii) of the TNGST Act, thus holding this issue against the assessee.

Issue 4: Applicability of Amended Provisions to Pre-existing Disputes
The Tribunal examined whether the amended provisions of Section 36 of the TNGST Act, introduced by Tamil Nadu Act No. 11 of 1997, apply to disputes that commenced before May 8, 1997. The Tribunal held that the right to appeal and apply for stay is a substantive right that accrues when the lis (dispute) commences. Citing judgments like [1953] 4 STC 114 (SC) [Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh], the Tribunal concluded that the unamended provisions of Section 36(5) apply to disputes that arose before May 8, 1997, granting a higher statutory right to seek stay. For assessment orders passed after May 8, 1997, the Appellate Tribunal retains only incidental or ancillary power to grant stay. Thus, the Tribunal held that the unamended provisions apply to pre-existing disputes, providing a better right of seeking stay.

Conclusion:
The Tribunal allowed all petitions, holding that:
1. Section 3 of Tamil Nadu Act No. 11 of 1997 is valid and intra vires.
2. The Appellate Tribunal retains incidental and ancillary power to entertain stay applications in fit and proper cases.
3. The Appellate Tribunal has no power to grant stay orders under Section 36(3)(iii) of the TNGST Act.
4. The unamended provisions of Section 36(5) apply to orders of assessment made before May 8, 1997, while the amended provisions apply to orders made after that date.

The Tribunal directed that interim orders granted by the Special Tribunal or the Madras High Court would continue until the Sales Tax Appellate Tribunal passes orders under the guidelines issued in this judgment or until January 31, 1999, whichever is earlier.

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