2008 (8) TMI 817 - HC - VAT and Sales Tax

Constitutional validity of section 22 of the Karnataka Sales Tax Act, 1957 challenged - Held that - In so far as the argument that the provision is violative of article 14 of the Constitution of India as it treats such assessees against whom the order might have been passed bona fide and other assessees who might have suffered an arbitrary order, is concerned, it is not an argument which can be entertained as a right of appeal can be availed of by all assessees in the manner provided for by the statute and not otherwise.In so far as the argument that the provision is violative of article 14 of the Constitution of India as it treats such assessees against whom the order might have been passed bona fide and other assessees who might have suffered an arbitrary order, is concerned, it is not an argument which can be entertained as a right of appeal can be availed of by all assessees in the manner provided for by the statute and not otherwise. No merit at all in the challenge to the Constitutional validity of section 22 of the Act. The manner in which the petitioner has been prosecuting this petition even without complying with the conditional order passed by this court also disentitles the petitioner from seeking relief before this court and rendering the petition liable for dismissal. In the result, interim orders granted earlier in the writ petition are all vacated and the writ petition is dismissed.

Issues Involved:
1. Validity of Section 22(3) of the Karnataka Sales Tax Act, 1957.
2. Validity of Section 22(5) of the Karnataka Sales Tax Act, 1957.
3. Requirement to deposit 50% of the disputed amount for appeal.
4. Alleged violation of Articles 14 and 19 of the Constitution of India.
5. Quashing of proceedings before the Special JMFC (Sales Tax).

Issue-wise Detailed Analysis:

1. Validity of Section 22(3) of the Karnataka Sales Tax Act, 1957:
The petitioner challenged the constitutional validity of Section 22(3) of the Act, which mandates the deposit of 50% of the disputed tax amount for an appeal to be admitted by the Karnataka Appellate Tribunal. The petitioner argued that this provision is violative of Articles 14 and 19 of the Constitution of India, rendering the appeal remedy virtually negatory due to the onerous condition imposed.

2. Validity of Section 22(5) of the Karnataka Sales Tax Act, 1957:
The petitioner also questioned the validity of Section 22(5) of the Act, which confers discretion on the Tribunal to stay the payment of the remaining 50% of the disputed tax amount. The petitioner contended that this provision interferes with the Tribunal's discretion and is unreasonable, especially in cases where the assessment order is arbitrary.

3. Requirement to Deposit 50% of the Disputed Amount for Appeal:
The petitioner argued that the requirement to deposit 50% of the disputed amount is an onerous condition that discriminates against assessees who suffer from arbitrary assessment orders. The petitioner claimed that this condition makes the appeal remedy illusory for those unable to make such a deposit, thus violating Articles 14 and 19 of the Constitution of India.

4. Alleged Violation of Articles 14 and 19 of the Constitution of India:
The petitioner contended that the provisions of Section 22(3) and 22(5) of the Act are discriminatory and violate Article 14 of the Constitution by treating all assessees uniformly, regardless of the nature of the assessment order. Additionally, the petitioner argued that these provisions infringe upon the right to carry on business under Article 19 of the Constitution by imposing unreasonable restrictions.

5. Quashing of Proceedings Before the Special JMFC (Sales Tax):
The petitioner sought to quash the proceedings before the Special JMFC (Sales Tax) in Civil Misc. No. 06/2007, wherein the respondents had initiated steps to recover the amount of Rs. 39,54,049 determined as due for the years 2001-02 to 2004-05. The petitioner argued that the recovery of this amount as though it is a fine under the provisions of the Criminal Procedure Code is unjustified.

Court's Analysis and Judgment:

Validity of Section 22(3) and 22(5):
The court upheld the validity of Sections 22(3) and 22(5) of the Karnataka Sales Tax Act, 1957, stating that the right of appeal is a statutory right and can be availed of only in the manner provided by the statute. The court emphasized that a right of appeal is neither an inherent right nor a fundamental right but a right conferred under the statute. The court referred to the Supreme Court's rulings in various cases, including Nand Lal v. State of Haryana and Vijay Prakash D. Mehta v. Collector of Customs (Preventive), Bombay, to support its conclusion that imposing conditions for the exercise of the right of appeal is within the Legislature's competence and does not render the provision unconstitutional.

Requirement to Deposit 50% of the Disputed Amount:
The court found no merit in the argument that the requirement to deposit 50% of the disputed amount is discriminatory or violates Articles 14 and 19 of the Constitution. The court noted that the statute provides a uniform procedure for all assessees to avail of the appellate remedy and does not make any invidious discrimination. The court also pointed out that the statutory provision aims to prevent frivolous appeals and ensure the implementation of tax policies.

Violation of Articles 14 and 19:
The court rejected the petitioner's contention that the provisions of Section 22(3) and 22(5) violate Articles 14 and 19 of the Constitution. The court clarified that the liability determined under the statute is for raising revenue for the State and does not regulate or prevent the petitioner's business. The court reiterated that the appeal provision is a way of relief and does not deny any right under Article 19 of the Constitution.

Quashing of Proceedings Before the Special JMFC (Sales Tax):
The court did not find any merit in the petitioner's request to quash the proceedings before the Special JMFC (Sales Tax). The court noted that the petitioner had not complied with the conditional interim order to deposit 50% of the amount sought to be recovered and concluded that the petitioner was not a bona fide litigant prosecuting for genuine relief.

Conclusion:
The court dismissed the writ petition, vacated the interim orders granted earlier, and upheld the constitutional validity of Sections 22(3) and 22(5) of the Karnataka Sales Tax Act, 1957. The court emphasized that the petitioner must comply with the statutory provisions to avail of the appellate remedy and found no merit in the arguments challenging the validity of these provisions.

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