2013 (3) TMI 581 - HC - VAT and Sales Tax

Pre deposit - provisional assessment - waiver or reduction of pre-dopsit - Held that - The Appellate Authority enjoys wide discretionary powers to waive either full or part of the pre-deposit requirement. The same can be done conditionally or unconditionally. In the present facts and circumstances of the case a sum of 1.28 Crores as already recovered from the petitioners qua the demand arising out provisional assessment of 3 Crores should be sufficient to meet with the pre-deposit requirement. No further pre-deposit should be insisted upon particularly as already noted demand itself upon application of judgment of this Court and even as per the department s calculation comes down to 2.40 Crores. Pre-deposit would thus be in excess of 50% of the total demand inclusive of interest and penalty. Rest of the steps for recovery taken in furtherance of the demand must be reversed. The attachment of the Bank account is set aside. The security on the stock obtained from the petitioners is lifted. A sum of 35.03 Lacs directly recovered from the bank account of the petitioners by the respondents shall be refunded. The Appellate Authority shall decide the appeal proceedings unmindful of the observations made in this order in accordance with law and preferably within four months from receipt of a copy of this order.

Summary

Issues:
1. Demand raised by respondents against petitioners under provisional assessment.
2. Recovery proceedings initiated by respondents during pendency of appeal.
3. Contention regarding reversal of tax credit on fuel used in manufacturing activity.
4. Dispute over pre-deposit requirement for appeal.
5. Allegations of high-handed actions by departmental authorities.

Issue 1: Demand raised by respondents against petitioners under provisional assessment:
The petitioners, engaged in manufacturing vitrified and ceramic tiles, faced a demand of Rs. 3 Crores under a provisional assessment by the Adjudicating Authority. The petitioners appealed against this order, also seeking waiver of pre-deposit under Section 73(4) of the VAT Act.

Issue 2: Recovery proceedings initiated by respondents during pendency of appeal:
The respondents undertook coercive recovery measures, including obtaining stock as security, attaching the petitioners' bank account, and recovering amounts from the account. The departmental actions were challenged as high-handed, especially as recovery continued despite the pending appeal and application for pre-deposit waiver.

Issue 3: Contention regarding reversal of tax credit on fuel used in manufacturing activity:
The petitioners argued that the department's demand was inflated due to a misinterpretation of the tax credit reversal on fuel used in manufacturing. They contended that a previous court judgment clarified the issue, reducing the demand considerably. The petitioners claimed excess reversal of credit, which, if considered, would lower the demand below the amount already recovered.

Issue 4: Dispute over pre-deposit requirement for appeal:
The respondents opposed the petition, asserting that the demand, even after adjustment for the fuel tax credit issue, stood at Rs. 60 Lacs out of the total Rs. 3 Crores. They argued that the petitioners' claim of excess credit reversal was not raised during the provisional assessment. The court deliberated on the pre-deposit requirement under Section 73(4) of the VAT Act, emphasizing the Appellate Authority's discretionary power to waive such deposits.

Issue 5: Allegations of high-handed actions by departmental authorities:
The court noted the aggressive recovery actions taken by the respondents, such as attaching the bank account and seeking direct recovery from customers, during the pendency of the appeal. The court directed the reversal of these steps, emphasizing the need for judicious exercise of powers by departmental authorities and timely resolution of legal disputes.

In conclusion, the court decided to waive further pre-deposit requirements, ordered the reversal of recovery steps, and instructed the Appellate Authority to decide the appeal within four months. The judgment highlighted the importance of upholding legal procedures and cautioned against aggressive postures by departmental authorities.