1994 (11) TMI 429 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Requirement of interest payment as a condition precedent for hearing an appeal under Section 20 of the Punjab General Sales Tax Act, 1948.
2. Financial incapacity of the petitioner to pay tax and interest.
3. Legality of the imposition of additional tax and interest.

Detailed Analysis:

1. Requirement of Interest Payment as a Condition Precedent for Hearing an Appeal:
The petitioner challenged the order of the Sales Tax Tribunal, Punjab, which required the petitioner to deposit the amount of tax together with interest as a condition precedent for the hearing of the appeal. The petitioner argued that the element of interest is not required to be deposited as a condition precedent to the hearing of the appeal filed under Section 20 of the Act. The court examined the relevant sections of the Punjab General Sales Tax Act, 1948, including Sections 11B, 11D, 20(2), and 20(5). It was noted that Section 20(5) imposes a bar to the entertaining of an appeal by the Appellate Authority unless the appeal is accompanied by satisfactory proof of the payment of tax or penalty, but it does not mention interest. The court concluded that the omission of the expression "or interest payable" from Section 20(5) and its proviso is deliberate and the Legislature never intended that the appellant must pay the amount of interest before an appeal can be entertained. Therefore, the Sales Tax Tribunal committed a serious illegality in requiring the petitioner to pay the amount of interest apart from the amount of tax as a condition precedent for hearing the appeal.

2. Financial Incapacity of the Petitioner to Pay Tax and Interest:
The petitioner pleaded that it was not in a position to pay Rs. 47,12,294/- due to its capital being locked up in committed business and an exhausted bank overdraft. The petitioner argued that the Appellate Authority and the Sales Tax Tribunal had not considered its financial incapacity and arbitrarily insisted on the payment of the entire tax and interest. The court noted that Section 20(5) of the Act allows the Appellate Authority to entertain an appeal without the tax or penalty being paid if it is satisfied that the dealer is unable to pay, provided reasons are recorded in writing. However, the court did not delve deeply into this issue, as it found that the requirement to deposit interest was itself without legal sanction.

3. Legality of the Imposition of Additional Tax and Interest:
The petitioner also challenged the very levy of interest and the imposition of additional tax. The court noted that the legality of the order passed by the Assessing Authority (Annexure P-1) was already under consideration before the Appellate Authority in the appeal filed by the petitioner. Since the petitioner had already availed the alternative remedy of appeal, the court refrained from recording a finding on the question of the petitioner's liability to pay tax and interest. The court emphasized that the appeal should be heard on merits by the Appellate Authority without the requirement of depositing interest.

Conclusion:
The writ petition was allowed, and the impugned order (Annexure P-1) was quashed. The petitioner was directed to pay the remaining tax amount of Rs. 3,000/- within three weeks, after which the appeal would be heard and decided on merits by the Appellate Authority. The court held that there is no requirement of payment of interest as a condition precedent for hearing an appeal filed under Section 20 of the Act.