2013 (5) TMI 728 - HC - VAT and Sales Tax

Direction to pre-deposit a sum as a condition precedent for hearing the objections - Special Commissioner invoked the provisions of the 3rd proviso to Section 74(1) of the Delhi Value Added Tax Act, 2004 - Held that - Since the returns in each of these petitions had been filed much prior to the introduction of the 3rd proviso to Section 74(1) the Commissioner could not have invoked that proviso and required the petitioners to make the pre-deposits as a condition for entertaining their objections. Consequently, the impugned orders are set aside and the respondents are directed to hear the objections without the requirement of the petitioners making any pre-deposit. The writ petitions allowed.

Issues Involved:

1. Applicability of the 3rd proviso to Section 74(1) of the Delhi Value Added Tax Act, 2004.
2. Whether the right to file objections is a substantive right akin to the right to file an appeal.
3. Retrospective application of legislative amendments.
4. Harmonious reading of Section 35(2) and Section 74(1) of the said Act.
5. Relevant date for considering the applicability of the 3rd proviso to Section 74(1).

Issue-Wise Detailed Analysis:

1. Applicability of the 3rd Proviso to Section 74(1):

The petitioner challenged the order requiring a deposit of Rs. 25 lacs as a pre-condition for hearing objections, invoking the 3rd proviso to Section 74(1) of the Delhi Value Added Tax Act, 2004, introduced on 01.10.2011. The petitioner argued that this proviso did not exist during the relevant periods (2008-2009 and 2010-2011), and thus could not be applied retrospectively to their cases.

2. Substantive Right to File Objections:

The petitioner contended that the right to file objections, similar to the right to file an appeal, is a substantive right. This right was vested at the time of filing the returns, and any subsequent amendment that imposed a pre-condition for hearing objections could not take away this vested right unless the amendment was explicitly retrospective.

3. Retrospective Application of Legislative Amendments:

The court examined whether the 3rd proviso to Section 74(1) could be applied retrospectively. It was noted that the proviso was not expressly made retrospective, unlike other provisions in the Act (Sections 74A(5), 81(2) 2nd proviso, and 106(4)), which were explicitly stated to have retrospective effect. Thus, the 3rd proviso could not be applied retrospectively by implication.

4. Harmonious Reading of Section 35(2) and Section 74(1):

The respondents argued that the insertion of the 3rd proviso to Section 74(1) did not introduce anything new, as similar provisions existed under Section 35(2). However, the court found that Section 35(2) deals with the collection of assessed tax and penalties, while Section 74 deals with objections. The two sections operate in different fields, and the requirement under the 3rd proviso to Section 74(1) creates an impediment in hearing objections, unlike Section 35(2).

5. Relevant Date for Considering the Applicability of the 3rd Proviso:

The court determined that the relevant date for considering the applicability of the 3rd proviso is the date of filing the returns, not the date of filing objections. This conclusion was supported by various decisions, including Hoosein Kasam Dada (India) Ltd. v. The State of Madhya Pradesh, which established that the right of appeal (and by analogy, the right to file objections) crystallizes on the date of filing the returns.

Conclusion:

The court held that since the returns were filed before the introduction of the 3rd proviso to Section 74(1), the Commissioner could not invoke this proviso to require pre-deposits as a condition for hearing objections. The impugned orders were set aside, and the respondents were directed to hear the objections without requiring any pre-deposit. The writ petitions were allowed, and all pending applications were disposed of.

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