2014 (4) TMI 840 - HC - VAT and Sales Tax

Waiver of Pre-deposit Condition for waiver - Undue hardship - Under the GST Act and under Central Sales Tax Act Disposal of stay - Held that - On merely establishing a prima facie case, interim order of protection should not be passed - But if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand - Petitions for stay should not be disposed of in a routine matter unmindful of the consequence flowing from the order requiring the assessee to deposit full or part of the demand - Merely because this Court has indicated the principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest - Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens faith in the impartiality of public administration, interim relief can be given. While dealing with the application twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interest of Revenue have to be kept in view - There are two important expressions in Section 35(f) - One is undue hardship - This is a matter within the special knowledge of the applicant for waiver and has to be established by him - A mere assertion about undue hardship would not be sufficient - It was noted by this Court in S. Vasudeva Vs State of Karnataka and Ors. 1993 (3) TMI 350 - SUPREME COURT OF INDIA that under Indian conditions expression Undue hardship is normally related to economic hardship - Undue which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it - Undue hardship is caused when the hardship is not warranted by the circumstances Relying upon Mehsana District Cooperative Milk P.U. Ltd. vs. Union of Indina 2003 (3) TMI 113 - SUPREME COURT OF INDIA - The conditions as to predeposit in appeal can be waived mainly on the ground of undue hardship/ financial hardships - Moreover, when the petitioners have neither pleaded any undue hardship and / or financial hardship it cannot be said that the learned Tribunal has committed any error and / or illegality in directing the petitioner original appellant to deposit a sum of Rs. 20 crores as predeposit - Petitions fail and are dismissed Decided against assessee.

Summary

Issues Involved:
1. Legality of the Tribunal's order directing the petitioner to deposit a sum of Rs. 20 crores as pre-deposit.
2. Consideration of undue hardship or financial hardship in waiving the pre-deposit requirement.
3. Impact of the pre-deposit on the public distribution system.

Detailed Analysis:

1. Legality of the Tribunal's Order:
The petitioners challenged the Tribunal's order directing them to deposit Rs. 20 crores as pre-deposit against a total demand of approximately Rs. 800 crores under the Gujarat Sales Tax Act and the Central Sales Tax Act. The Tribunal had initially directed the petitioners to deposit Rs. 10 crores in each of the two appeals. The petitioners argued that the Tribunal erred in imposing this pre-deposit requirement, especially considering the appellant is a Public Sector Undertaking (PSU) involved in oil distribution. They cited earlier instances where the Tribunal granted unconditional stay without any pre-deposit for previous assessment years. However, the court noted that the Tribunal's order was reasonable given the substantial total demand and the lack of any plea of undue hardship or financial hardship from the petitioners.

2. Consideration of Undue Hardship or Financial Hardship:
The petitioners did not plead any undue hardship or financial hardship, which are crucial considerations in deciding waiver applications for pre-deposit. The court emphasized that undue hardship must be demonstrated by the applicant, and mere assertions are insufficient. The court referred to the Supreme Court's decisions in Benara Valves Ltd. vs. Commissioner of Central Excise and Mehsana District Cooperative Milk P.U. Ltd vs. Union of India, which highlight the necessity of considering undue hardship and safeguarding the interest of revenue when deciding on pre-deposit waivers. The court concluded that the petitioners' failure to demonstrate undue hardship or financial hardship justified the Tribunal's decision to require a pre-deposit.

3. Impact on Public Distribution System:
The petitioners argued that the pre-deposit requirement might affect the public distribution system, given their role as a PSU in oil distribution. The court found no substance in this argument, stating it was not appreciable how a deposit of Rs. 20 crores by a PSU like the petitioner would impact the public distribution system. The court also noted that the Supreme Court had not laid down any absolute proposition of law mandating complete waiver of pre-deposit for PSUs, as argued by the petitioners based on the cases of M/s. Pennar Industries and Ravi Gupta.

Conclusion:
The court dismissed the petitions, upholding the Tribunal's order directing the petitioners to deposit Rs. 20 crores as pre-deposit. The court granted the petitioners an additional four weeks to comply with the Tribunal's order. The decision underscores the importance of demonstrating undue hardship or financial hardship when seeking waiver of pre-deposit requirements and affirms the Tribunal's discretion in such matters.