2014 (7) TMI 195 - HC - VAT and Sales Tax

Waiver of pre deposit - VATO held that the assessee claimed input tax credit (ITC) on goods purchased by it but had reduced the credit which was claimed after receiving the credit notes from the sellers and cash discount from the selling dealer - Held that - As is evident from the previous discussion, the assessee has questioned the liability; its appeal on the substantive addition is pending before the VAT Tribunal. Admittedly, it has also deposited 40% of the disputed amount. In the circumstances, further requirement to deposit 20% of the penalty amount would not be warranted as it would place undue restriction on the appellant s right to be heard in appeal. The direction to deposit 20% of the penalty amount made in the impugned order is hereby set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Pre-deposit requirement of penalty amount.
2. Claim of input tax credit by the appellant.
3. Disputed additions made by the VATO and confirmed by OHA.
4. Interpretation of Section 76(4) regarding penalty imposition.
5. Appellant's right to be heard in appeal without undue restrictions.

Analysis:

1. The appellant challenged the impugned order that mandated a pre-deposit of 20% of the penalty amount determined in the case. The appellant, a dealer in lubricants, claimed input tax credit but had reduced the credit after receiving credit notes and cash discounts from sellers. The VATO made additions, upheld by the OHA, leading to the pending appeal before the VAT Tribunal, which directed a 40% pre-deposit of the disputed amount. The appellant argued that the amounts were paid, and the Tribunal should proceed with the appeal without requiring an additional 20% deposit for the penalty.

2. The respondents relied on Section 76(4), highlighting the consequences of the appellant's failure to reverse the credit proportionately, justifying the penalty imposition. They argued that the pre-deposit directive of 20% was reasonable and should not be challenged. However, the Court examined the submissions and noted that the appellant disputed the liability, with the substantive appeal pending before the VAT Tribunal. It was acknowledged that the appellant had already deposited 40% of the disputed amount, making an additional 20% deposit for the penalty unjustified and restrictive to the appellant's right to a fair appeal hearing.

3. Considering the circumstances, the Court set aside the direction to deposit 20% of the penalty amount, emphasizing that it would unduly restrict the appellant's right to be heard in the appeal. The Tribunal was instructed to proceed with hearing the appeal on its merits in compliance with the law. Ultimately, the appeal was allowed, granting relief to the appellant from the additional pre-deposit requirement for the penalty amount, ensuring a fair opportunity for the appeal to be heard without unnecessary financial burdens.