2014 (8) TMI 94 - HC - VAT and Sales Tax

Disallowance of Input tax credit - vendor s registration certificates were cancelled ab initio - liability to pay certain amount of tax without penalty and interest - Held that - after the order of assessment when the challenge was made before the Deputy Commissioner in the First Appeal, the Deputy Commissioner directed pre-deposit for sum of ₹ 10 lakh. Such order was challenged before the Tribunal by the present appellant. The Tribunal though had directed the appellant to pay 20% of the tax amount making such sum to be ₹ 1.79 lakhs (rounded off) and the same was directed to be paid within a period of 30 days, however, curiously thereafter, without any request from either sides and also without reasonings, the Tribunal also directed the registry to place concerned matter along with the hearing of other group and disposed of the matter on merits. Tribunal thus has chosen to by pass the first appellate authority as is noticed in many other matters. If either side approaches the Tribunal, being aggrieved by the order of either grant or rejection of requirement of pre-deposit, it is open for the Tribunal to take into consideration the law on the subject and decide the validity of the order of directing or not directing the amount of pre-deposit. However, that would not ipso facto entitle the tribunal to give a complete go bye to the well laid down procedures of law as also such requirement of pre-deposit and decide the matter on merit - Resultantly, impugned order dated 11.9.2013 passed by the Gujarat Value Added Tax Tribunal is quashed. Appeal is placed back before the tribunal for fresh consideration and disposal on the issue of pre-deposit - Decided in favour of assessee.

Summary

Issues involved:
1. Challenge against the order of the Gujarat Value Added Tax Tribunal dated 11.9.2013.
2. Disallowance of input tax credit claims by the Assessing Officer.
3. Direction for pre-deposit by the Deputy Commissioner of Commercial Tax.
4. Tribunal's decision to convert the appeal on pre-deposit into one on merits.
5. Applicability of Section 73(4) of the Gujarat Value Added Tax Act, 2003.
6. Tribunal's authority to entertain appeals without full pre-deposit.
7. Judicial observations on the Tribunal's practice of deciding appeals on merits without addressing pre-deposit issues.
8. Remand of the case back to the Tribunal for fresh consideration on the issue of pre-deposit.

Detailed Analysis:
1. The appellant, engaged in the trading business, challenged an assessment order disallowing certain input tax credit claims. The Deputy Commissioner directed a pre-deposit of Rs. 10 lakh, which was later reduced to 20% of the tax amount by the Tribunal. However, the Tribunal proceeded to dispose of the appeal on merits without addressing the pre-deposit issue, contrary to statutory requirements and judicial precedents. The High Court emphasized the need for a rehearing on the aspect of pre-deposit, citing the decision in the case of Anil Kumar v. State of Gujarat (Tax Appeal No.688/2013).

2. Section 73(4) of the Act mandates that no appeal against an assessment order shall be entertained unless accompanied by proof of payment of tax or relaxation of pre-deposit requirements. The Tribunal's failure to limit the scope of the appeal to the pre-deposit issue rendered the appellant's first appeal before the Appellate Commissioner non-maintainable. The High Court highlighted the Tribunal's error in bypassing the first appellate authority and waiving the pre-deposit requirement without proper justification, as per the legal provisions.

3. Judicial observations emphasized the importance of adhering to the pre-deposit requirement before proceeding with the appeal, as established by legal precedents and the intent of the statutory provisions. The Court cited relevant case laws to underscore the necessity of addressing pre-deposit issues before delving into the merits of the appeal. The judgment in Tax Appeal No.711 of 2013 highlighted the undesirable trend of deciding appeals on merits without due consideration of pre-deposit requirements, leading to a remand for proper adherence to legal procedures.

4. The High Court, in line with previous judgments and legal principles, quashed the Tribunal's order and remanded the case for fresh consideration solely on the issue of pre-deposit. The decision underscored the significance of procedural compliance and the statutory requirement of addressing pre-deposit issues before delving into the substantive merits of the appeal. The appeal was disposed of accordingly, emphasizing the need for adherence to established legal procedures in tax matters.