2015 (2) TMI 1013 - HC - VAT and Sales Tax

Compounding the offences - Section 81 of DVAT 2004 - Whether the Appellate Tribunal, Value Added Tax can give direction to the Sales Tax Department to compound a FIR which was registered and charge sheet has been filed by the police department - Whether the order of Commissioner on application under Section 54 Sales Tax Act is final not subject to scrutiny by the Appellate Tribunal - Held that - It is clear that Section 93 of Delhi VAT Act differs materially from Section 54 of Delhi Sales Tax Act. Under the repealed law, the composition is permissible either before or even after the commencement of the proceedings in respect of the offence. In contrast, under Section 93 of Delhi VAT Act, the authority to compound is restricted to the period before the institution of proceedings for an offence under the law. - In the scheme for composition of offences under Delhi Sales Tax Act, the matter cannot end merely by rejection of the request of the offender on the ground that the composition money offered is inadequate . Rule 44(2), quoted earlier, clearly envisages that it is the obligation of the Commissioner to determine the amount of money subject to deposit of which he is agreeable to the composition. He cannot close the request for composition merely by conveying the composition money offered is inadequate. He must determine the appropriate amount of money and intimate to the offender giving him requisite time for its deposit. Though for purposes of the present discussion it may be a digression, considering the directions that we intend to issue, it must also be observed here that unlike the scheme of Section 320 of the Code of Criminal Procedure (referable to the general penal law), in case of composition of offences under Section 54 of Delhi Sales Tax Act, the matter does not depend upon the approval of the criminal court which is seized of such prosecution. The composition is brought about and given effect to by the offender and the Commissioner on their own. The terms are settled, formalized and acted upon outside the criminal court. Once the Commissioner accepts the composition on conditions as to which he has reached an appropriate satisfaction, within the sphere of guidance given to him by the law, further proceedings before the criminal court (even if already commenced) for such offence under the special law can not be further proceeded with Section 54(2) . Law expects the Commissioner to take a conscious and informed decision. The prosecution for criminal offence under Section 50 is to be launched not as a general rule but in exceptional cases. If the Commissioner finds that enough deterrence can be provided by penalty to be imposed under Section 56 (inasmuch as it permits him to impose penalty two and half times the tax that has accrued in favour of the Revenue), he would choose that course instead of sending the matter to criminal court under Section 50. Noticeably further if, given the gravity of the facts involved, the matter has been taken to the criminal court for prosecution, the consequences for the wrongdoer are stiffer, even if he is able to persuade the Commissioner to compound, for the reason the composition money might represent even a higher revenue in the form of three times the tax that would have been evaded. Expression may consider used by the Appellate Tribunal in its order dated 16.01.2006 could not have been construed by the Commissioner as anything but a direction. By using such phraseology, the Tribunal was being courteous. The only task remitted was to determine if the amount offered was the maximum permissible composition money that could be levied. In this fact situation, it was the turn of the Commissioner to show due deference to the views of the higher forum (Appellate Tribunal) and restrict his inquiry only to the subject of determination of the composition money. Decision of the Commissioner on application under Section 54 for composition cannot be treated as final or immune from further scrutiny by the appellate authority. It necessarily follows that the Appellate Tribunal scrutinizing such order is competent to pass all such orders as the lower authority (subject to its appellate jurisdiction) is competent to pass. Since the Appellate Tribunal allowed the request for composition on modified terms and remitted the matter to the Commissioner, the latter was bound by the said mandate. - Decided against the revenue. Whether Commissioner has indulged in disobedience or that his order bordered on contempt by not following the direction of the tribunal - Held that - It was not correct for the Commissioner, to whom the matter had been remitted by the Appellate Tribunal by its order dated 16.01.2006, to assume that it was not bound by the views of the Appellate Tribunal, particularly by relegating the case back to the stage of scrutiny of the request for composition on considerations other than that of adequacy of the composition money. - While we affirm the conclusion reached by the Appellate Tribunal in the impugned order dated 07.01.2014 as to the impropriety of the second rejection of the request for composition, we do not uphold the findings that the Commissioner had indulged in disobedience or that his order bordered on contempt . There is no foundation for such adverse views to be recorded. We must also point out to the Appellate Tribunal that errors do occur and the hierarchy of superior forums (appellate etc.) is provided to bring in corrections. Wrong orders passed by the forum lower in order, unless actuated by malice, do not necessarily undermine majesty of law or lower the dignity of superior authorities.

Summary

Issues Involved:
1. Jurisdiction of the Appellate Tribunal to direct the Sales Tax Department to compound an FIR and the extent of discretion available to the Commissioner in considering a request for composition of offense.
2. Whether the order dated 16.01.2006 by the Appellate Tribunal was a direction to compound the offense.
3. Whether the Commissioner's order on an application under Section 54 of the Sales Tax Act is final and not subject to scrutiny by the Appellate Tribunal.

Detailed Analysis:

1. Jurisdiction of the Appellate Tribunal and Discretion of the Commissioner:
The primary issue concerns whether the Appellate Tribunal can direct the Sales Tax Department to compound an FIR and the extent of discretion available to the Commissioner under Section 54 of the Delhi Sales Tax Act. The court noted that the Appellate Tribunal has the jurisdiction to entertain appeals against the Commissioner's orders under Section 54, as the Commissioner represents the revenue and is thus an adversary vis-`a-vis the assessee. The Tribunal can scrutinize the Commissioner's decision, ensuring it aligns with principles of justice and public policy, and that the composition money offered is adequate and not illusory. The Commissioner must determine the appropriate composition amount if the initial offer is inadequate, and cannot merely reject the request without such determination.

2. Nature of the Appellate Tribunal's Order:
The second issue revolves around whether the Appellate Tribunal's order dated 16.01.2006 constituted a direction to the Commissioner to compound the offense. The court clarified that the Tribunal's use of "may consider" was a courteous way of issuing a direction, given the context of the case where the only scrutiny left was the adequacy of the composition money. The Tribunal's order was binding, and the Commissioner was expected to follow it, restricting his inquiry to the determination of the composition money.

3. Finality of the Commissioner's Order:
The third issue addressed whether the Commissioner's order on an application under Section 54 is final and immune from scrutiny by the Appellate Tribunal. The court held that the Commissioner's decision is subject to appeal before the Tribunal, which can pass orders similar to those the Commissioner is competent to pass. The Tribunal has the authority to scrutinize and modify the Commissioner's decision, ensuring it complies with the statutory provisions and principles of justice and public policy.

Conclusion:
The court concluded that the Commissioner had erred in rejecting the composition request without determining the appropriate composition amount and that the Appellate Tribunal's order was binding. The court directed the Commissioner to determine if the amount offered as composition money was adequate and to proceed accordingly, ensuring the offenses under Section 50(1)(a) and (j) are compounded upon deposit of the determined amount. The directions of the Appellate Tribunal were upheld, except for the imposition of costs, which was set aside.