2015 (4) TMI 212 - HC - VAT and Sales Tax

Reduction of input tax credit - levy of interest and penalty under Section 12(7) - Validity of Tribunal's order - First appellate authority ordered for pre deposit - On appeal to Tribunal, Tribunal decided appeal on merits - Held that - Tribunal has committed grave error in deciding the appeal on merits and considering the legality and validity of the adjudication order. It is required to be noted that as such the appeal before the learned Tribunal was against the order passed by the First Appellate Authority dismissing the appeal on non deposit of ₹ 3,60,000/- as pre deposit i.e. on non compliance of the order of pre deposit. It is required to be noted that First Appellate Authority did not decide the appeal on merits and the First Appellate Authority did not go into the legality and validity of the adjudication order. Under the circumstances, as such appeal before the learned Tribunal was confined to the question whether condition of pre deposit of ₹ 3,60,000/- imposed by the First Appellate Authority was legal or not. In such appeal, as such, learned Tribunal could not have entertained question of legality of the adjudication order. From the impugned judgment and order passed by the learned Tribunal, it appears that the learned Tribunal has decided the appeal as if it was hearing the appeal against the judgment and order passed by the learned First Appellate Authority deciding the appeal on merits. Impugned judgment and order passed by the learned Tribunal deserves to be quashed and set aside and the matter is to be remanded to the learned Tribunal to decide the appeal afresh and appeal shall be confined to the legality and validity of the order passed by the learned First Appellate Authority imposing condition of pre deposit of ₹ 3,60,000/- and dismissing the appeal on non deposit of amount of pre deposit. - Decided partly in favour of assessee.

Summary

Issues:
1. Interpretation of the scope of Second Appeal before the Tribunal.
2. Legality of the order passed by the First Appellate Authority.
3. Consideration of merits by the Tribunal.

Analysis:
1. The High Court considered the scope of the Second Appeal before the Tribunal, emphasizing that the appeal was against the order of the First Appellate Authority dismissing the appeal due to non-compliance with the pre-deposit order. The Court noted that the Tribunal erred in deciding the appeal on merits and considering the legality of the adjudication order, which was beyond the scope of the appeal. The Court highlighted that the Tribunal should have confined its consideration to the legality of the pre-deposit condition imposed by the First Appellate Authority.

2. The Court found that the First Appellate Authority did not delve into the merits of the case or the legality of the adjudication order. Therefore, the Tribunal's decision to consider and modify the assessment order for the year 2006-07 exceeded the scope of the appeal. The Court cited previous judgments disapproving such practices and emphasized the need for the Tribunal to limit its review to the specific issue of pre-deposit legality.

3. Regarding the legality of the order passed by the First Appellate Authority, the Court held that the Tribunal's decision to delve into the merits of the assessment order was erroneous. The Court quashed the Tribunal's judgment and remanded the matter back to the Tribunal to reconsider the appeal solely on the question of the legality and validity of the pre-deposit condition. The Court directed the Tribunal to complete this review within three months of receiving the order.

4. Ultimately, the Court allowed the appeal in part, setting aside the Tribunal's judgment and instructing a fresh consideration of the appeal within the specified scope. The Court made it clear that the review should focus on the legality of the pre-deposit condition and the justification for rejecting the appeal based on non-compliance with the pre-deposit requirement. The Court concluded by stating that there would be no order as to costs in the given circumstances.

5. As a result of the disposal of the Tax Appeal, the Court did not issue any order in relation to OJCA No.163 of 2014, which was consequently disposed of as well.