2019 (3) TMI 1716 - AT - VAT and Sales Tax

Maintainability of appeal - non-payment of 25% of total demand towards pre-deposit - demand was raised on ground of certain transactions traced by the Investigation Officer during the search operation carried on by the State Tax Authority - HELD THAT - The First Appellate Authority while exercising the discretion under Section 73 (4) of the GVAT Act was required to consider the prima facie merits of the submission of appellant as well as legality and validity of the orders passed by the Assessing Authority before deciding the quantum of pre-deposit amount. It appears that in the present cases, the First Appellate Authority has mechanically passed the orders of first appeals without considering prima facie merits of the cases and without considering the legality and validity of the orders of Assessing Authority, determined the quantum of pre-deposit. This Tribunal cannot ignore that the appellant has paid in all ₹ 43,71,922/- as against the tax liability of ₹ 2,54,45,421/- which comes to approximately 16.9% of tax dues raised by the Assessing Authority. It is also a reality that the Assessing Authority failed to appreciate the submission made by the appellant with evidences in three files on 19.03.2018 without making further enquiry or investigation thereupon framed the heavy handed tax liability. Such act of the Assessing Authority is a clear breach of principle of natural justice and law. Even First Appellate Authority without appreciating the facts, law and submission made by the appellant, mechanically passed the orders directing the appellant to pay 25% of total dues towards pre-deposit for all above three appeals, does not seem to be fair and reasonable. Since First Appellate Authority has dismissed the appeals summarily on ground of non-payment of pre-deposit without gone into the merits of the case, we decide to remand these matters back to First Appellate Authority for a fresh hearing on merits with direction to produce a copy of challan of ₹ 10,00,000/- before First Appellate Authority - Appeal allowed by way of remand.

Summary

Issues Involved:
1. Non-payment of 25% of total demand towards pre-deposit.
2. Alleged tax evasion and unaccounted sales.
3. Breach of principles of natural justice.
4. Legality of assessment orders and penalties imposed.
5. Requirement of pre-deposit for admitting appeals.

Detailed Analysis:

1. Non-payment of 25% of total demand towards pre-deposit:
The appellant challenged the orders of the First Appellate Authority, which dismissed the appeals due to non-payment of 25% of the total demand as pre-deposit. The appellant argued that they had already paid approximately 17% of the tax liability and sought consideration of this payment as sufficient for admitting the second appeals and granting a stay against recovery of dues.

2. Alleged tax evasion and unaccounted sales:
The Assessing Authority raised a demand based on transactions discovered during a search operation. The appellant contended that the Assessing Authority ignored their submissions and evidence, resulting in an unjust and arbitrary assessment. The appellant provided detailed explanations and evidence for various transactions, such as estimates given to customers, promotional expenses, free food to guests, and gift coupons, arguing that these were not actual sales and should not attract tax liability.

3. Breach of principles of natural justice:
The appellant argued that the assessment orders were passed without proper consideration of their submissions and evidence, and without granting adequate opportunities for a hearing. The Tribunal noted that the appellant had cooperated in the assessment proceedings and provided written submissions with evidence. The Tribunal found that the Assessing Authority failed to verify the correctness of the appellant's submissions and passed ex-parte assessment orders, breaching the principles of natural justice.

4. Legality of assessment orders and penalties imposed:
The Tribunal observed that the Assessing Authority did not properly investigate the appellant's submissions and imposed heavy penalties without justification. The Tribunal cited relevant case law to support the contention that the enhancement in turnover and imposition of penalties were not sustainable in the absence of proper evidence and investigation. The Tribunal also noted that the appellant's payment of 16.9% of the tax dues before any orders were passed indicated a cooperative attitude.

5. Requirement of pre-deposit for admitting appeals:
The Tribunal considered the prima facie merits of the appellant's case and the legality of the assessment orders. It concluded that the First Appellate Authority mechanically directed the appellant to pay 25% of the total demand without considering the merits of the case. The Tribunal found that the appellant's payment of 16.9% of the tax dues was substantial and directed the appellant to deposit an additional ?10,00,000/- towards pre-deposit within one month. The Tribunal remanded the matters back to the First Appellate Authority for a fresh hearing on merits and granted a stay against recovery proceedings until the final disposal of the first appeals.

Order:
The Tribunal allowed the second appeals, quashed the orders of the First Appellate Authority, and directed the appellant to deposit ?10,00,000/- towards pre-deposit within one month. The First Appellate Authority was instructed to verify the challan and hear the appellant afresh on merits, preferably within six months. A stay against recovery proceedings was granted until the final disposal of the first appeals.