2016 (3) TMI 1030 - HC - VAT and Sales Tax

Seeking direction for declaring Section 62(5) of the Punjab Value Added Tax Act, 2005 as ultravires - Violative of Article 14 as it provides mandatory deposit of 25% tax, interest and penalty as a condition precedent for hearing of appeal without giving any discretion to the appellate authority to waive such deposit - Demand of tax in lieu of not providing exemption - Petitioner engaged in the business of running a rice mill at Faridkot and an exempted unit from 10.12.1999 to 9.12.2009 - Held that - by relying on the decision of this court in the case of Punjab State Power Corporation Limited vs. The State of Punjab and Others) 2016 (2) TMI 245 - PUNJAB AND HARYANA HIGH COURT , even when no express power has been conferred on the first appellate authority to pass an order of interim injunction/protection, by necessary implication and intendment in view of various pronouncements and legal proposition expounded above and in the interest of justice, the partial or complete waiver can be granted only in deserving and appropriate cases where the first appellate authority is satisfied that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the condition of pre-deposit to continue as a condition precedent to the hearing of the appeal before it. - Petition disposed of

Summary

Issues:
Challenge to the constitutionality of Section 62(5) of the Punjab Value Added Tax Act, 2005; Quashing of specific orders dated 19.12.2012, 29.11.2013, and 12.2.2015.

Analysis:
The petitioner sought a declaration that Section 62(5) of the PVAT Act is unconstitutional for mandating a 25% deposit of tax, interest, and penalty without allowing the appellate authority discretion to waive this requirement. Additionally, the petitioner aimed to annul specific orders issued on 19.12.2012, 29.11.2013, and 12.2.2015. The petitioner, a registered dealer operating a rice mill, had an unutilized exemption as of 1.4.2005. Following an assessment for the year 2008-09, the Assessing authority demanded payment due to the petitioner's failure to export 25% of its turnover. Appeals were filed, but were dismissed for not complying with the 25% deposit requirement under Section 62(5) of the PVAT Act.

The Court considered the precedents and legal principles established in previous cases, particularly CWP No.26920 of 2013, to determine the applicability of Section 62(5) of the PVAT Act. It was concluded that the appellate authority has the power to waive the pre-deposit condition in deserving cases to prevent the appeal's purpose from being frustrated. The provision was deemed directory, granting authority to partially or completely waive the pre-deposit requirement based on the circumstances. The power to grant interim protection/injunction by the first appellate authority in cases of undue hardship was upheld as legal and valid. The Court emphasized that such discretion should not be exercised routinely, but only when a strong prima facie case justifies it.

In alignment with the principles established in previous cases, the Court disposed of the writ petition in a manner consistent with the decision in Punjab State Power Corporation Limited's case. The orders dismissing appeals due to non-compliance with the pre-deposit condition were set aside, and the matters were remitted to the first appellate authority for reconsideration. The appellate authority was directed to adjudicate applications for interim protection/injunction in light of the legal principles outlined, ensuring that the purpose of the appeals is not frustrated by the pre-deposit requirement.