2016 (6) TMI 656 - HC - VAT and Sales Tax

Waiver of pre-deposit - GVAT - pendency of BIFR proceedings - tribunal insisted that the appellant deposits 25% of the tax demand for each year within three months of the date of the order, failing which, the appeals would be dismissed. - Held that - if any proceedings are pending before the BIFR or the appellate authority, that by itself not mean that the predeposit requirement under subsection (4) of section 73 of the VAT Act would be obliterated. Nevertheless financial condition of the company being one of the prime considerations, the pendency of such proceedings and contents thereof may be relevant. On the basis of such proceedings or independently also, it is always open for the company to establish before the appellate authority that condition of predeposit is required to be waived. Reverting to the facts of the present case, we may recall at one stage the Tribunal had itself remanded the proceedings before the appellate authority for fresh decision without insisting on any predeposit. It was only when the appellant failed to appear before the appellate authority despite sufficient chances that the appellate authority dismissed the appeals for default. In such facts, in order to bring a degree of seriousness on part of the appellant, it was undoubtedly necessary to impose a condition of predeposit. However, directing deposit of 25% of the due tax demand was excessive. In facts of the case, we therefore, direct the appellant to deposit a total of ₹ 50 lakhs with the State authority within a period of four months - part relief granted to appellant.

Issues Involved:
1. Condition of predeposit imposed by the Tribunal.
2. Financial condition of the appellant and its implications under SICA.
3. Applicability of Section 73(4) of the VAT Act.
4. Tribunal's discretionary power in imposing predeposit conditions.
5. Relevance of pending BIFR proceedings on predeposit requirements.

Detailed Analysis:

1. Condition of Predeposit Imposed by the Tribunal:
The Tribunal, by an order dated 8.1.2013, required the appellant to deposit 25% of the tax demand for each year within three months, failing which the appeals would be dismissed. This condition was challenged by the appellant on the grounds of financial hardship and ongoing BIFR proceedings.

2. Financial Condition of the Appellant and Its Implications Under SICA:
The appellant, a company registered under the Companies Act and assessed under the Gujarat Value Added Tax Act, 2003, claimed to be a sick industrial unit with a reconstruction scheme pending before the AAIFR. The appellant argued that under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), no condition for predeposit should have been imposed. The Tribunal, however, noted that the BIFR had dismissed the application and viewed the appellant as prolonging proceedings.

3. Applicability of Section 73(4) of the VAT Act:
Section 73(4) of the VAT Act stipulates that no appeal against an order of assessment shall be entertained unless accompanied by proof of payment of tax. The proviso allows the appellate authority to waive this requirement partially or totally. The court examined whether the predeposit requirement falls within the scope of Section 22(1) of SICA, which suspends certain legal proceedings against a sick company. The court concluded that the predeposit condition does not equate to execution, distress, or recovery proceedings and thus does not fall under the suspension provided by Section 22(1) of SICA.

4. Tribunal's Discretionary Power in Imposing Predeposit Conditions:
The Tribunal's imposition of the predeposit condition was deemed discretionary. The court acknowledged that the right to appeal is statutory and can be conditioned by statutory provisions such as Section 73(4) of the VAT Act. The Tribunal's decision to impose a predeposit was based on the appellant's failure to appear before the appellate authority, which led to the dismissal of the appeals for default.

5. Relevance of Pending BIFR Proceedings on Predeposit Requirements:
The court referenced various judgments, including those by the Supreme Court, to illustrate that pending BIFR proceedings do not automatically waive the requirement of predeposit under the VAT Act. However, the financial condition of the company and the pendency of such proceedings may be relevant considerations for the appellate authority when deciding on a waiver.

Conclusion:
The court held that pending BIFR proceedings do not obliterate the predeposit requirement under Section 73(4) of the VAT Act. Nevertheless, the financial condition of the company and the contents of such proceedings may be relevant for seeking a waiver. Given the appellant's failure to appear before the appellate authority and the need to impose seriousness, the court found the 25% predeposit excessive. Instead, the appellant was directed to deposit ?50 lakhs within four months, upon which the Tribunal's orders would be reversed, and the appellate proceedings revived for a decision on merits. The appeals were disposed of accordingly.

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