2017 (1) TMI 911 - HC - VAT and Sales Tax

Grant of interim stay against the recovery of the amount of tax assessed by the respondents-authorities - the appellant had challenged the said assessment for recovery of the tax, interest and the penalty. The learned Single Judge dismissed the petitions on the ground of alternative remedy. However, in the writ appeals before the Division Bench of this Court, the Division Bench upheld the levy of tax as per its decision dated 06.02.2010. The matters were carried before the Apex Court and the Apex Court initially vide order dated 12.03.2010 granted interim order against the deposit of ₹ 50 crores and also observed that pending the petitions, the petitioner will now implement the impugned judgment for the future period till the matter is finally disposed of. But subsequently upon the application for modification preferred by the appellant, the Apex Court having taken note of the deposit of the amount of ₹ 50 crores, observed that let the Assessing Officer proceed with the assessment proceedings, but restrained recovery till further orders - appellant contended that in view of the aforesaid order of the Apex Court, no recovery whatsoever can be made by the State authorities even if the assessment is completed for the subsequent period may be after 2008 to 2010 and even from 2010 to 2016. Held that - It is hardly required to be stated that in an intra- Court appeal, the judicial scrutiny would be available if the learned Single Judge has committed ex facie error or has exercised discretion in a perverse manner. If the learned Single Judge has taken one possible view when two views are possible, it may not be a case for interference. As such, if the matter is examined in light of the same, the learned Single Judge has exercised discretion by granting interim protection upon condition to deposit 50% of the tax amount which could be approximately around ₹ 336 crores, since in any case, the protection is already granted for the interest and the penalty. As such, in our view, it cannot be said that the discretion has been exercised by the learned Single Judge in a perverse manner or that the learned Single Judge has committed any ex facie error while granting the interim protection which may call for interference in an intra- Court appeal. By virtue of the interim order of the learned Single Judge, the appellant may be required to deposit about ₹ 337 Crores, whereas as against the VAT amount, if calculated for the period after April 2010 to March 2014 it comes to ₹ 544 Crores. Under the circumstances, if the lump-sum figure of ₹ 337 Crores which may be required to be deposited by the order of the learned Single Judge is considered as against the amount of ₹ 544 Crores, it cannot be said that the ultimate effect of imposing a condition to deposit the amount while granting interim protection is not by properly balancing the rights nor it can be said that any unreasonable view has been taken by the learned Single Judge while modulating the interim protection. We do not find any case made out for interference to the order passed by the learned Single Judge so far as it relates to grant of interim protection on condition to deposit 50% of the tax amount. However, we make it clear that our observations in the present order shall not prejudice rights of the parties to approach the Apex Court for appropriate modification and/or clarification of the order of the Apex Court in the pending S.L.P. and if any clarification or modification is so made by the Apex Court, the right of the parties shall stand governed accordingly. Appeal dismissed - decided against appellant.

Issues Involved:
1. Interim stay against the recovery of the amount of tax assessed.
2. Interpretation of the Supreme Court's interim orders.
3. Discretion exercised by the learned Single Judge.
4. Calculation and deposit of the tax amount.
5. Impact of service tax already paid on VAT demand.

Detailed Analysis:

1. Interim Stay Against Recovery of Tax:
The appeals challenge the common order by the learned Single Judge dated 20.09.2016, which did not grant an interim stay against the recovery of the tax assessed for the period from August 2008 to March 2014. The appellant argued that the Supreme Court's interim order should prevent any recovery by the state authorities, even for periods after 2008. The learned Single Judge granted protection on the condition of depositing 50% of the tax demand, which the appellant contested as erroneous.

2. Interpretation of the Supreme Court's Interim Orders:
The appellant contended that the Supreme Court's order dated 12.03.2010 and subsequent order dated 03.05.2010 implied a stay on recovery for all subsequent periods. The Supreme Court had directed the petitioner to deposit ?50 crores and stated that no recovery would be made until further orders. The respondent argued that the Supreme Court's orders only applied to the period before 03.05.2010 and not beyond. The Court noted that the interpretation of the Supreme Court's orders was crucial and suggested that the Apex Court itself would be best positioned to clarify this aspect.

3. Discretion Exercised by the Learned Single Judge:
The Court emphasized that in intra-Court appeals, judicial scrutiny is limited to checking if the learned Single Judge committed an ex facie error or exercised discretion perversely. The learned Single Judge had granted interim protection on the condition of depositing 50% of the tax amount, which was not deemed perverse or erroneous by the Court. The Court noted that the learned Single Judge had balanced the rights of both parties appropriately.

4. Calculation and Deposit of the Tax Amount:
The appellant suggested that the interim relief should consider the service tax already paid, proposing a deposit of only the difference between the VAT demanded and the service tax paid. The Court rejected this argument, stating that it would counter the Division Bench's judgment, which upheld the VAT liability. The Court found that the learned Single Judge's condition to deposit 50% of the tax amount (approximately ?337 crores) was reasonable compared to the total VAT demand (?674 crores).

5. Impact of Service Tax Already Paid on VAT Demand:
The appellant's argument that the service tax already paid should reduce the VAT deposit requirement was not accepted. The Court highlighted that the Division Bench had maintained the VAT liability, and the Supreme Court had not stayed this judgment. Therefore, the appellant's contention was not tenable.

Conclusion:
The Court dismissed the appeals, finding no merit in interfering with the learned Single Judge's order. The Court clarified that its observations were limited to the interim order and did not prejudice the parties' rights to seek clarification or modification from the Supreme Court. The Court also noted that the learned Single Judge's decision did not influence the final determination of the case. All interim stay applications were disposed of accordingly.

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