2017 (4) TMI 1000 - HC - VAT and Sales Tax

Tax paid versus Tax Dispute - Payment versus Pre-deposit - WB VAT - Scope of the term used and defined - second proviso to Section 84(1) - appellant contended that the appeal is required to be made with a payment of tax and not a deposit or a pre-deposit. - Held that - An assessee applying for refund and such claim for refund having been reduced, an assessee preferring an appeal against such reduction is not required to deposit 15% of the tax in dispute in terms of the second proviso to Section 84(1) of the Act of 2003. This recording cannot be construed to mean that, when there is a demand for tax in the order of assessment, the assessee will be permitted not to deposit the requisite 15% on the ground that, it had claimed refund and the order of assessment is one of demand for tax. In the present case, if an assessee complies with the requirements under the second proviso of Section 84(1) of the Act of 2003, then the revenue would not be proceeding to realize the balance of the sum due. Therefore, effectively by depositing 15% of the tax in dispute, an assessee will receive an order of stay of recovery proceeding. This cannot be said to be hardship let alone undue hardship. Requirement of a pre-deposit is not a hardship. They, however, contend that, so far as the appeal is concerned, they should be guided by the provisions applicable prior to the amendments introduced to the second proviso on Section 84(1). The petitioners seek to have, by such contention best of both worlds. They seek to take the advantage of the amendments being introduced to the various provisions of the Act of 2003 permitting a more transparent and a beneficial method of assessment so far as an assessment is concerned, and on the other hand, not accept the appeal provision which is founded upon the amendments introduced to the other provisions of the Act of 2003 and the Rules framed thereunder. The right of appeal altered with effect from April1, 2015 is in consonance with the amendments introduced to the assessment procedure. The petitioners have accepted the assessment procedure. They are, therefore, bound to accept the appeal provisions also. The right to prefer the appeal is sought to be made conditional. Conditions imposed have not been found to be unreasonable, arbitrary or violative of any provisions of the Constitution. The provisions for appeal, therefore, cannot be said to have violated the right guaranteed under Article 19(1)(g) of the Constitution of India.

Summary

Issues Involved:
1. Constitutionality of the second proviso to Section 84(1) of the West Bengal Value Added Tax Act, 2003.
2. Relief or reliefs entitled to the parties.

Issue-wise Detailed Analysis:

1. Constitutionality of the Second Proviso to Section 84(1) of the West Bengal Value Added Tax Act, 2003:

The petitioners challenged the vires of the second proviso to Section 84(1) of the West Bengal Value Added Tax Act, 2003, arguing that it requires "payment of tax in dispute" for maintaining an appeal against an order in original, which they contended is an exaction rather than a pre-deposit. They argued that the term "payment" cannot be equated with "deposit" or "pre-deposit" and that the second proviso is beyond the legislative competence of the state legislature. The petitioners relied on various judicial precedents and dictionary meanings to support their contention that "payment" and "deposit" are distinct terms.

The respondents countered that the constitutional validity of a fiscal statute should be tested on the parameters laid down in relevant Supreme Court judgments, emphasizing the presumption of constitutionality and the greater latitude for classification in taxation laws. They argued that the amendments introduced to the Act and the Rules from April 1, 2015, aimed at making the assessment process more transparent and just, justified the requirement of the 15% payment.

The court noted that the second proviso to Section 84(1) includes three parts: (i) appeals presented on or after April 1, 2015, must fulfill the specified requirements, (ii) payment of the full amount of tax, interest, penalty, or late fee admitted to be due, and (iii) payment of 15% of the amount of tax in dispute. The court found that the term "payment" in the second proviso could be interpreted as a deposit or pre-deposit, and that the mechanism of requiring a 15% deposit does not constitute an exaction or undue hardship.

The court also addressed the petitioners' concerns about scenarios where the claim of refund is reduced, clarifying that in such cases, no deposit is required as there is no positive tax incidence. The court upheld the second proviso, finding that it does not cause undue hardship and is not arbitrary or discriminatory. The court emphasized that the right to appeal is a substantive right that can be modulated by subsequent enactments, and the amendments to the Act and Rules from April 1, 2015, were in consonance with the altered assessment procedure.

2. Relief or Reliefs Entitled to the Parties:

Given the elapsed time from the filing of the writ petitions to their disposal, the court directed that the petitioners be allowed to prefer an appeal from the order of assessment within four weeks from the date of the judgment, subject to compliance with all other provisions required for preferring an appeal. The appellate authority was instructed to treat such appeals as within the period of limitation, and the department was directed not to raise the point of limitation in such cases.

Conclusion:

The court dismissed the writ petitions, upholding the constitutionality of the second proviso to Section 84(1) of the West Bengal Value Added Tax Act, 2003, and provided the petitioners with an extended period to file their appeals. The interim orders, if any, were vacated, and no order as to costs was made. Urgent certified website copies of the judgment were to be made available to the parties upon compliance with requisite formalities.