2018 (1) TMI 35 - HC - VAT and Sales Tax

Whether, on the facts and in the circumstances of the case, the Gujarat Value Added Tax Tribunal was justified in refusing to grant waiver of pre-deposit for admission of appeal and grant of stay against recovery of dues? Held that - there is nothing to indicate any complicity on the part of the appellant in filing the manual revised return with a view to defraud the Government. Even in the charge-sheet filed after conclusion of the investigation, there is no allegation whatsoever against the appellant and on the contrary, the proprietor and his son are shown as witnesses. In this background, when the additions have been made on the basis of such fraudulent revised return showing huge sales while the regular returns filed by the appellant were of sales of much less volume, it cannot be gainsaid that if the appellant is not involved in the fraud, it is by and large a dealer working on a small scale and having an annual turnover of rupees ten to twenty lakh and consequently, would not be in a position to pay even a fraction of the tax, penalty and interest, as assessed on the basis of the sales shown in the revised returns. Having regard to the fact that there is not even a whisper of an allegation against the appellant insofar as the commission of fraud by filing revised return is concerned, at least for the purpose of waiver of pre-deposit the appellant ought to have been given the benefit of doubt and permitted to prosecute the appeal without saddling it with the onerous liability of making pre-deposit of amounts beyond its capacity. Considering the backdrop of the case, this court is of the view that the Tribunal was not justified in not granting complete waiver in payment of pre-deposit to the appellant. Appeal allowed.

Issues Involved:
1. Refusal to grant waiver of pre-deposit for admission of appeal and grant of stay against recovery of dues.
2. Assessment based on fraudulent revised returns filed by a retired partner.
3. Dismissal of first appeals due to non-payment of 25% of total dues as pre-deposit.
4. Tribunal’s order directing partial pre-deposit for admission of appeals and stay against recovery of dues.

Issue-wise Detailed Analysis:

1. Refusal to grant waiver of pre-deposit for admission of appeal and grant of stay against recovery of dues:
The appellant challenged the Tribunal's refusal to grant a complete waiver of the pre-deposit required for the admission of the appeal and stay against the recovery of dues. The court noted that the appellant was a victim of fraud committed by the ex-partner, and the details submitted in the fraudulent revised returns should not have been considered for assessment against the appellant. The court observed that the appellant's regular returns indicated a small-scale business with an annual turnover of around ten to twenty lakh rupees, making it financially incapable of paying the assessed dues based on the fraudulent returns.

2. Assessment based on fraudulent revised returns filed by a retired partner:
The appellant’s ex-partner, after retirement, filed fraudulent revised returns manually, showing significantly higher sales and purchases, which led to a substantial tax demand against the appellant. The court highlighted that the revised returns filed by the ex-partner were fraudulent and not attributable to the appellant. The appellant had no complicity in filing the fraudulent returns, as evidenced by the charge-sheet filed by the police, which named the ex-partner and others as the accused, while the appellant and his son were listed as witnesses.

3. Dismissal of first appeals due to non-payment of 25% of total dues as pre-deposit:
The first appellate authority dismissed the appellant's appeals for non-payment of 25% of the total dues as a pre-deposit. The court criticized this decision, stating that the first appellate authority failed to consider the appellant's financial capacity and the fraudulent nature of the revised returns. The court opined that the first appellate authority should have applied its mind to the facts of the case and assessed the appellant's ability to make such a substantial pre-deposit.

4. Tribunal’s order directing partial pre-deposit for admission of appeals and stay against recovery of dues:
The Tribunal directed the appellant to deposit ?10,00,000/- for the year 2011-12 and ?5,00,000/- for the year 2012-13 for the admission of appeals and stay against recovery of dues. The court found that the Tribunal failed to provide reasons for necessitating such pre-deposit and mechanically reduced the amount without considering the appellant's small-scale business and financial incapacity. The court concluded that the Tribunal was not justified in not granting a complete waiver of the pre-deposit, given the absence of any allegations against the appellant regarding the fraud.

Conclusion:
The court quashed the Tribunal's order and restored the appeals to the first appellate authority, granting the appellant a complete waiver from the payment of pre-deposit for the purpose of admission and stay. The first appellate authority was directed to hear and decide the appeals on merits without being influenced by the observations made in this judgment.

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