2019 (11) TMI 553 - HC - VAT and Sales Tax

Compliance with the pre-deposit - adjustment of duty paid under protest during investigation - MVAT Act - whether the amount of duty (which was paid under protest) should be considered for the purpose of computing the 10% mandatory pre-deposit required for filing the appeal in accordance with the Section 26(6A) of the MVAT Act? HELD THAT - In the present case the appeal is against an order. That order is an order passed under section 23. If it is that order which is appealable then all the sub-sections of section 23 and the assessment proceedings cannot be lost sight of. If already some amounts are paid albeit under protest they would be adjusted against the total tax liability and the demand to follow. The order therefore is a composite one - In the instant case that order copy of which is annexed to the petition is passed by the Deputy Commissioner of Sales Tax. He had before him the request of the petitioner and the reply to the show cause notice wherein he was called upon to complete the VAT/CST assessment along with the entry tax for the financial year 2013-2014. It is therefore clear that if the petitioner/ appellant is aggrieved by it it is an order of assessment. At the end of the assessment there is a tax liability. That is crystallised and a notice of demand is issued to the petitioner. When the appeal is against such a tax liability the petitioner cannot contend that because a paltry amount was deposited under protest prior to the assessment and at the time of investigation that be adjusted against the pre-deposit contemplated by section 26(6A) of as compliance with subsection (6A) of section 26 of the MVAT Act. If this argument of Mr. Sridharan is accepted it would mean that a payment under protest made at the time of investigation to avoid tax liability or to escape assessment would suffice and on the strength of that the appeal would be entertained despite there being no proof of payment of the aggregate of the amounts as set out in clauses (a) and (b) of sub-section (6A) of section 26 of the MVAT Act. While it is true that payment under protest cannot be regarded as acceptance of the tax liability that principle has no application to the instant case. It is opined that If the amount is paid within 4 weeks from today the Appellate Court shall entertain the Appeal and decided it on merits in accordance with law - Petition dismissed.

Summary

Issues Involved:
1. Challenge to the impugned letter dated 4.6.2018 issued by the Joint Commissioner of Sales Tax.
2. Direction to accept the petitioner’s appeal against the Assessment Order dated 26.12.2017 without further pre-deposit.
3. Interpretation of Section 26(6A) of the MVAT Act regarding pre-deposit requirements.
4. Consideration of payments made under protest as compliance with pre-deposit requirements.

Detailed Analysis:

1. Challenge to the Impugned Letter Dated 4.6.2018:
The petitioner contested the impugned letter issued by the Joint Commissioner of Sales Tax, which clarified that payments made under protest during investigation could not be considered as pre-deposit for the purposes of Section 26(6A) of the MVAT Act. The petitioner argued that this interpretation was incorrect and contrary to the provisions of the law.

2. Direction to Accept Appeal Without Further Pre-Deposit:
The petitioner sought a direction for the Joint Commissioner of Sales Tax (Appeals-V) to accept its appeal against the Assessment Order dated 26.12.2017 without requiring any further payment of pre-deposit. The petitioner had already paid an amount of ?2,32,37,249/- towards tax under protest, which it argued should be considered sufficient for the 10% pre-deposit requirement under Section 26(6A) of the MVAT Act.

3. Interpretation of Section 26(6A) of the MVAT Act:
The core issue revolved around the interpretation of Section 26(6A) of the MVAT Act, which mandates a pre-deposit of 10% of the disputed tax amount for filing an appeal. The petitioner contended that the payments made under protest should be considered as part of this pre-deposit. The court examined the language of Section 26(6A) and the legislative intent behind the provision, emphasizing that the pre-deposit requirement was a pre-condition for filing an appeal and not merely a procedural formality.

4. Consideration of Payments Made Under Protest:
The petitioner argued that the payments made under protest during the investigation should be considered as compliance with the pre-deposit requirement. The court, however, rejected this argument, stating that such payments made before the assessment order could not be construed as fulfilling the pre-deposit condition under Section 26(6A). The court held that the payments made under protest were adjusted against the total tax liability and the demand to follow, and thus could not be treated as pre-deposit for the purpose of filing an appeal.

Conclusion:
The court dismissed the writ petition, holding that the petitioner’s payments under protest could not be considered as compliance with the pre-deposit requirement under Section 26(6A) of the MVAT Act. The court emphasized that the pre-deposit condition was mandatory for the appeal to be entertained. The petitioner was granted four weeks to comply with the pre-deposit requirement to enable the filing of the appeal. The court's decision underscored the importance of adhering to statutory requirements for pre-deposit in tax disputes and clarified the interpretation of Section 26(6A) of the MVAT Act.