2020 (7) TMI 84 - HC - VAT and Sales Tax

Reopening of assessement - compounding of tax - reversal of tax under Section 25(1) of the 2003 Act - HELD THAT - It is a matter of record that the second appeal is pending adjudication before the Tribunal. On going through Ext.P4, the demand was stayed subject to deposit of 20% way back in February 2020 and the amount ordered to be deposited in one month expired on 19.03.2020. The petitioner prima facie do not require any concession but, the Tribunal ought to have imposed the condition of 20% as envisaged under Section 55(4) of the 2003 Act, though strictly not applicable to the second appeal, particularly owing to the fact that there was complete lock down and hardy any business carried out during this period and it was very difficult to generate money and pay the amount. The percentage of amount reduced from 30% to 20% which would come ₹ 15,83,000/- an odd, rounded to ₹ 16,00,000/- to be deposited in two instalments. The first instalment to be deposited on or before 25.06.2020 and the second would fall on 25.07.2020. Thereafter on compliance of the direction, the Tribunal shall consider and decide the appeal. In case of any failure to deposit the amount, the respondents shall be at liberty to initiate action for recovery of the amount in accordance with law - petition disposed off.

Summary

Issues involved:
1. Demand of reverse tax under the Kerala Value Added Tax Act, 2003.
2. Eligibility for input tax credit and special rebate for a jewellery dealer.
3. Reopening of assessment for the assessment year 2015-2016.
4. Recovery action initiated by the respondent before appeal disposal.
5. Disposal of stay application during the lockdown period.
6. Reduction of the percentage of amount to be deposited for stay.

Analysis:

1. The petitioner, a jewellery dealer, challenged the demand of reverse tax under the Kerala Value Added Tax Act, 2003. The petitioner argued that being a non-compounded dealer, they were eligible for input tax credit and special rebate. The dispute arose from the reopening of the assessment for the year 2015-2016, leading to a demand for reverse tax.

2. The petitioner believed they were entitled to a special rebate on purchases from unregistered dealers under Section 6(2) of the 2003 Act. An appeal was filed against the assessment order, and during the pendency of the appeal, the respondent initiated recovery action, resulting in the recovery of a substantial sum from the petitioner.

3. The petitioner filed a second appeal before the Tribunal along with a stay application, which was not promptly taken up. Seeking relief, the petitioner approached the High Court, which directed the Tribunal to dispose of the application within a specified timeframe. However, the stay application was disposed of in a manner where a high percentage of the amount had to be paid within a short period, causing hardship to the petitioner.

4. The respondent argued against reducing the percentage of the amount to be deposited, citing the provisions of Section 55(4) of the 2003 Act. The Court acknowledged the impact of the Covid-19 lockdown on businesses, leading to financial constraints for the petitioner. Despite the pending appeal, the Tribunal had ordered a significant deposit, which was deemed unreasonable given the prevailing circumstances.

5. In the judgment, the Court exercised its power under Article 226 of the Constitution of India to modify the impugned order, reducing the percentage of the amount to be deposited for the stay from 30% to 20%. The revised amount was set to be paid in two instalments, considering the financial challenges faced by the petitioner during the lockdown period. Non-compliance would empower the respondents to initiate recovery action as per the law.

This detailed analysis highlights the key issues addressed in the judgment, focusing on the legal arguments, procedural aspects, and the final relief granted by the Court.