2020 (8) TMI 530 - HC - VAT and Sales Tax

Maintainability of application - alternative statutory remedy of appeal - Gujarat VAT Act - whether we should entertain this writ application in exercise of our writ jurisdiction under Article 226 of the Constitution of India or relegate the writ applicant to avail the statutory remedy of preferring an appeal as provided under the provisions of the GVAT Act? HELD THAT - If the order is made by a Deputy Commissioner as in the case on hand, the appeal shall lie to the Joint Commissioner. In the case of an order passed in appeal by a Joint Commissioner, a second appeal would lie to the Tribunal. Ultimately, an appeal lies to the High Court from every order passed in appeal by the Tribunal, if the High Court is satisfied that the case involves a substantial question of law. Thus, the GVAT Act, 2003 provides for a complete machinery to challenge an order of assessment and the impugned order of assessment can only be challenged as prescribed by the Act and not by a writ application under Article 226 of the Constitution of India. It is a settled position of law that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute must only be availed of. Reliance placed upon the decision of the Supreme Court in the case of TITAGHUR PAPER MILLS CO. LIMITED. AND ANOTHER VERSUS STATE OF ORISSA AND ANOTHER 1983 (4) TMI 49 - SUPREME COURT , wherein it is observed that where a right or liability is created by a statute, which gives a special remedy for enforcing it, the remedy provided by that statute must only be availed of. As in the instance case, the GVAT Act, 2003 provides complete machinery for the assessment/reassessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the authorities, in our opinion, the writ applicant should not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution, more particularly, when the writ applicant has the adequate remedy open him by an appeal to the Joint Commissioner - it is not convincing that it is not a case wherein we should entertain this writ application under Article 226 of the Constitution of India despite there being an efficacious alternative remedy of filing an appeal. This writ application cannot be admitted and the writ applicant is relegated to avail the alternative remedy of filing an appeal under Section 73 of the GVAT Act, 2003 - application dismissed.

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Incorrect assessment of contracts as works contracts.
3. Misclassification of sales and services.
4. Non-consideration of documentary evidence and case laws.
5. Levy of VAT on service value.
6. Taxing construction items under the residuary entry.
7. Availability of alternative remedy.

Issue-wise Detailed Analysis:

1. Violation of principles of natural justice:
The writ applicant argued that the assessment order was passed in gross violation of the principles of natural justice. The Assessing Officer allegedly declined to consider judgments from the Supreme Court and the High Court on various issues. The applicant claimed that despite the availability of an alternative remedy, the writ application should be entertained due to this violation.

2. Incorrect assessment of contracts as works contracts:
The Assessing Officer treated and assessed the contracts awarded to the writ applicant as works contracts. The applicant contended that this assessment was incorrect and contrary to the legal precedents set by higher courts.

3. Misclassification of sales and services:
The applicant was engaged in providing consulting engineering and construction services, including buying and selling goods. The assessment order classified certain sales as local sales liable to a higher VAT rate due to non-submission of specific proofs. The applicant argued that this classification was incorrect and contrary to the decision in State of Gujarat vs. Shandong Tiejun Electric Power Engineering Company Ltd., which held that the condition of Rule 42 (2A) of the GVAT Rules is not mandatory.

4. Non-consideration of documentary evidence and case laws:
The applicant submitted that voluminous records and documents were placed before the Assessing Officer, but none of these were considered in the assessment order. This non-consideration allegedly demonstrated non-application of mind and resulted in a serious miscarriage of justice.

5. Levy of VAT on service value:
The applicant contended that the assessment order sought to levy VAT on the value of services provided, which was not tenable in law. This was argued to be contrary to the judgment of the Supreme Court in State of Karnataka vs. Durga Projects.

6. Taxing construction items under the residuary entry:
The applicant argued that taxing construction items under the residuary entry at the highest rate was incorrect and contrary to legal precedents.

7. Availability of alternative remedy:
The respondents, represented by the Government Pleader, raised a preliminary objection regarding the maintainability of the writ application, arguing that the applicant had an alternative efficacious remedy of preferring an appeal before the Appellate Authority. The court analyzed the provisions of the GVAT Act, 2003, which provides a complete machinery for challenging an order of assessment through a hierarchy of authorities, ultimately leading to an appeal to the High Court on substantial questions of law.

Analysis and Conclusion:
The court referred to several precedents, including Titaghur Paper Mills Co. Ltd. vs. State of Orissa and Commissioner of Income Tax vs. Chhabil Dass Agrawal, emphasizing that where a statute provides a special remedy, that remedy must be availed of. The court noted that the GVAT Act provides a complete mechanism for redressal of grievances, and thus, the writ applicant should not bypass this machinery by filing a writ application under Article 226 of the Constitution.

The court acknowledged that exceptions to the rule of alternative remedy exist, such as when the statutory authority acts in defiance of fundamental principles of judicial procedure or in total violation of the principles of natural justice. However, in this case, the court found no such exceptional circumstances warranting the bypass of the statutory remedy.

Ultimately, the court declined to entertain the writ application and relegated the writ applicant to avail the alternative remedy of filing an appeal under Section 73 of the GVAT Act, 2003. The court directed that the Appellate Authority should hear the appeal on its merits without being influenced by any observations made in this order, allowing the applicant to raise all contentions available in law.

Judgment:
The writ application was rejected, and the applicant was directed to pursue the alternative remedy of filing an appeal.