2023 (12) TMI 557 - HC - GST

Inconsistency of some interim orders passed by this Court as regards the amount of pre-deposit - Right of second appeal - petitioner contends that the ingredients of Section 74 of the U.P.GST Act 2017 are not made out from the show cause notice as well as orders passed by the revenue authorities as prerequisites of Section 74 of the U.P.GST Act are not satisfied - HELD THAT - The Uttar Pradesh Goods and Services Tax Act as well as the Central Goods and Services Tax Act contemplate pre-deposit of certain amounts i.e. 10% of the of the disputed tax liability before the first appellate authority. In addition to that 20% of the disputed tax liability is liable to be deposited before the second appellate authority at the time of institution of the appeal. The purpose of grant of interim orders in a lis and the need for consistency in granting orders in similar cases was underlined in SILIGURI MUNICIPALITY AND OTHERS VERSUS AMALENDU DAS AND OTHERS 1984 (1) TMI 63 - SUPREME COURT where it was held that the main purpose of passing an interim order is to evolve a workable formula or a workable arrangement to the extent called for by the demands of the situation keeping in mind the presumption regarding the constitutionality of the legislation and the vulnerability of the challenge only in order that no irreparable injury is occasioned. The Court has therefore to strike a delicate balance after considering the pros and cons of the matter lest larger public interest is not jeopardized and institutional embarrassment is eschewed. In congruent facts identical interim orders are liable to be granted otherwise an anomalous situation will be created where similarly situated persons will be accorded differential treatment leading to discrimination and violation of Article 14 of the Constitution of India. The second aspect which requires to be given weight is that the assessee cannot be faulted for what is essentially a failure of the Government. The statute contemplates deposit of 10% plus 20% of the disputed tax liability before the first and second appellate authorities respectively. By imposing a demand of 50% in these matters the assessees will be penalized for no fault of theirs - The grant of interim orders in the aforesaid manner made in the said orders passed by this Court balances the interests of revenue as well as the rights of the assessees. However it needs to be clarified that it is always open to the Court to grant interim orders which are at variance with the aforesaid orders in peculiar facts and circumstances of a particular case while exercising writ jurisdiction in the interests of justice. The petitioner shall deposit 20% of the disputed tax liability in addition to the earlier deposit before the assessing authority (which is 10% of the disputed tax amount). Subject to the aforesaid deposit the recovery proceedings of the balance amount shall remain stayed till the decision of this writ petition - The application for interim relief is finally disposed of.

Summary

1. ISSUES PRESENTED and CONSIDERED

The judgment addresses the following core legal questions:

• Whether the prerequisites of Section 74 of the U.P. GST Act, 2017 are satisfied in the show cause notice and orders passed by the revenue authorities.
• Whether the denial of the right to a second appeal due to the non-constitution of the appellate tribunal under Section 112 of the U.P. GST Act, 2017 is justified.
• What is the appropriate percentage of pre-deposit required for interim relief in the absence of a functional appellate tribunal?
• How should the court balance the interests of the revenue and the rights of the assessee in granting interim orders?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Prerequisites of Section 74 of the U.P. GST Act, 2017

• Relevant legal framework and precedents: Section 74 of the U.P. GST Act, 2017 prescribes conditions for issuing show cause notices and orders by revenue authorities.
• Court's interpretation and reasoning: The petitioner argued that the conditions under Section 74 were not met, but the court did not provide a detailed analysis on this point, focusing instead on the procedural aspects of appeal rights.
• Key evidence and findings: The court did not delve into the specifics of the evidence regarding Section 74 compliance.
• Application of law to facts: The court acknowledged the petitioner's contention but did not make a conclusive finding on this issue.
• Treatment of competing arguments: The court noted the petitioner's argument but did not address it substantively in the interim order.
• Conclusions: The issue remains unresolved pending further proceedings.

Issue 2: Denial of Right to Second Appeal

• Relevant legal framework and precedents: Section 112 of the U.P. GST Act, 2017 provides for a second appeal to an appellate tribunal, which has not been constituted.
• Court's interpretation and reasoning: The court emphasized that executive inertia should not deny statutory rights, citing Supreme Court precedents on avoiding impossibility due to state inaction.
• Key evidence and findings: The court acknowledged the absence of the appellate tribunal and the resulting denial of the petitioner's appeal rights.
• Application of law to facts: The court applied principles of fairness and non-discrimination, asserting the petitioner's right to appeal should not be hindered by the government's failure to establish the tribunal.
• Treatment of competing arguments: The court sided with the petitioner, finding the state's inaction unjustifiable.
• Conclusions: The court recognized the petitioner's right to appeal and granted interim relief pending tribunal constitution.

Issue 3: Appropriate Percentage of Pre-Deposit

• Relevant legal framework and precedents: Sections 107 and 112 of the GST Acts outline pre-deposit requirements for appeals.
• Court's interpretation and reasoning: The court examined inconsistent interim orders regarding pre-deposit percentages, emphasizing the need for uniformity and fairness.
• Key evidence and findings: The court reviewed past orders requiring 30% or 50% pre-deposits and noted the inconsistency with statutory requirements.
• Application of law to facts: The court decided on a 20% pre-deposit, aligning with statutory provisions and ensuring equitable treatment.
• Treatment of competing arguments: The court balanced revenue interests with assessees' rights, opting for a consistent approach.
• Conclusions: The court directed a 20% pre-deposit, maintaining consistency with statutory guidelines and prior judgments.

Issue 4: Balancing Revenue Interests and Assessee Rights

• Relevant legal framework and precedents: The court referenced Supreme Court judgments on equitable interim relief and consistency in judicial decisions.
• Court's interpretation and reasoning: The court emphasized the need for similar treatment in similar cases to avoid discrimination and uphold Article 14 of the Constitution.
• Key evidence and findings: The court highlighted the inconsistency in previous interim orders and the need for a standardized approach.
• Application of law to facts: The court applied principles of fairness, opting for a 20% pre-deposit to balance interests.
• Treatment of competing arguments: The court considered the state's and assessees' positions, favoring a balanced interim relief approach.
• Conclusions: The court established a precedent for consistent interim orders, ensuring fairness and non-discrimination.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "The executive inertia cannot become the cause of denial of a statutory right."
• Core principles established: The court underscored the need for consistency in interim orders, fairness in appeal rights, and non-discrimination in judicial treatment.
• Final determinations on each issue: The court directed a 20% pre-deposit for interim relief, pending the constitution of the appellate tribunal, and stayed recovery proceedings for the balance amount.