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

Issues Involved:
1. Validity of the show cause notice under Section 74 of the U.P.GST Act, 2017.
2. Denial of the right to a second appeal due to non-constitution of the appellate tribunal.
3. Inconsistency in interim orders regarding the amount of pre-deposit required.

Issue 1: Validity of the Show Cause Notice

Shri Rishi Raj Kapoor, learned counsel for the 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.

Issue 2: Denial of the Right to a Second Appeal

The petitioner has assailed the order passed by the first appellate authority under the Uttar Pradesh Goods and Services Tax Act. The second appeal lies before the appellate tribunal under Section 112 of the Act. The appellate tribunal has not been made functional till date though it is informed that the notification has been made in that regard. The right of second appeal which is vested in the petitioner by the statute is being denied on account of the failure of the appropriate Government to constitute the tribunal. Hence this writ petition.

The executive inertia cannot become the cause of denial of a statutory right. In this context it would be apposite to recall the observations made by the Supreme Court in Supdt. of Taxes v. Onkarmal Nathmal Trust reported at (1976) 1 SCC 766:

"The State cannot take advantage of its own wrong and lack of diligence. The State cannot contend that it was impossible to issue any notice within the period mentioned in Section 7(2) of the new Act. The State did not endeavour to obtain appropriate orders to surmount the difficulties by reason of the injunction against taking steps within the time contemplated in Section 7(2) of the new Act. The State is guilty of default."

Issue 3: Inconsistency in Interim Orders

The short controversy which arises is the inconsistency of some interim orders passed by this Court as regards the amount of pre-deposit. One line of interim orders contemplates deposit of 30% of the amount out of which 10% which is deposited before the first appellate authority is liable to be adjusted. Some of the aforesaid category of interim orders passed in similar petitions are extracted hereunder.

In M/S Kent Cables Pvt. Ltd. vs. State Of U.P. And 2 Others (Writ Tax No. - 1372 of 2019) the following order was passed:

"The instant petition has been filed challenging the order of the First Appellate Authority under the U.P. Goods & Service Tax Act, 2017. Under the statute, a Second Appeal lies before the Appellate Tribunal. However, the same has not been constituted so far, therefore the petitioner has approached this Court by way of the instant petition. Learned counsel for the petitioner points out that while filing First Appeal, the petitioner had deposited 10% of the disputed tax liability as provided under sub-section (6) of Section 107 of the Act. He submitted that an appeal before the Tribunal would be competent only if 20% of the remaining amount of tax in dispute is deposited in addition to the amount deposited before the First Appellate Authority. He submitted that the petitioner is ready and willing to deposit 20% of the remaining amount of tax in dispute. Accordingly, the petitioner is permitted to deposit 20% of the remaining amount of tax in dispute and as soon as the said amount is deposited, the recovery proceedings for the balance amount shall remain stayed as provided under sub-section (9) of Section 112 of the Act."

In M/S Tulsi Steels vs. State Of U.P. And 2 Others (Writ Tax No. - 953 of 2022), the following order was passed:

"1. Present petition has been filed against the order of the First Appeal Authority. Since the Tribunal has yet not been constituted, the present petition is being entertained at this stage. 2. Matter requires consideration. 3. All respondents may file counter affidavit within a period of six weeks. Petitioner shall have two weeks thereafter to file rejoinder affidavit. 4. List thereafter. 5. In the meanwhile, it is directed that the petitioner shall deposit 30% of the disputed amount of tax in accordance with Section 112(8) of the Central Goods and Services Tax Act 2017 within a period of three weeks from today and in which event, the recovery proceedings for the balance amount of tax, penalty and fine under order dated 20.10.2021 for A.Y. 2019-20, shall remain stayed till disposal of the instant petition. 6. Any amount already deposited be adjusted against deposit to be made under this order."

In M/S Nandan Sales Corporation vs. State Of U.P. And 2 Others (Writ Tax No. - 903 of 2023) the following order was passed:

"Heard learned counsel for the petitioner and the learned Standing Counsel for the State-respondents, revenue. Matter requires consideration. All respondents may file counter affidavit within four weeks. Petitioner shall have one week thereafter to file rejoinder affidavit. List thereafter. In the meanwhile, it is directed that the petitioner shall deposit 30% of the disputed amount of tax in accordance with Section 112(8) of the Central Goods and Services Tax Act 2017 within a period of three weeks from today and in which event, the recovery proceedings for the balance amount of tax, penalty and fine shall remain stayed till disposal of the instant petition. Any amount already deposited be adjusted against deposit to be made under this order."

However, there seems to be another view wherein 50% of the disputed tax amount was directed to be deposited before granting interim protection. The order rendered in M/S Virender Kumar Projects Pvt Ltd vs. State Of U.P. And 2 Others (Writ Tax No. - 945 of 2023) is reproduced hereunder:

"In the meantime, no coercive action shall be taken against the petitioner pursuant to the impugned order, provided the petitioner deposits 50% of the disputed tax amount in accordance with law within a period of two weeks from today. Any amount already deposited by the petitioner be adjusted against the deposit to be made under this order."

Clearly, in the facts of these cases, there appears to be inconsistency in the interim orders granted by this Court.

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 relevant provision is liable to be extracted hereunder:

"Section 112. Appeals to Appellate Tribunal (8) No appeal shall be filed under sub-section (1), unless the appellant has paid-- (a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and (b) a sum equal to twenty per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order, [subject to a maximum of fifty crore rupees,] in relation to which the appeal has been filed."

The practices in go in other High Courts will also fortify the narrative. The Patna High Court in M/s Cohesive Infrastructure Developers Pvt. Ltd. vs. The Central Board of Indirect Taxes and Customs and Others (Civil Writ Jurisdiction Case No. 15438 of 2023) while deciding the interim application in similar facts also made the following directions:

"6. This Court is, therefore, inclined to dispose of the instant writ petition in the following terms:-(i) Subject to deposit of a sum equal to 20 percent of the remaining amount of tax in dispute, if not already deposited, in addition to the amount deposited earlier under Sub-Section (6) of Section 107 of the B.G.S.T. Act, the petitioner must be extended the statutory benefit of stay under Sub-Section (9) of Section 112 of the B.G.S.T. Act. The petitioner cannot be deprived of the benefit, due to non- constitution of the Tribunal by the respondents themselves. The recovery of balance amount, and any steps that may have been taken in this regard will thus be deemed to be stayed. It is not in dispute that similar relief has been granted by this Court in the case of SAJ Food Products Pvt. Ltd. vs. The State of Bihar & Others in C.W.J.C. No. 15465 of 2022.(ii) The statutory relief of stay, on deposit of the statutory amount, however in the opinion of this Court, cannot be open ended. For balancing the equities, therefore, the Court is of the opinion that since order is being passed due to non- constitution of the Tribunal by the respondent- Authorities, the petitioner would be required to present/file his appeal under Section 112 of the B.G.S.T. Act, once the Tribunal is constituted and made functional and the President or the State President may enter office. The appeal would be required to be filed observing the statutory requirements after coming into existence of the Tribunal, for facilitating consideration of the appeal.(iii) In case the petitioner chooses not to avail the remedy of appeal by filing any appeal under Section 112 of the B.G.S.T. Act before the Tribunal within the period which may be specified upon constitution of the Tribunal, the respondent- Authorities would be at liberty to proceed further in the matter, in accordance with law.(iv) If the above order is complied with and a sum equivalent to 20 per cent of the remaining amount of the tax in dispute is paid then, if there is any attachment of the bank account of the petitioner pursuant to the demand, the same shall be released."

Further, the Patna High Court in PCPL and RK - JV a Joint Venture vs. The State of Bihar and others (Civil Writ Jurisdiction Case No. 3733 of 2023) also issued the following directions while deciding the applications:

"This Court is, therefore, inclined to dispose of the instant writ petition in the following terms:-(i) Subject to deposit of a sum equal to 20 percent of the remaining amount of tax in dispute, if not already deposited, in addition to the amount deposited earlier under Sub-Section (6) of Section 107 of the B.G.S.T. Act, the petitioner must be extended the statutory benefit of stay under Sub-Section (9) of Section 112 of the B.G.S.T. Act. The petitioner cannot be deprived of the benefit, due to non- constitution of the Tribunal by the respondents themselves. The recovery of balance amount, and any steps that may have been taken in this regard will thus be deemed to be stayed. It is not in dispute that similar relief has been granted by this Court in the case of SAJ Food Products Pvt. Ltd. vs. The State of Bihar & Others in C.W.J.C. No. 15465 of 2022.(ii) The statutory relief of stay, on deposit of the statutory amount, however in the opinion of this Court, cannot be open ended. For balancing the equities, therefore, the Court is of the opinion that since order is being passed due to non- constitution of the Tribunal by the respondent-Authorities, the petitioner would be required to present/file his appeal under Section 112 of the B.G.S.T.