2023 (11) TMI 1336 - HC - GST

Inconsistency of some interim orders passed by this Court as regards the amount of pre-deposit - Executive s failure to constitute an appellate tribunal - Whether assessee can be faulted for what is essentially a failure of the Government? Grant of interim orders - HELD THAT - There appears to be inconsistency in the interim orders granted by this Court. The Patna High Court in M/s Cohesive Infrastructure Developers Pvt. Ltd. vs. The Central Board of Indirect Taxes and Customs and Others 2023 (11) TMI 247 - PATNA HIGH COURT while deciding the interim application in similar facts held that 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. 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 v. Amalendu Das 1984 (1) TMI 63 - SUPREME COURT where it was held that T he 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. Whether assessee can be faulted for what is essentially a failure of the Government? - HELD THAT - 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. This is the rationale which is borne out from the first set of interim orders rendered in M/S Kent Cables 2019 (12) TMI 1665 - ALLAHABAD HIGH COURT M/S Tulsi Steels 2022 (7) TMI 1488 - ALLAHABAD HIGH COURT and M/S Nandan Sales Corporation 2023 (7) TMI 1332 - ALLAHABAD HIGH COURT . 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. Conclusion - i) 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. ii) The petitioners should not be penalized for the government s failure to constitute the tribunal. Learned counsel for the respondents to file counter affidavit. List after six weeks.

Summary

1. ISSUES PRESENTED and CONSIDERED

The legal judgment from the Allahabad High Court primarily revolves around the following core issues:

• Whether the executive's failure to constitute an appellate tribunal under the Uttar Pradesh Goods and Services Tax Act and the Central Goods and Services Tax Act can deny the petitioners their statutory right to a second appeal.
• The inconsistency in interim orders regarding the percentage of pre-deposit required for granting interim relief in tax disputes under the GST Acts.
• The necessity of maintaining consistency in judicial orders to prevent discrimination and uphold the principle of equality under Article 14 of the Constitution of India.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Denial of Statutory Right to Second Appeal

• Relevant Legal Framework and Precedents: The Uttar Pradesh Goods and Services Tax Act and the Central Goods and Services Tax Act provide for a second appeal before an appellate tribunal. However, the tribunal has not been constituted, hindering the petitioners' right to appeal.
• Court's Interpretation and Reasoning: The court emphasized that executive inertia cannot deny a statutory right. It cited the Supreme Court's decision in Supdt. of Taxes v. Onkarmal Nathmal Trust, which highlighted that the state cannot take advantage of its own inaction.
• Key Evidence and Findings: The absence of a functional appellate tribunal due to the government's failure to constitute it was identified as the primary cause for denying the petitioners' right to appeal.
• Application of Law to Facts: The court applied the principle that the state cannot benefit from its own default, thereby supporting the petitioners' claim for relief under Article 226 of the Constitution.
• Treatment of Competing Arguments: The court rejected any argument that the delay in constituting the tribunal could justify denying the petitioners their statutory rights.
• Conclusions: The court concluded that the petitioners' right to a second appeal is being unjustly denied due to the government's failure to act.

Issue 2: Inconsistency in Interim Orders

• Relevant Legal Framework and Precedents: Section 112 of the GST Acts requires a pre-deposit of 10% before the first appellate authority and an additional 20% before the second appellate authority.
• Court's Interpretation and Reasoning: The court noted inconsistencies in interim orders, with some requiring a 30% deposit and others 50%. It emphasized the need for consistency, citing Siliguri Municipality v. Amalendu Das and Vishnu Traders v. State of Haryana.
• Key Evidence and Findings: The court identified various interim orders with differing pre-deposit requirements, leading to unequal treatment of similarly situated parties.
• Application of Law to Facts: The court applied the principle of consistency in judicial orders to ensure equal treatment under Article 14 of the Constitution.
• Treatment of Competing Arguments: The court recognized the need for varying orders in peculiar circumstances but stressed the importance of uniformity in similar cases.
• Conclusions: The court favored the approach requiring a 30% deposit, aligning with the statutory framework and ensuring fairness.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The state cannot take advantage of its own wrong and lack of diligence. Inactivity is not impossibility." This emphasizes the court's stance against executive inaction.
• Core Principles Established: The judgment establishes that statutory rights cannot be denied due to executive inertia and underscores the necessity for consistency in judicial orders to uphold equality.
• Final Determinations on Each Issue: The court directed that the petitioners should not be penalized for the government's failure to constitute the tribunal. It also mandated a consistent approach in interim orders, favoring a 30% pre-deposit requirement.

The judgment effectively balances the rights of the assessees with the interests of the revenue, ensuring that statutory rights are protected and judicial consistency is maintained. The court's decision underscores the importance of government accountability and the judiciary's role in upholding constitutional principles.