2024 (9) TMI 1353 - HC - VAT / Sales Tax

Constitutional validity of Section 33 (5) of the Haryana Value Added Tax Act, 2003 - waiver of condition of pre-deposit of surety bond or bank guarantee - inability to furnish security in the form of surety bond or bank guarantee - HELD THAT - While power does not lie with the appellate authority to waive the condition of pre-deposit of surety bond or bank guarantee in terms of Section 33 (5) of the HVAT Act, however, this Court is not precluded under Article 226 of the Constitution of India to direct the appeal to be heard without insisting upon the precondition. It is true that the Supreme Court in M/s Tecnimont Private Limited 2019 (9) TMI 788 - SUPREME COURT considered a separate set of provisions, however, we do not agree with the learned State counsel that merely because under Section 33 (5) of the HVAT Act the requirement is not of actual deposit but submitting a bank guarantee or adequate security to the satisfaction of the assessing officer. The provision has to be read differently. While such a provision may exist on the statute, the circular issued asking for irrevocable bank guarantee or security in the form of surety bond is too onerous a condition. This Court is satisfied that the petitioners before us would not be in a position to submit security in the nature of surety bond as in all the cases the company or the concerned Directors would be required to have property worth the said amount which they do not possess. A person cannot be left remediless, and in view thereto, as opined in M/s Tecnimont Private Limited and Smt. P. Laxmi Devi 2019 (9) TMI 788 - SUPREME COURT the Joint Excise and Taxation Commissioner (Appeals), Faridabad, is directed to hear the appeals without insisting upon the pre-condition required under Section 33 (5) of the HVAT Act and decide the appeals on merits. Since the concerned appellate authority would not have the power to waive off the pre-deposit as required under Section 33 (5) of the HVAT Act, the order passed by the Haryana Tax Tribunal, Chandigarh, upholding the order of the Joint Excise and Taxation Commissioner (Appeals), Faridabad, in refusing to entertain the appeal without submitting surety bonds or pre-deposit cannot be said to be illegal - appeal disposed off.

Issues Involved:

1. Constitutionality of Section 33(5) of the Haryana Value Added Tax Act, 2003.
2. Requirement of pre-deposit of surety bond or bank guarantee under Section 33(5) of the HVAT Act.
3. Financial incapacity of the petitioner companies to furnish security.
4. Quashing of orders by the Joint Excise and Taxation Commissioner (Appeals) and the Haryana Tax Tribunal.
5. Applicability of Supreme Court judgments and previous High Court decisions.
6. Ex-parte assessment orders and procedural compliance under the HVAT Act.

Detailed Analysis:

1. Constitutionality of Section 33(5) of the Haryana Value Added Tax Act, 2003:

The petitioners initially sought to challenge the constitutionality of Section 33(5) of the HVAT Act. However, this prayer was not pressed by the petitioners in light of the Supreme Court's judgment in M/s Tecnimont Private Limited vs. State of Punjab and others (2021) 12 SCC 477, which upheld similar provisions under the Punjab VAT Act.

2. Requirement of Pre-Deposit of Surety Bond or Bank Guarantee:

The petitioners argued that their financial incapacity prevented them from fulfilling the requirement of furnishing a bank guarantee or surety bond as mandated by Section 33(5) of the HVAT Act. They relied on the Supreme Court's judgment in M/s Tecnimont Private Limited, which indicated that appellate authorities do not have the power to waive such preconditions but that High Courts can provide relief in cases of extreme hardship.

3. Financial Incapacity of the Petitioner Companies:

The petitioners presented evidence, including affidavits and financial statements, demonstrating their inability to furnish the required security. The court noted that the net worth of the petitioner companies was significantly less than the demand raised, rendering them incapable of providing the surety bonds or bank guarantees.

4. Quashing of Orders by the Joint Excise and Taxation Commissioner (Appeals) and the Haryana Tax Tribunal:

The petitioners sought quashing of the orders passed by the Joint Excise and Taxation Commissioner (Appeals) and the Haryana Tax Tribunal, which dismissed their appeals due to non-furnishing of adequate security. The court found that while the appellate authorities acted within their statutory limits, the High Court under Article 226 of the Constitution could direct the appeals to be heard without insisting on preconditions.

5. Applicability of Supreme Court Judgments and Previous High Court Decisions:

The petitioners cited various Supreme Court judgments, including Commissioner of Income-Tax, Delhi vs. Bansi Dhar and Sons (1986) 1 SCC 523 and Government of Andhra Pradesh vs. Smt. P. Laxmi Devi (2008) 4 SCC 720, to support their plea for relief from the onerous conditions of Section 33(5). The court acknowledged these precedents and emphasized that in cases of extreme hardship, the High Court could intervene to provide relief.

6. Ex-Parte Assessment Orders and Procedural Compliance:

The petitioners also challenged the ex-parte assessment orders, claiming procedural lapses, including non-service of mandatory notices under Section 15(2) of the HVAT Act. The court held that these procedural issues could be raised before the appellate authority, thus not requiring immediate intervention.

Conclusion:

The High Court directed the Joint Excise and Taxation Commissioner (Appeals), Faridabad, to hear the appeals without insisting on the precondition of furnishing a surety bond or bank guarantee, considering the financial incapacity of the petitioners. The court remanded the matters for expeditious disposal within three months and allowed the writ petitions. The other procedural issues related to ex-parte assessment orders were left to be contested before the appellate authority. All pending applications were disposed of without costs.

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