2020 (8) TMI 341 - HC - VAT and Sales Tax

Principles of Natural Justice - it is contended that the order is contrary to binding precedent of the superior officer in the Petitioner s own case for the earlier Assessment Years 2013-14 and 2014-15 - transactions of sale of nickel-cobalt by the Petitioner either to customers within Arshiya FTWZ or to DTA units within Arshiya FTWZ of goods - HELD THAT - The transaction of sale of nickel-cobalt by the Petitioner either to customers within the Arshiya FTWZ or to DTA units within the Arshiya FTWZ are under consideration for levy of VAT for all the three assessment years, 2013-14, 2014-15 and 2015-16. The Appellate Orders for Assessment Years 201314 and 2014-15, subject matter of review by the higher authorities, have neither been stayed nor modified. Whether or not, this is a sale in the course of import, is not an issue we would like to go into at this stage, nor are we making any observations on the merits of this case. We are also not commenting on the allegations/ counter allegations with respect to the appeal sought to be filed or on the issue of pre-deposit or, for that matter, whether the view taken by the Appellate Authority for Assessment Years 2013-14 and 201415 was right. It is sufficient for us to observe that the two sets of facts i.e. facts of the present case and facts in the case of Assessment Years 2013-14 and 2014-15, are apparently identical and once there is a finding on identical transactions given by the Appellate Authority in respect of two Assessment Years in the case of an Assessee, unless that is set aside or the order is suspended by a competent court or authority, Respondent No.3 Adjudicating Authority was bound to follow the orders of the Appellate Authority for Assessment Years 2013-14 and 2014-15 for the Assessment Year 2015-2016. The Impugned Order consisting of Assessment order dated 20th March, 2020 and the notice of demand and remand the proceedings back to Respondent No.3 Deputy Commissioner of State Tax, for denovo consideration in accordance with law and after hearing the Petitioner and considering its submissions and passing a speaking order in line with the aforesaid observations and keeping in mind the principles of judicial discipline and binding precedent that require subordinate authorities to follow the orders of the higher appellate authorities - Petition allowed.

Summary

Issues Involved:
1. Whether the Impugned Order dated 20th March 2020 for Assessment Year 2015-16 is contrary to the principles of natural justice.
2. Whether the Impugned Order disregards binding precedents set by the Appellate Orders for Assessment Years 2013-14 and 2014-15.
3. Whether the transactions carried out in Arshiya FTWZ are liable to VAT under the MVAT Act.
4. Whether the Petitioner has an alternative remedy of filing an appeal.

Issue-wise Detailed Analysis:

1. Principles of Natural Justice:
The Petitioner contended that the Impugned Order violated the principles of natural justice as it did not consider the submissions regarding the binding nature of the Appellate Orders dated 26th April 2019 and 24th May 2019. Despite the Petitioner’s specific reliance on these orders, the Impugned Order failed to mention or deal with them, nor did it record the submission dated 3rd February 2020. The Court agreed with the Petitioner, noting that the Impugned Order did not address the Appellate Orders or distinguish them, thus failing to observe judicial discipline.

2. Binding Precedents:
The Petitioner argued that the transactions for Assessment Year 2015-16 were identical to those for Assessment Years 2013-14 and 2014-15, which had been settled in favor of the Petitioner by the Appellate Authority. The Court reiterated the principle of judicial discipline, emphasizing that subordinate authorities must follow the decisions of higher appellate authorities unless stayed or set aside. The Court found that Respondent No.3 had not followed this principle, thereby setting aside the Impugned Order and remanding the matter for reconsideration.

3. VAT Liability under MVAT Act:
The Petitioner maintained that the sales of nickel-cobalt were exempt from VAT under Section 5(2) of the CST Act as they were sales made in the course of import. Conversely, Respondent No.3 argued that these sales were liable to VAT under the MVAT Act as they were transactions within the State of Maharashtra. The Court noted that the Appellate Authority had previously held that such sales were not liable to VAT under the MVAT Act, as the goods were sold by transfer of documents of title before crossing the customs frontiers. The Court did not delve into the merits of this issue but emphasized the necessity for the Assessing Authority to follow the binding precedent.

4. Alternative Remedy of Filing an Appeal:
Respondent No.3 argued that the Writ Petition was not maintainable as the Petitioner had an alternative remedy of filing an appeal, which it had not pursued to avoid the 10% statutory deposit. The Court, however, did not relegate the Petitioner to the appellate remedy, considering the special circumstance that the Assessing Authority ignored the previous favorable orders without satisfactory reasons.

Conclusion:
The Court set aside the Impugned Order dated 20th March 2020 and the accompanying notice of demand. It remanded the proceedings back to Respondent No.3 for a de novo consideration, emphasizing the need for a speaking order that adheres to judicial discipline and binding precedent. The Court also directed that the Petitioner’s submissions be duly considered in the reassessment process.