2022 (3) TMI 1315 - HC - VAT and Sales Tax

Mandatory pre-deposit - Vires of the second proviso to Section 84 (1) of West Bengal Value Added Tax Act, 2003 - right to appeal - fundamental rights guaranteed under Article 19(1)(g) - insistence of protection of payment of 15% of the disputed tax as stipulated in the second proviso to Section 84(1) of the Act infringes/abrogates the vested right of appeal under Section 84(1), when such right accrues to a dealer on the date of filing the return - compulsory extraction of tax before the same becomes due and payable - second proviso to Section 84(1) infringes Article 14 of the Constitution of India - right of appeal conferred under Section 84(1) can be construed as an absolute right - effect of substitution of second proviso to Section 84(1) of the West Bengal Finance Act, 2015 - alleged hardship of a dealer would be a relevant consideration while considering the vires of a statutory provision or not. HELD THAT - Section 84(1) of the Act provides for an appellate remedy to an aggrieved dealer. The said provision is a substantive law, which confers a right on an aggrieved dealer. The provisos contained in sub-section (1) of Section 84 regulate the procedure for exercising such right of appeal. The first proviso to Section 84(1) deals with procedural aspects in respect of an appeal in which the dispute is in excess of rupees twenty lakh and the authority, which will be disposing of such appeal as may be constituted by the Commissioner. The second proviso deals with the procedure to be adopted by the aggrieved dealer in cases where appeals are preferred on or after the 1st day of April, 2015 - if the right of appeal as provided under Section 84(1) could be entertained upon compliance of certain conditions by the aggrieved dealer at the time of preferring an appeal, which would be a provision in the realm of procedural law. It can be further clarified by observing that Section 84(1) of the Act provides for the authority before whom the appeal can be preferred and the circumstances under which the dealer could exercise such right and the conditions to be followed by the dealer for availing such right are stipulated in the proviso, which are procedural in nature. Thus, the appellants cannot be heard to say that they have a vested right in a procedural law. For entertaining an appeal under Section 84(1), the dealer is required to produce proof of payment of 15% of the disputed tax in terms of the procedure prescribed in Clause (b) of second proviso to Section 84(1). It cannot be disputed by the appellants that on and after the order of assessment is passed and the tax is quantified the liability accrues. Mere filing of an appeal does not suspend the liability so determined. The liability would subsist until it is set aside or modified. Therefore, to state that the 15% is a compulsory extraction, is incorrect, as it is only a measure or quantification for the appeal being entertained - the second proviso to Section 84(1) is neither discriminatory nor violative of Article 14 of the Constitution of India and accordingly. The tests which are to be applied to test the constitutional validity of a substantive law is not required to be applied to the cases on hand as we have conclusively held that the provisos to Section 84(1) are procedural. The constitutional validity of the second proviso to Section 84(1) is upheld. In cases where the appellants have prayed for consequential relief in the writ petitions by challenging show-cause notices or assessment orders, liberty is granted to such of those appellants to file the reply to the show-cause notices within 30 days from the date of receipt of the server copy of this judgment and order after which the concerned assessing authority shall proceed with the matter in accordance with law - Appeal dismissed.

Issues Involved:
1. Whether the requirement of producing proof of payment of 15% of the disputed tax under the second proviso to Section 84(1) of the West Bengal Value Added Tax Act, 2003 infringes or abrogates the vested right of appeal.
2. Whether the second proviso to Section 84(1) violates Article 14 of the Constitution by treating different categories of assessments and assessees equally.
3. Whether the right of appeal under Section 84(1) can be subject to conditions imposed by the legislature.
4. The effect of the substitution of the second proviso to Section 84(1) by the West Bengal Finance Act, 2015.
5. Whether the principles of "reading down" can be applied to the second proviso to Section 84(1).
6. Whether alleged hardship faced by a dealer is relevant in considering the vires of a statutory provision.

Detailed Analysis:

Issue 1: Vested Right of Appeal and Compulsory Extraction of Tax
The court analyzed whether the requirement of producing proof of payment of 15% of the disputed tax infringes the vested right of appeal. It was argued that this condition amounts to a compulsory extraction of tax. The court held that the second proviso to Section 84(1) is procedural, not substantive, and thus does not infringe on the right of appeal. The proviso prescribes a condition for entertaining an appeal, which is within the legislative competence of the State. The court concluded that this requirement is not a compulsory extraction of tax but a procedural condition for the appeal to be entertained.

Issue 2: Violation of Article 14
The appellants argued that the second proviso violates Article 14 by treating different categories of assessments and assessees equally. The court rejected this argument, stating that the substantive law under Section 84(1) does not distinguish between different types of assessments or assessees. It provides a uniform right of appeal to all dealers, whether casual or otherwise. The court found no discrimination and held that the provision does not violate Article 14.

Issue 3: Conditions on the Right of Appeal
The court examined whether the legislature can impose conditions on the right of appeal under Section 84(1). It was held that the right of appeal is a statutory right, and the legislature can impose conditions for exercising this right. The court referred to previous judgments which upheld similar conditions as valid, provided they are not onerous or unreasonable. The condition of producing proof of payment of 15% of the disputed tax was deemed reasonable and not an infringement on the right of appeal.

Issue 4: Effect of Substitution by the West Bengal Finance Act, 2015
The court analyzed the effect of the substitution of the second proviso to Section 84(1) by the West Bengal Finance Act, 2015. It was held that the substitution is retrospective and relates back to the date when the original Act came into force. The court concluded that the substitution intended to replace the old proviso entirely, making the new proviso applicable to all appeals filed on or after April 1, 2015.

Issue 5: Application of "Reading Down"
The court addressed whether the principles of "reading down" could be applied to the second proviso to Section 84(1). It was held that there is no ambiguity in the proviso that necessitates reading down. The proviso is clear and unambiguous, and the principle of reading down is not applicable. The court emphasized that the proviso is a procedural law and validly applies retrospectively.

Issue 6: Relevance of Hardship
The court considered whether the alleged hardship faced by dealers is relevant in assessing the vires of the statutory provision. It was held that hardship is not a criterion for determining the constitutionality of a statutory provision. The court found that the condition of producing proof of payment of 15% of the disputed tax is neither onerous nor unreasonable, and thus, the alleged hardship does not affect the validity of the provision.

Conclusion:
The court dismissed the appeals and upheld the constitutional validity of the second proviso to Section 84(1) of the West Bengal Value Added Tax Act, 2003. The court granted liberty to appellants to file replies to show-cause notices or appeals within specified time frames, ensuring compliance with the procedural requirements.

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