2023 (3) TMI 120 - HC - VAT and Sales Tax

Validity of reassessment order - demand of pre-deposit - non-availment of any opportunity of hearing because of the Pandemic due to COVID-19 virus - Whether The Gujarat Value Added Tax Tribunal is justified in demanding pre-deposit without assigning any reasons or by overlooking the prima facie case of the appellant? HELD THAT - This Court in case of KAVYA MARKETING VERSUS STATE OF GUJARAT 2022 (4) TMI 1202 - GUJARAT HIGH COURT has also needed to deal with the order where the Tribunal had directed to pre-deposit and hearing of the matter was prolonged on the aspect of pre-deposit. It had chosen not to address the prima facie case of the writ applicant at the stage when the directions had been issued for pre-deposit. This Court had frowned upon such approach on the part of the Tribunal by holding that This Court has time and again in identical cases has held that Tribunal is obliged to consider a prima facie case, which the appellant may be in position to highlight. It a strong prima facie case is made out, then in such circumstances, there should not be any difficulty in entertaining the appeal even without insisting for payment of tax penalty or even smaller amount. In the instant case, as can be noticed from the chronology of events, the original reassessment order which was passed after the provisional attachment order and the audit assessment was placed upon the provisional assessment order and also considering the very material which was taken into consideration during the audit assessment - It is not the final reassessment order and the amount quantified is necessary to be looked into. It is essentially the chronology of events, coupled with the fact that there is complete absence of the any opportunity at the time of reassessment which shall need to be regarded. The matter is remanded back to the original authority for passing reassessment order on quashing and setting aside that order - the reference of carried forward input tax credit of Rs.5,86,000/- to the credit of the appellant shall continue to act as as pre-deposit - petition allowed.

Summary

Issues:
1. Challenge to the decision of The Gujarat Value Added Tax Tribunal in Second Appeal No. 151 of 2021 under the Central Sales Tax Act, 1956.
2. Provisional assessment order passed under Section 9(2) of the CST Act read with Section 33 of the Vat Act for the year 2014-15.
3. Reassessment under Section 9(2) of the CST Act read with Section 35 of the Vat Act initiated despite finalization of audit assessment.
4. Demand for pre-deposit by the Tribunal without considering the appellant's case and reasons for reassessment.
5. Justification for demanding pre-deposit despite the appellant's unutilized input tax credit balance and prior pre-deposit made against provisional assessment orders.

Detailed Analysis:

1. The appellant, an HUF engaged in trading electronic items, challenged the decision of The Gujarat Value Added Tax Tribunal in Second Appeal No. 151 of 2021 under the Central Sales Tax Act, 1956. The Tax Appeal was preferred under Section 78 of the Gujarat Value Added Tax Act, 2003 due to an issue regarding the classification of sales made through websites and the demand raised against the appellant based on a provisional assessment order for the year 2014-15.

2. Following search proceedings at the appellant's premises, a provisional assessment order was passed under Section 9(2) of the CST Act read with Section 33 of the Vat Act. The First Appeal against this order was dismissed summarily, leading to a combined pre-deposit demand by the Tribunal for the years 2013-14 and 2014-15. Subsequently, a scrutiny assessment under Section 9(2) of the CST Act was conducted, resulting in a nominal demand paid by the appellant.

3. Despite finalizing the audit assessment, a reassessment under Section 9(2) of the CST Act read with Section 35 of the Vat Act was initiated, raising concerns for the appellant. The First Appeal challenging the reassessment order was dismissed due to non-payment of pre-deposit, leading to the Second Appeal challenging the pre-deposit amount set by the Tribunal.

4. The substantial questions of law raised in the appeal primarily revolved around the Tribunal's justification for demanding pre-deposit without considering the appellant's case, especially in the context of the COVID-19 pandemic-induced restrictions and the availability of input tax credit balance. The Court emphasized the importance of addressing the prima facie case of the appellant before insisting on pre-deposit, citing previous judgments to support the appellant's position.

5. In its final decision, the Court found that the Tribunal erred in demanding a pre-deposit without adequately considering the appellant's circumstances, including the unutilized input tax credit balance. The Court quashed the pre-deposit order and directed the matter to be remanded back to the original authority for reassessment, with the appellant's carried forward input tax credit acting as the pre-deposit. The Court also instructed the First Appellate Authority to pass the reassessment order within a specified timeframe and prohibited the respondent from raising any demand until the matter was resolved.

This detailed analysis covers the issues involved in the legal judgment, highlighting the challenges faced by the appellant regarding the reassessment and pre-deposit demands, and the Court's decision to remand the matter for reassessment considering the appellant's circumstances.