Time limit for compliance of mandatory "Pre-Deposit" for entertaining appeal by the appellate authority.

2019 (7) TMI 589 - Supreme Court

Related Acts in the present case

The provisions of APGST Act, 1957 or AP VAT Act, 2005 or Telangana State VAT Act, 2005

Facts of the case

Appeal of the assessee was rejected on the ground that, the appellant-assessee had failed to comply with the precondition of producing proof of payment of tax admitted to be due or of such installments as may have been granted and/or the proof of payment of twelve and a half percent (12.5%) of the difference of the tax assessed by the assessing authority and the tax admitted by the appellant for the relevant assessment year in respect of which the appeal has been preferred by the concerned appellant-assessee, warranting rejection of the appeal in terms of the second proviso of Section 19 and proviso of Section 21 (2) of the APGST Act, 1957 or second proviso of Section 31 and proviso of Section 33 (2) of the AP VAT Act, 2005.

Contention of the assessee

The thrust of the argument is that in cases where the appellant-assessee has already paid the requisite amount referred to in the second proviso of the concerned provision, before the appeal is taken by the Appellate Authority/Court for the “first time for consideration” after its filing in the office of the Appellate Authority, that will be substantial compliance of the second proviso. In such a case, the Appellate Authority would be obliged to admit the appeal if it deserves consideration on merits and the appellant-assessee cannot be nonsuited on the ground that the amount so paid is after the limitation period specified for filing of an appeal.

Contention of the State / Revenue

 if the amount specified in the second proviso is not deposited within the period provided for filing an appeal and including for condonation of delay, such appeal would be inflicted with institutional defect and will have to be rejected on that count in light of the mandate contained in the proviso of the concerned provision. It is urged that the appellants have been illadvised to invoke doctrine of merger. According to the respondent State, on a bare perusal of the decision of this Court in M/s. Innovatives Systems [2015 (2) TMI 1314 - Supreme Court], and the other decisions passed following the same would clearly indicate that it has been passed in the fact situation of the concerned case.

Notably, this Court has not interpreted the provisions under consideration or for that matter explicitly overturned the principle expounded by the Division Bench in Ankamma Trading Company [2011 (2) TMI 1254 - Andhra Pradesh High Court]. Whereas, a bare reading of the provision makes it amply clear that it is a mandatory provision. Failure to comply with the stipulation in the second proviso would inevitably denude the Appellate Authority from entertaining the same or so to speak, admitting the same on merits. Heavy reliance has been placed on the decision in the case of M/s. Lakshmi Rattan Engineering Works Ltd. Vs. Asst. Commr. Sales Tax, Kanpur & Anr. [1967 (9) TMI 116 - Supreme Court], wherein this Court was called upon to interpret Section 9 of the relevant enactment.

As per that provision, no appeal against an assessment shall be entertained unless it is accompanied by satisfactory proof of the payment of the tax amount admitted by the appellant to be due. The exposition in this decision, according to the respondent State, would admit of no other interpretation of the second proviso as is held by the Division Bench of the High Court in Ankamma Trading Company [2011 (2) TMI 1254 - Andhra Pradesh High Court]. In that, the Appellate Authority cannot exercise power to admit the appeal beyond the statutory period and since the pre-deposit is quintessence, the requirement of pre-deposit within the maximum period of limitation for filing the appeal including, for condoning the delay in filing the same, would have bearing on the second proviso of the concerned provision. 

Analysis and Decision:

Upon reading the Section under consideration as a whole, it is evident that the first proviso in the concerned Section (Section 19 and Section 31, as the case may be) pertains to limitation period “for filing” of an appeal; and discretion of the Appellate Authority to condone the delay in filing of such appeal, up to a maximum period specified therein. Indeed, the second proviso is part of the same Section. However, it is an independent condition and in one sense, mutually exclusive condition mandating or enjoining the appellant to produce proof of payment of tax dues in respect of which the appeal is preferred.

That obligation, in our opinion, can be discharged until the appeal is considered for admission and/or condonation of delay in filing of the appeal, as the case may be, by the Appellate Authority for the first time.

We are inclined to take this view as even the High Court in Ankamma Trading Company (supra) had justly noted that the said proviso does not provide for any specific period within which the tax dues should be paid. Moreover, there is no express stipulation to deposit the tax dues in respect of which the appeal is preferred, at the time of its filing, institution or presentation as such. In the absence of such a clear stipulation, it must necessarily follow that it is open to the assessee to file the appeal within the statutory period of limitation provided therefor and later on, deposit the specified tax dues but before the appeal is taken up for consideration by the Appellate Authority for the first time – be it for condonation of delay in filing the appeal and/or to admit it on merits or otherwise. The proof of such payment having been made could be produced thereat. Failing which, the Appellate Authority will have no other option but to reject the appeal on that count. The Appellate Authority has no power to extend the time to deposit the specified tax dues.

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It is well recognized that filing, institution or presentation of appeal in the office of the Appellate Authority is an independent event than the appeal being taken up for consideration “for the first time” for being admitted on merits or otherwise and/or for condonation of delay in filing it, as the case may be. There is no reason to interpret the stated proviso in any other manner lest, inevitably, it would result in rewriting the same and entail in doing violence to the legislative intent. Presumably, this Court in M/s. Innovatives Systems [2015 (2) TMI 1314 - Supreme Court], and other decisions rendered following the same, therefore, was persuaded to allow the appeal preferred by the assessee and to relegate the parties before the Appellate Authority for consideration of the appeal for admission on merits.

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In that sense, the legal position expounded in Ankamma Trading Company [2011 (2) TMI 1254 - Andhra Pradesh High Court], stood impliedly overruled, even though that decision has not been adverted to or expressly overruled by this Court.

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 Indeed, the decision of this Court in M/s. Innovatives Systems [2015 (2) TMI 1314 - Supreme Court], is a brief judgment. That, however, would make no difference. For, it is well established that once a special leave petition has been granted, the doors for the exercise of appellate jurisdiction of this Court have been let open. Resultantly, the order impugned before the Supreme Court became an order appealed against and any order passed thereafter would be an appellate order and attract the doctrine of merger despite the fact that the order is of reversal or of modification or of affirming the order appealed against and including is a speaking or nonspeaking one. This legal position has been restated in Kunhayammed [2000 (7) TMI 67 - Supreme Court]. Having said this, we must reject the argument of the respondent State that the decision of this Court in M/s. Innovatives Systems [2015 (2) TMI 1314 - Supreme Court], and other decisions following the same, cannot be considered as binding precedent.

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Reverting to the factual position in the appeals under consideration, admittedly, the appellant-assessee had deposited the specified tax dues before the date on which appeal preferred by them was taken up for consideration for the first time for admission on merits. In such a situation, the stated proviso becomes unavailable to reject the appeal on the ground of institutional defect. In this view of the matter, all these appeals must succeed.

Full Text:

2019 (7) TMI 589 - Supreme Court