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TMI Blog1989 (10) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner or the Deputy Commissioner under section 20 shall not, pending disposal of the appeal, be stayed by the Appellate Tribunal." However, the power to grant stay is retained in so far as the appeals filed against an order passed by the A.C. or the D.C., under section 21 of the Act, is reproduced below: "Section 11(3)(i). In sub-section (5), in the first proviso, after the words 'Appellate Tribunal may', the words and figures except in case of an appeal against an order passed by the Assistant Commissioner or Deputy Commissioner under section 20', shall be inserted, (ii) second proviso shall be omitted." The main contention of the petitioners is that the Tribunal had power to grant stay in all matters filed under section 22(1) of the Act before the amendment, in exercise of its discretion to make an order of stay in regard to payment of tax during the pendency of the appeals as provided under sub-section (5). It is argued that by virtue of the amendment, the power to grant stay even on imposing conditions, is taken away, thus seriously affecting the rights of the assessees-appellants and defeating in many fit cases the very right of appeal and the purpose of contesting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal by virtue of the amendment taking away the power of stay and the petitioner is faced with imminent recovery by coercive process. Writ Petitions Nos. 3651 to 3653 of 1989 connected with Writ Petitions Nos. 4089 and 4090 of 1989. The contentions urged before the Appellate Tribunal in appeals before it are: (i) that the assessments on the dissolved firms completed without notice to the other partners, are bad in law; (ii) that the assessments were completed beyond the period of limitation; (iii) that the petitioner is not liable to pay tax on the sale of certain seeds, which is exempt under the Act; and (iv) financial hardship to pay the tax by the petitioner-firm having regard to the fact that the firm is dissolved and none of the erstwhile partners, is in a position to deposit the disputed tax during the pendency of the appeals and are faced with coercive recovery by issue of notice to the tenants of the partners under section 14 of the Act. It is also argued that the petitioners have a Prima facie case on merits and, therefore, it is a fit case for stay of the recovery on various grounds urged before the Tribunal. Writ Petitions Nos. 13559 and 13560 of 1989. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in Hoosein Kasam Dada v. State of Madhya Pradesh [1953] 4 STC 114. The settled position in regard to the nature of the right of appeal and other incidents of such right, as stated above, in points (i) and (ii) is the ratio of the said decision. It is necessary to refer, in this connection, to the leading case on the subject referred to by the Supreme Court in Hoosein Kasam Dada's case [1953] 4 STC 114, viz., the decision of the judicial Committee in Colonial Sugar Refining Co. Ltd. v. Irving [1905] AC 369. They have also referred to and followed, with approval, the enunciation of the law by Sir John Rankin, C.J., in Kirpa Singh v. Risalldar Ajaipal Singh AIR 1928 Lah. 627 (FB). The dispute in Hoosein Kasam Dada's case [1953] 4 STC 114 (SC) arose under the proviso to section 22(1) of the C.P. and Berar Sales Tax Act, 1947, as it stood prior to its amendment in 1949. An aggrieved assessee was entitled to file an appeal provided he paid such amount of tax as he might admit to be due from him. Under the proviso to section 22(1), after amendment, the appeal had to be accompanied by satisfactory proof of payment of tax in respect of which the appeal had been preferred. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct had an unfettered right of appeal and that right cannot be whittled down by adopting the provisions relating to the procedure laid down under section 129 of the Customs Act. Applying the observations made by Sri S.R. Das, J. (as he then was) in Hoosein Kasam Dada's case [1953] 4 STC 114, the Supreme Court reiterated that a provision which is calculated to deprive the appellant of the unfettered right of appeal, cannot be regarded as mere procedure. II. The next class of cases that were relied upon by the petitioners is about the scope of the power vested in the Appellate Tribunal, quite apart from the right of the assessee dealt with in the cases referred to above. (i) The first of the cases on this point is the case decided by the Supreme Court in Income-tax Officer v. M.K. Mohammed Kunhi [1969] 71 ITR 815. The Supreme Court was dealing with the powers of the Appellate Tribunal under section 254 of the Income-tax Act. Though there was no specific conferment of power to stay the recovery of the disputed tax during the pendency of the appeal under section 254 of the Income-tax Act, the Supreme Court held that the powers conferred on the Appellate Tribunal with widest possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservations made by Jessel M.R. about the powers of the Court of Appeal to grant stay, is reproduced below: "It appears to me on principle that the court ought to possess that jurisdiction, because the principle which underlies all orders for the preservation of property pending litigation is this, that the successful party in the litigation, that is, the ultimately successful party, is to reap the fruits of that litigation, and not obtain merely a barren success. That principle, as it appears to me, applies as much to the court of first instance before the first trial, and to the Court of Appeal before the second trial, as to the court of last instance before the hearing of the final appeal." (ii) The recent decision of the Supreme Court dealing with the powers of the Appellate Tribunal under the Income-tax Act is the one reported in [1986] 157 ITR 665; AIR 1986 SC 421 (Commissioner of Income-tax v. Bansi Dhar Sons). It was held in that case that the High Court cannot exercise its inherent power under section 151 or constitutional power under article 226 to grant stay of recovery of the disputed tax in a reference pending before it under the Income-tax Act. But the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and bankers by freezing their bank account and by distraint and sale of movables and immovables through revenue recovery. It is also pointed out that by the amendment to section 22 by inserting the proviso to sub-section (4), the assessee cannot claim any interest on any amount refunded to him as a result of the appeal, whereas, the assessee has to pay exorbitant interest on the tax withheld as required under section 13(2) of the Act which works out to nearly 30 per cent for each month depending upon the delay. It is, therefore, demonstrated that even if the assessee succeeds in the appeal, he is not entitled to any interest on the amount refunded. In support of the arguments of Sri Indra Kumar, Sri Ramabhadran, learned counsel appearing for some of the petitioners, submitted that there is clear discrimination brought about in the amending Act and the amendment is, therefore, arbitrary and unconstitutional. It was argued that the power to grant stay by the Tribunal was taken away with effect from 1st April, 1988. This amendment was brought about in order to implement the Finance Minister's speech, viz., that the amendment is necessary in order to ensure better recovery of taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th reference to the provisions of section 20, sub-section (5) that the Deputy Commissioner can confirm, reduce or annul the assessment, but he is also empowered to enhance assessment, and thus, he has all the powers of an assessing authority under the Act. Therefore, in case of an order enhancing the assessment, it becomes a first appeal to the Appellate Tribunal and that, therefore, there is no reason or rationale to exclude the power of stay by the Tribunal even in such cases. It is also further argued that there is no rationale or nexus so far as the distinction made between the appeals against orders made under sections 20 and 21 under which it is provided power to revise in cases where prejudice to the interests of Revenue has resulted. It was, therefore, argued by Sri Gandhi, with some emphasis, that the amendment which is brought about without appreciating and without keeping in view of the implications of such an amendment, should be struck down as arbitrary, irrational and unconstitutional. The learned counsel has also supported the arguments of the other learned counsel that by virtue of section 5 of the Karnataka Appellate Tribunal Act of 1976, the Appellate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mposing conditions of payment of tax before an appeal is admitted. (2) [1979] 44 STC 331 (P H) (Subhash Chander Co. v. State of Punjab). Dealing with the right of appeal and constitutionality of subsection (5) of section 20 of the Punjab General Sales Tax Act, if was held by the High Court that the right of appeal is a mere creature of the statute and it is open to the legislature which confers such a right, equally to take away the same if necessary. These observations were made in the context of the provisions of sub-section (5) of section 20 under which it was obligatory for the appellant to produce proof of payment of tax. However, it has to be observed under the proviso to the said provision, the appellate authority, if satisfied that the dealer is unable to pay the tax assessed could entertain the appeal without the tax or penalty or permit him to pay part of the tax. This decision does not assist the respondent's case. (3) AIR 1975 SC 1234 (Anant Mills Co. Ltd. v. State of Gujarat). The observation made by Khanna, J., in paragraph 40 of the judgment is relied upon. The Supreme Court was dealing with the constitutionality of the provisions of the Bombay Provincial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the present amendment should also be upheld as valid and constitutional and the writ petitions be dismissed on this sole ground. As stated in the early part of this order, the question that arises in these cases has to be decided on the basis of the principles laid down in various decisions of the Supreme Court, relied upon by the petitioners, vis-a-vis, the effect of the amendment brought about by Act 15 of 1988 to section 22 of the Karnataka Sales Tax Act taking away the power of the Tribunal to grant stay in certain cases. On a review of the case law relied upon by the learned counsel for the petitioners, the settled position that emerges is: (i) a right of appeal is not mere matter of procedure but is a substantive right; (ii) that right of appeal is a vested right which is governed by the existing law before amendment; (iii) such vested right which inheres in a party at the commencement of the proceedings under the Karnataka Sales Tax Act, cannot be destroyed by a subsequent amendment; and (iv) the impugned amendment taking away the power to grant stay in fit cases, is opposed to the very concept of vesting appellate powers in an authority. In the context of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the law that is being developed and interpreted by the Supreme Court on this aspect. It is a legislation passed without application of mind and regardless of the consequences and prejudice it would cause to the valuable rights of the dealers under the Act and at the same time interfering with the discretionary powers vested and conferred upon the Appellate Tribunal under the Act. In the result, for the reasons stated above, the writ petitions are allowed and sub-section (3A) as inserted by section 11 of the amending Act 15 of 1988, is struck down as unconstitutional and ultra vires section 22 of the Karnataka Sales Tax Act. Further, the amendment brought about to sub-section (5) of section 22 by section 11(3) of the amending Act 15 of 1988, is also struck down, as a consequence. In the light of this order, the Appellate Tribunal is directed to entertain stay applications that may be filed by the assessees-appellants against the orders passed under section 20 of the Karnataka Sales Tax Act and pass suitable orders as is deemed fit on the facts of each case. It is also further directed that the Appellate Tribunal shall continue to exercise its powers conferred on it und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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