2014 (7) TMI 1149 - HC - VAT and Sales Tax

Court directs public sector entity to provide bank guarantee instead of 30% tax deposit

The court ruled in favor of the public sector undertaking, directing it to provide a bank guarantee instead of making a 30% tax deposit as required by ... Demand of outstanding tax due - whether the petitioner should deposit 30% of the tax dues before the appellate authority in terms of Section 62 (1)(4)(c)(i) of the Act - Held that:- Even 30% of the tax to be deposited would be around ₹ 10 crores and odd, which indeed is a greater amount. The petitioner i s a public sector undertaking and is in a comfortable and good financial condition. In that view of the matter, 70% of the dues need not be deposited before the appellate authority and instead of waiving deposit of 30% of the tax amount before the appellate authority, the petitioner is directed to give a bank guarantee to the satisfaction of the appellate authority on or before 01.08.2014. If such a bank guarantee is given by t he petitioner, the appellate authority to consider the case of the petitioner on merits and dispose it in accordance with law. - petitioner also undertake to pay the entire tax dues with interest in accordance with provisions of the Act within a period of one month from the date of the order of the appellate authority in case it is unsuccessful before that authority. This undertaking is of course is subject to any further orders that to be made by any other authority - Petition disposed of. Issues:1. Validity of the endorsement demanding outstanding tax dues from a public sector undertaking.2. Interpretation of Section 62 of the Karnataka Value Added Tax Act, 2003 regarding appeals and deposit requirements.3. Consideration of waiving the deposit of 30% of tax amount for a public sector undertaking.4. Comparison with a previous Supreme Court judgment involving a public sector company.Analysis:The judgment pertains to a public sector undertaking challenging an endorsement demanding outstanding tax dues issued by the 3rd respondent authority. The endorsement was based on a reassessment order passed under Section 39 of the Karnataka Value Added Tax Act, 2003. The petitioner had filed an appeal before the 4th respondent, but it had not been heard yet. The petitioner argued that the entire tax liability was disputed and, therefore, should not be required to deposit 30% of the tax amount as per Section 62 of the Act. The petitioner relied on a Supreme Court judgment involving another public sector company where a deposit was waived pending appeal.The court considered both sides' arguments. The respondents opposed waiving the deposit, fearing it could set a precedent and bypass the statutory provision. They argued that the petitioner, being a financially stable company, should make the deposit. The court noted that the petitioner's liability was under dispute, and the decision rested with the appellate authority. It referenced the Supreme Court's decision involving a public sector company and agreed that the petitioner should not be required to deposit 30% of the tax amount. Instead, the petitioner was directed to provide a bank guarantee to the appellate authority and pay the entire tax dues with interest within a month if unsuccessful before that authority. The court emphasized that the order was specific to the petitioner being a public sector undertaking and should not be treated as a precedent for other assesses.In conclusion, the court disposed of the writ petitions by directing the petitioner to provide a bank guarantee instead of making the 30% tax deposit, considering the petitioner's status as a public sector undertaking. The judgment highlighted the unique circumstances of the case and the need to balance the statutory provisions with the petitioner's financial condition.