2015 (9) TMI 1513 - HC - VAT and Sales Tax

Court Invalidates Communication, Directs Appeal Hearing; Stay Granted Pending Bank Guarantee

The court set aside Ext.P6 communication as legally per se illegal and directed the 4th respondent to proceed with the hearing of Ext.P5 appeal before the ... Suppression of facts - offence of storing and stocking unaccounted goods in the undeclared godown - legality or otherwise of Ext.P6 communication issued by the 4th respondent by which Ext.P5 appeal filed by the petitioner before the Appellate Tribunal under Section 60 of the KVAT Act has been returned, stating that the petitioner has to file a revision against Ext.P3 order, before the Commissioner of Commercial Taxes, under Section 59 of the KVAT Act. Held that: - By virtue of the amendment made to sub-section (1) of Section 55 of the KVAT Act, an order imposing penalty under sub-section (8) of Section 44 or under Section 67 of the KVAT Act became not appealable, with effect from 1.4.2014. Therefore, with effect from the aforesaid date, a dealer who is aggrieved by an order imposing penalty under sub section (8) of Section 44 or under Section 67 of the KVAT Act has to avail the revisional jurisdiction provided under Section 57 of the KVAT Act, by filing an application for revision - However, in the case of an appeal already pending before the Deputy Commissioner (Appeals) and Assistant Commissioner (Appeals), arising out of orders issued under sub-sections (8) and (9) of Section 44, Section 67, etc., an exception is carved out in the third proviso to sub-section (1) of Section 55 of the KVAT Act, by providing that the pending appeal shall stand transferred to the appropriate authority under the KVAT Act and such authority shall consider the same as if it is an appeal filed before it. Writ petition is disposed of setting aside Ext.P6 communication issued by the 4th respondent and directing the said respondent to take back Ext.P5 appeal on the files of the Kerala Value Added Tax Appellate Tribunal and to post the same for hearing by the Bench of the Tribunal, treating Ext.P3 order passed by the 2nd respondent as one arising out of an appeal filed under sub-section (1) of Section 55 of the KVAT Act, in view of the third proviso to Section 55 of the said Act - decided in favor of petitioner. Issues Involved:1. Legality of Ext.P6 communication.2. Treatment of Ext.P2 appeal as a revision under Section 57 of the KVAT Act.3. Compliance with the third proviso to Section 55 of the KVAT Act.4. Stay of recovery proceedings pending appeal.Issue-wise Detailed Analysis:1. Legality of Ext.P6 Communication:The primary issue addressed in this judgment is the legality of Ext.P6 communication issued by the 4th respondent. The petitioner filed Ext.P5 appeal before the Appellate Tribunal under Section 60 of the KVAT Act, which was returned by the 4th respondent, stating that the petitioner must file a revision before the Commissioner of Commercial Taxes under Section 59 of the KVAT Act. The court found this reasoning to be legally per se illegal and contrary to the third proviso to Section 55 of the KVAT Act.2. Treatment of Ext.P2 Appeal as a Revision Under Section 57 of the KVAT Act:The petitioner's business premises were inspected, leading to a penalty under sub-sections (8) and (10) of Section 44 of the KVAT Act for storing goods in an undeclared godown. The petitioner filed Ext.P2 appeal against this penalty. Due to amendments in Section 55 of the KVAT Act by the Kerala Finance Act, 2014, the appeal was transferred to the 2nd respondent, who erroneously treated it as a revision under Section 57. The court declared this procedure illegal, emphasizing that the 2nd respondent should have considered the transferred appeal as if it was originally filed before it, in compliance with the third proviso to sub-section (1) of Section 55.3. Compliance with the Third Proviso to Section 55 of the KVAT Act:The third proviso to Section 55 stipulates that appeals pending as of 1.4.2014 shall be transferred to the appropriate authority and considered as if filed before it. The 2nd respondent failed to comply with this mandate by treating the appeal as a revision. The court highlighted that the 2nd respondent's action was arbitrary and patently illegal, as the transferred appeal should have retained its status as an appeal, not a revision.4. Stay of Recovery Proceedings Pending Appeal:The petitioner sought a stay on recovery proceedings pending the resubmission of Ext.P5 appeal. The court granted this stay for two months, conditional on the petitioner furnishing a bank guarantee for 75% of the penalty amount within two weeks. This stay was to enable the petitioner to resubmit the appeal and move the stay petition before the Kerala Value Added Tax Appellate Tribunal.Conclusion:The court disposed of the writ petition by setting aside Ext.P6 communication and directing the 4th respondent to take back Ext.P5 appeal for hearing by the Tribunal. The court also stayed all recovery proceedings for two months, subject to the petitioner furnishing a bank guarantee for 75% of the penalty amount. No order as to costs was made.