2013 (3) TMI 385 - HC - VAT and Sales Tax

High Court overturns tribunal's interim protection order in VAT dispute, stresses assessing merits before granting stay.

ITC. Ltd. Versus Commercial Tax Tribunal And Others

The Allahabad High Court set aside the tribunal's order granting interim protection to an assessee in a Value Added Tax dispute for specific months in ... Payment of VAT - tribunal has extended protection to 90% of the disputed amount of tax assessed and the assessee has been required to deposit 10% amount and to furnish security for 90% of it - assessee preferred revision application as in granting interim protection even to the extent of 90%, the tribunal has not considered the prima-facie merits of the case - Held that:- The assessee has strong prima-facie case in as much as the impugned assessment has been passed without adverting to the books of accounts and pointing out any discrepancy therein. As decided I. T. C. LTD. Versus COMMISSIONER (APPEALS), CUS. & C. EX., MEERUT-I [2003 (10) TMI 70 - HIGH COURT OF JUDICATURE AT ALLAHABAD] the stay should not be granted on mere asking of the party but on consideration of the prima-facie merits of the case. The tribunal has not dealt with the prima-facie merits of the case in deciding the stay application, thus its order is accordingly set aside and the matter is remitted to the tribunal for fresh consideration of the stay application of the assessee in accordance with law within a period of six weeks time. The notice dated 5.4.2013 requiring the assessee to deposit 10% of the disputed tax assessed by 8th March 2013, failing which the bank accounts of the assessee are threatened to be attached is to be set aside as some breathing time may be allowed for depositing the aforesaid 10% of the amount. Thus the assessee is permitted to deposit 10% of the amount demanded as per the order of the tribunal within a period of two weeks from today. Issues:1. Dispute over payment of Value Added Tax for specific months in 2012.2. Granting of interim protection to the assessee by the tribunal.3. Lack of consideration of prima-facie merits by the tribunal in granting interim protection.4. Setting aside the tribunal's order and remitting the matter for fresh consideration.5. Requirement for the assessee to deposit a percentage of the disputed tax assessed.Analysis:The judgment by the Allahabad High Court revolves around a dispute concerning the payment of Value Added Tax for the months of August, September, and October 2012 by an assessee engaged in manufacturing cigarettes. The assessing authority based the assessment on past turnover due to discrepancies in the turnover for the concerned months. The assessee was initially granted interim protection by depositing 35% of the disputed amount and furnishing security for the remaining 65%. Subsequently, the tribunal extended the protection to 90% of the disputed tax, requiring a 10% deposit and security for the same. However, the assessee, dissatisfied with the tribunal's decision, filed a revision contending that the tribunal failed to consider the prima-facie merits of the case in granting interim protection.The judgment highlights the importance of assessing the prima-facie merits before granting stay applications, citing a precedent from a Division Bench of the Court. The Court noted that the tribunal did not adequately consider the prima-facie merits in the interim stay application, leading to the setting aside of the tribunal's order. The matter was remitted back to the tribunal for a fresh consideration of the stay application in line with the law, with a directive for expeditious resolution within six weeks from the date of the order. During the proceedings, the assessee requested additional time to deposit the 10% of the disputed tax as demanded by the tribunal, which was granted by the Court.In conclusion, the judgment disposed of the petition accordingly, emphasizing the need for the first appellate authority to ensure prompt and thorough adjudication of the appeal on its merits. The judgment underscores the significance of considering prima-facie merits in granting interim protection and upholding procedural fairness in tax dispute resolution.