2015 (1) TMI 765 - HC - VAT and Sales Tax

Court quashes VAT tribunal's pre-deposit, reinstates appeals for proper assessment

SHIVAM WATER TREATERS PVT LTD. Versus STATE OF GUJARAT

The court quashed the Gujarat Value Added Tax Tribunal's order requiring a significant pre-deposit for an appeal, considering the petitioner's financial ... Order of Pre-deposit complied or not - Whether the Deputy Commissioner of Commercial Tax needs to be directed to hear the appeal on merits without requiring the petitioner to make any further deposit towards the tax dues – Held that:- By an order dated 5th July, 2011, the assets of the petitioner including goods, factory, land, motor cars, lands of Directors, etc. came to be attached - at the time of attachment, the value of the properties was around ₹ 53 crores, out of which the stock was valued at ₹ 48 crores - However, now according to the respondent, the value of the stock is estimated at ₹ 2.15 crores only - The appellate authority/Deputy Commissioner has directed the petitioner to pre-deposit ₹ 7,13,27,525/- for hearing the appeals on merits - instead of deciding the matter on merits by examining as to whether the petitioner had made out a prima facie case or as to whether any of the circumstances envisaged under the proviso to section 73 of the Act are attracted, the Tribunal proceeded to ask the Department to dispose of the stock attached by it with a view to recover the amount towards the pre-deposit – section 73(4) of the GVAT Act, it is apparent that the same prohibits entertainment of any appeal by an appellate authority unless the same is accompanied by satisfactory proof of payment of tax in respect of which the appeal has been preferred - However, the proviso thereto permits the appellate authority if it thinks fit for reasons to be recorded in writing to entertain the appeal without payment of tax with penalty or without penalty, on payment of proof of a smaller sum as it may consider reasonable or on the appellant furnishing in the prescribed manner, security for such amount as the appellate authority may direct - Thus, any of the aforesaid three courses of action are available to the appellate authority, if it so deems fit. The court has examined the order of assessment passed by the AO and is of the view that the petitioner does have a prima facie case in its favour - insofar as the payment of pre-deposit as directed by the appellate authority is concerned, the court is of the view that as per the averments made in the affidavit-inreply filed by the respondent that at the time when the properties were attached vide order dated 5th July, 2011, the same were worth ₹ 53 crores, and as such the interest of the department is sufficiently secured – thus, the appeals filed by the petitioner before the appellate authority are required to be heard on merits without payment of any amount by way of pre-deposit, in view of the fact that sufficient security is available with the department by way of attachment of the properties of the petitioner – thus, the order of the Tribunal is set aside and the matter is restored to the DCCT for adjudication – Decided in favour of applicant assessee. Issues Involved:1. Challenge to the order of the Gujarat Value Added Tax Tribunal.2. Direction to hear the appeal on merits or remand to the first appellate authority.3. Requirement of pre-deposit for the appeal.4. Financial hardship and attachment of assets.5. Tribunal's approach to the pre-deposit requirement.6. Application of Section 73 of the GVAT Act.7. Prima facie case and balance of convenience.Issue-wise Detailed Analysis:1. Challenge to the Order of the Gujarat Value Added Tax Tribunal:The petitioner challenged the order dated 9th September 2014, passed by the Gujarat Value Added Tax Tribunal. The Tribunal upheld the Deputy Commissioner's decision requiring a pre-deposit for the appeal to be heard on merits.2. Direction to Hear the Appeal on Merits or Remand to the First Appellate Authority:The petitioner sought a direction for the Tribunal to hear the appeal on merits or to remand the matter to the Deputy Commissioner of Commercial Tax, who had dismissed the appeal due to non-compliance with the pre-deposit order.3. Requirement of Pre-deposit for the Appeal:The Tribunal directed the petitioner to make a pre-deposit of Rs. 7,13,27,525 under the VAT Act and Rs. 10,00,000 under the CST Act. The petitioner argued financial hardship, citing that all assets were attached, making it impossible to comply with the pre-deposit order.4. Financial Hardship and Attachment of Assets:The petitioner's assets, including goods, factory, land, motor cars, and properties of the Directors, were attached by the department. The petitioner argued that this attachment should be considered sufficient security, negating the need for a pre-deposit.5. Tribunal's Approach to the Pre-deposit Requirement:The Tribunal initially ordered the department to recover the pre-deposit amount from the sale of attached assets. However, it failed to consider whether the petitioner had made out a prima facie case or if the balance of convenience and irreparable loss warranted a waiver of the pre-deposit.6. Application of Section 73 of the GVAT Act:Section 73(4) of the GVAT Act typically requires proof of payment of tax for an appeal to be entertained. However, the proviso allows the appellate authority to waive this requirement if sufficient security is provided. The Tribunal did not adequately consider this provision in its decision.7. Prima Facie Case and Balance of Convenience:The court noted that the Tribunal did not apply its mind to whether the petitioner had a prima facie case or if the balance of convenience and irreparable injury justified waiving the pre-deposit. The court found that the petitioner did have a prima facie case and that the attached assets provided sufficient security.Conclusion:The court concluded that the Tribunal's order failed to consider relevant factors and could not be sustained. It quashed the Tribunal's order, the auction notice, and the Deputy Commissioner's order dismissing the appeals. The appeals were restored to the Deputy Commissioner for a decision on merits, with the attachment of properties considered sufficient security under Section 73(c) of the GVAT Act. The petition was allowed with no order as to costs.