2016 (2) TMI 613 - HC - VAT and Sales Tax

Court upholds tax deposit requirement, allows waiver in deserving cases. Precedent guides Tribunal on deposit conditions.

M/s Ambuja Cements Limited Versus The State of Punjab and others

The High Court upheld the validity of Section 65(3) of the Punjab Value Added Tax Act, 2005, mandating a 25% tax deposit for revision applications but ... Constitutional validity of requirement of mandatory pre-deposit of 25% without giving any discretion to the revisional authority to waive such deposit. - Section 65(3) of the Punjab Value Added Tax Act, 2005 (PVAT) - Held that:- provisions of Section 65(3) of PVAT Act are held to be intra vires, however, the Tribunal shall decide the matter in accordance with law in terms of the judgment in Punjab State Power Corporation Limited's case [2016 (2) TMI 245 - PUNJAB AND HARYANA HIGH COURT] - Decided in favor of assessee. Issues:Challenge to the vires of Section 65(3) of the Punjab Value Added Tax Act, 2005 regarding mandatory deposit for revision hearing without discretion.Analysis:The petitioner sought a declaration that Section 65(3) of the PVAT Act is unconstitutional for mandating a 25% tax deposit without revisional authority discretion and to quash a demand notice for a substantial amount. The petitioner, a registered company, faced revisional proceedings for the 2006-07 assessment year due to discrepancies in cement sale prices. Despite expiry of assessment time limits, revision proceedings were initiated, leading to a revised order imposing a significant demand. Previous legal challenges were unsuccessful, and the petitioner deposited substantial sums for other years. The petitioner argued that the deposit should be considered against the additional demand. The High Court heard arguments from both parties.The contentious Section 65(3) of the PVAT Act, akin to Section 62(5), requires a 25% deposit for revision applications. The Court referenced a previous case, Punjab State Power Corporation Limited, where it was concluded that the first appellate authority could waive the pre-deposit condition in deserving cases to prevent appeal frustration. The power to grant interim protection/injunction was deemed legal and valid in cases of undue hardship. The Court held that the provisions of Section 65(3) were valid but emphasized the authority's discretion to waive the deposit requirement in appropriate situations. The Tribunal was directed to decide the matter following the principles outlined in the Punjab Power Corporation Limited case.In conclusion, the Court upheld the validity of Section 65(3) of the PVAT Act but stressed the importance of the Tribunal exercising discretion in line with the precedents set in the Punjab Power Corporation Limited case. The writ petition challenging the section's vires was disposed of accordingly.