2021 (9) TMI 1149 - HC - VAT and Sales Tax

High Court clarifies pre-deposit rule for penalty stays, emphasizes appellate discretion

M/s. ACT Digital Home Entertainment Pvt. Ltd., Versus The State of Andhra Pradesh, Rep. by its Principal Secretary, Dept. of Revenue-Finance & (C.T) and three others.

The High Court set aside the order refusing to stay the recovery of disputed penalty pending appeal. It clarified that the pre-deposit requirement does ... Violation of principles of natural justice - penalty order was passed without considering that the assessment order - seeking stay on recovery of the disputed penalty pending the appeal - HELD THAT:- There are merits in the submission of the petitioner that since the appeal against the assessment order is pending, which according to the petitioner was passed during pandemic conditions without adequate opportunity being given to the petitioner to place relevant records before the assessing officer, as contended in the appeal proceeding, an arguable case has been made out in his favour and an order of stay of collection of the remaining penalty ought to have been passed on conditions. The impugned order is set aside and it is directed that deposit of 25% of the disputed penalty after adjusting the amount already deposited within a period of four (4) weeks from date, there shall be suspension of realization of the remainder of the disputed penalty till the disposal of the appeal. Petition allowed. Issues:1. Refusal to stay the recovery of disputed penalty pending appeal.2. Interpretation of provisions of the Andhra Pradesh Value Added Tax Act, 2005 regarding stay of collection of balance tax/penalty during appeal.3. Precedent set by previous judgments on pre-deposit requirements for appeal and suspension of penalty realization.Issue 1: Refusal to stay the recovery of disputed penalty pending appealThe writ petition challenges the CTD order refusing to stay the recovery of the disputed penalty pending appeal before the Appellate Deputy Commissioner. The petitioner argues that the penalty order was unjust as it was passed without considering the lack of adequate hearing during assessment. The petitioner relies on the case of Sri Dedeepriya Paints to support the claim that making a pre-deposit of 12.5% of the penalty should automatically suspend the realization of the remaining penalty pending appeal. However, the Government Pleader for Commercial Taxes contends that the provisions of Section 31(3)(a) and (b) of the A.P.VAT Act give discretionary power to the appellate authority to consider stay requests during appeal proceedings.Issue 2: Interpretation of provisions of the Andhra Pradesh Value Added Tax Act, 2005 regarding stay of collection of balance tax/penalty during appealThe Court analyzed the provisions of Section 31(3)(a) and (b) of the A.P.VAT Act, which empower the appellate authority to order stay of the balance tax/penalty under dispute pending appeal upon application by the appellant. The Court noted that the previous judgment in Sri Dedeepriya Paints did not establish a rule that pre-deposit of 12.5% automatically suspends the realization of the remaining tax liability. The discretionary power granted by the Act to the appellate and revisional authorities to stay collection during appeal proceedings was highlighted as crucial in determining the outcome of the case.Issue 3: Precedent set by previous judgments on pre-deposit requirements for appeal and suspension of penalty realizationThe Court distinguished the case of Sri Dedeepriya Paints from another judgment where a stay was granted on the condition of depositing 25% of the disputed tax. It was emphasized that no binding precedent was set by the previous case regarding the automatic suspension of penalty realization based on pre-deposit requirements. However, the Court acknowledged the merit in the petitioner's argument that an arguable case was presented due to inadequate opportunity during assessment, leading to the direction to suspend the realization of the remaining penalty upon depositing 25% within a specified period.In conclusion, the High Court set aside the impugned order and directed the suspension of the realization of the remaining penalty pending appeal upon the petitioner's compliance with the deposit requirement. The judgment clarified the discretionary power of the appellate and revisional authorities under the A.P.VAT Act in deciding on stay requests during appeal proceedings, emphasizing the need to consider the specific circumstances of each case.