2023 (11) TMI 717 - HC - VAT and Sales Tax

Punjab and Haryana HC reduces pre-deposit requirement from 25% to 10% under Section 62(5) PVAT Act citing financial hardship

The Punjab and Haryana HC modified the pre-deposit requirement under Section 62(5) of the PVAT Act from 25% to 10% of the additional demand. The court ... Pre-deposit requirement for first appeal - inherent powers under Article 226 of the Constitution of India - financial hardship as ground for modification of pre-deposit - entertainment of appeal on merits despite statutory pre-deposit conditionPre-deposit requirement for first appeal - financial hardship as ground for modification of pre-deposit - inherent powers under Article 226 of the Constitution of India - entertainment of appeal on merits despite statutory pre-deposit condition - Modification of the statutory pre-deposit condition imposed under Section 62(5) of the PVAT Act for filing first appeal and direction to entertain and decide the appeal on merits upon acceptance of a reduced pre-deposit. - HELD THAT: - The Court accepted the petitioner's unchallenged material showing heavy indebtedness and ongoing loan instalment obligations, and noted that forcing payment of the full 25% pre-deposit would impede the petitioner's ability to continue business and could lead to cancellation of GST registration. While the Supreme Court in Tecnimont Pvt. Ltd. upheld the mandatory nature of Section 62(5) and held that the appellate authority does not have implied power to dispense with the pre-deposit, the present High Court exercised its constitutional jurisdiction under Article 226 to afford relief on grounds of genuine financial hardship. The High Court found that, on the facts before it, modification of the pre-deposit to 10% would suitably balance the statutory requirement and the petitioner's hardship, and directed the respondent authorities to accept 10% as pre-deposit and to entertain and decide the appeal on merits in accordance with law. [Paras 13, 14]Petition allowed by exercise of Article 226 powers; petitioner permitted to file appeal which respondent-authorities shall entertain and decide on merits upon acceptance of 10% pre-deposit of the total demand instead of 25%.Final Conclusion: Writ petition allowed: the petitioner is directed to file the appeal and respondents shall accept a pre-deposit of 10% of the total demand and decide the appeal on merits in accordance with law. Issues involved:The judgment involves challenges to assessment orders for the assessment year 2015-16, focusing on financial difficulties faced by the petitioner in complying with pre-deposit conditions under Section 62(5) of Act 2005.Assessment Order Challenge:The petitioner, engaged in the business of manufacturing and selling yarn, challenged assessment orders due to financial constraints in complying with pre-deposit conditions. The assessment order disallowed input tax credit claimed on certain purchases, leading to financial burden on the petitioner.Appeals and Tribunal Proceedings:The petitioner filed appeals against the assessment orders, but due to financial constraints, was unable to fulfill pre-deposit requirements leading to rejection of appeals. The Punjab VAT Tribunal dismissed the appeal, granting a limited time for pre-deposit.Legal Precedents and Arguments:The petitioner relied on legal precedents, including the judgment in M/s Tecnimont Pvt. Ltd's case, to support the argument of financial hardship. The petitioner's financial difficulties were highlighted, including heavy debts and inability to pay due to market conditions.Court's Decision:The Court considered the financial hardship faced by the petitioner, noting the petitioner's regular payment of GST and debt obligations. In light of the petitioner's financial situation and willingness to deposit 10% as pre-deposit, the Court directed the authorities to entertain the appeal and decide on merits by accepting the reduced pre-deposit amount, exercising inherent powers under Article 226 of the Constitution of India.