2024 (5) TMI 986 - HC - VAT and Sales Tax

High Court allows VAT appeal admission without 12.5% deposit under Section 31 when no amount admitted due

The AP HC set aside the rejection of an appeal admission that was denied for non-compliance with the 12.5% deposit requirement under Section 31 of the AP ... Admission of appeal against endorsement rejecting statutory forms - pre-deposit requirement under the third proviso to Section 31 of the AP Value Added Tax Act - distinction between appeals against assessment orders and appeals against endorsementsAdmission of appeal against endorsement rejecting statutory forms - pre-deposit requirement under the third proviso to Section 31 of the AP Value Added Tax Act - Whether the requirement of producing proof of payment of 12.5% under the third proviso to Section 31 applies where an appeal is filed against an endorsement rejecting statutory Forms (Form H) and no tax has been quantified in that endorsement. - HELD THAT: - The Court examined the language of the IIIrd proviso to Section 31(1) and noted that it refers to proof of payment of tax, penalty, interest or any other amount 'admitted to be due' and of twelve and half percent of the difference between the amount assessed and the amount admitted by the appellant for the relevant tax period. The impugned endorsement rejecting Form H did not quantify or admit any tax, penalty or interest; it merely rejected the post-assessment declaration. Where no tax is quantified in the endorsement, the condition of pre-deposit of 12.5% envisaged by the IIIrd proviso cannot be operationally applied. The Court relied on the coordinate Bench decision in M/s. Sri Hari Maharalayam Company which held that insistence on 12.5% pre-deposit as a condition precedent to entertain an appeal against an endorsement (where no tax is quantified) is untenable, and directed the appellate authority to admit such appeals without insisting on the pre-deposit. Applying that reasoning, the Court concluded that the Appellate Additional Commissioner erred in dismissing the petitioner's appeal at the admission stage for non-compliance with the IIIrd proviso when the appeal was against an endorsement that did not quantify tax. [Paras 9, 11, 13]The impugned order refusing admission of the appeal for non-deposit of 12.5% is set aside and the appellate authority is directed to consider admission of the appeal without insisting on compliance with the IIIrd proviso of Section 31.Final Conclusion: Writ petition allowed; appellate authority directed to admit and consider the appeal against the endorsement without insisting on the 12.5% pre-deposit under the IIIrd proviso to Section 31 of the AP VAT Act for the tax period 2011-12. Issues:1. Challenge to endorsement requiring payment of 12.5% of disputed tax for admission of appeal under Section 31 of AP VAT Act.2. Interpretation of Section 31(1) IIIrd proviso of AP VAT Act.3. Applicability of precedent in M/s. Sri Hari Maharalayam Company case.Detailed Analysis:1. The petitioner challenged an endorsement issued by the 2nd Respondent, seeking proof of payment of 12.5% of disputed tax for admission of appeal dated 6.2.2024. The petitioner sought the court to set aside the endorsement as illegal, arbitrary, and contrary to law. The petitioner argued that the endorsement was in violation of settled principles and requested the court to direct the 2nd Respondent to admit the appeal without insisting on the payment of 12.5% of the disputed tax. The petitioner contended that the requirement of depositing 12.5% did not apply as they were challenging the endorsement dated 26.04.2023 and not the assessment order.2. The interpretation of Section 31(1) IIIrd proviso of the AP VAT Act was crucial in this case. The provision states that an appeal shall not be admitted unless the dealer produces proof of payment of tax, penalty, interest, or any other amount due, and 12.5% of the difference of the tax admitted by the appellant. The court analyzed this provision and found that the petitioner was not required to pay any tax, penalty, or interest as per the endorsement being challenged. Therefore, the court concluded that there was no need for the petitioner to deposit 12.5% of the tax as mandated by the IIIrd proviso of Section 31(1) of the AP VAT Act.3. The court referred to the precedent set in the case of M/s. Sri Hari Maharalayam Company, where it was held that if an appeal is filed against an endorsement without a quantified tax amount, the insistence on payment of 12.5% of the disputed tax is untenable. The court concurred with the decision in the aforementioned case and directed the respondent to consider the admission of the appeal without requiring compliance with the IIIrd proviso of Section 31 of the AP VAT Act. Consequently, the court allowed the writ petition, set aside the impugned order, and instructed the respondent to entertain the appeal without insisting on the payment of 12.5% of the disputed tax. No costs were awarded, and pending miscellaneous petitions were closed as a result of the judgment.