1953 (2) TMI 35 - SC - VAT / Sales Tax

Amendment to Section 22(1) creating deposit requirement not retrospective; appeal admitted without payment and decided on merits

Hoosein Kasam Dada (India) Ltd. Versus The State of Madhya Pradesh and Others

SC held that the amended proviso to Section 22(1) imposed a new substantive condition-proof of payment of assessed tax-reducing the prior unfettered right ... Change of law - Right to appeal on payment of tax admitted to be due - effect of the amendment to Section 22 of the Act - requisite to be fulfilled - appeal has to be accompanied by satisfactory proof of payment of the tax in respect of which the appeal had been preferred - HELD THAT:- It is clear from the language used in the proviso to Section 22(1) as it stood prior to the amendment that an aggrieved assessee had only to pay such amount of tax as he might admit to be due from him, whereas under the proviso to Section 22(1) as amended the appeal has to be accompanied by satisfactory proof of payment of the tax in respect of which the appeal had been preferred. The contention of the present assessee is that as the amendment has not been made retrospective its right of appeal under the original Section 22(1) remains unaffected and that accordingly as it does not admit anything to be due it was not liable to deposit any sum along with its appeal and the Commissioner was bound to admit its appeal and had no jurisdiction or power to reject it on the ground that it had not been accompanied by any proof of payment of the tax assessed against the appellant as required under the amended proviso and the Board of Revenue and the High Court were in error in not directing the Commissioner to admit the appeal. There can be no doubt that the new requirement 'touches' the substantive right of appeal vested in the appellant. Nor can it be overlooked that such a requirement is calculated to interfere with or fetter, if not to impair or imperil, the substantive right. The right that the amended section gives is certainly less than the right which was available before. A provision which is calculated to deprive the appellant of the unfettered right of appeal cannot be regarded as a mere alteration in procedure. Indeed the new requirement cannot be said merely to regulate the exercise of the appellant's pre-existing right but in truth whittles down the right itself and cannot be regarded as a mere rule of procedure. Thus, we are of the opinion that the appellant's appeal should not have been rejected on the ground that it was not accompanied by satisfactory proof of the payment of the assessed tax. As the appellant did not admit that any amount was due by it, it was under the section as it stood previously entitled to file its appeal without depositing any sum of money. We, therefore, allow this appeal and direct that the appeal be admitted by the Commissioner and be decided in accordance with law. The appellant is entitled to the costs of this appeal and we order accordingly. ISSUES PRESENTED AND CONSIDERED 1. Whether an amendment to the proviso of a statutory right of appeal that requires proof of payment of assessed tax before admission of the appeal can be applied to appeals arising from assessment proceedings instituted before the amendment. 2. Whether the requirement of deposit or proof of payment imposed by the amended proviso is a matter of procedure only or whether it affects a substantive vested right of appeal. 3. What is the relevant date for determining whether a litigant's right of appeal has vested for the purpose of applying a statute or amendment that imposes new conditions on appeals (i.e., date of institution of the original proceedings, date of assessment/decision, or date of filing of the appeal). 4. Whether the appellate authority has jurisdiction to refuse admission of an appeal filed after the amendment but arising from proceedings commenced before the amendment, on the ground that the appeal was not accompanied by proof of payment required by the amended proviso. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of statutory amendment to pending proceedings Legal framework: The statutory text before amendment required that no appeal 'shall be entertained' unless the appellant paid such amount of tax as he might admit to be due. The amended proviso required that no appeal 'shall be admitted' unless accompanied by satisfactory proof of payment of the tax in respect of which the appeal is preferred. Precedent treatment: The Court relied on authoritative decisions (notably the Colonial Sugar Refining Co. decision and subsequent High Court authorities) establishing that a statutory change which affects a litigant's right of appeal cannot be applied retrospectively to pending proceedings unless express words or necessary implication so indicate. Interpretation and reasoning: The Court held that the amendment imposes a substantial restriction on the right of appeal and is not expressly retrospective. The right of appeal that vested under the original proviso when proceedings commenced continues to be governed by the law as it stood at that date. Since the amendment was not expressly retrospective, it could not be applied to proceedings whose right of appeal vested before the amendment. Ratio vs. Obiter: Ratio - an amendment that substantially restricts a vested right of appeal does not apply to proceedings already instituted before the amendment unless retrospective effect is clearly intended. Conclusion: The amended proviso does not apply to appeals arising from assessment proceedings initiated before the amendment; such appeals remain governed by the pre-amendment proviso. Issue 2 - Substance vs. procedure: whether deposit requirement is procedural Legal framework: Distinction between procedural rules and substantive rights; established principle that rights of appeal are substantive, not merely procedural. Precedent treatment: The Court followed authorities which held that conditions that 'touch' or impair the right of appeal convert what might be labelled procedural requirements into substantive restrictions (e.g., decisions cited from Calcutta, Lahore, Madras, Allahabad and other benches following the Colonial Sugar principle). Interpretation and reasoning: The Court analysed the practical effect of requiring proof of payment of the entire assessed tax before admission of appeal. It concluded that the requirement could prevent appellants from exercising the right of appeal (e.g., inability to raise funds), and thus 'whittles down' the right itself rather than merely regulates its exercise. The Court rejected the contention that because an appellant can, in theory, pay, the requirement is merely procedural. Ratio vs. Obiter: Ratio - a statutory condition which curtails or impairs an existing unfettered right of appeal is substantive and cannot be treated as a mere procedural change for purposes of retrospective application. Conclusion: The deposit/proof-of-payment requirement is substantive in effect; it affects vested rights of appeal and cannot be imposed retrospectively without express legislative intent. Issue 3 - Date on which right of appeal vests Legal framework: Principles identifying when a right of appeal vests for purposes of applying subsequent statutory changes; authorities holding that the right vests when proceedings are instituted in the lower forum, not only at final decision. Precedent treatment: The Court cited and followed decisions (including Colonial Sugar, Nana bin Aba, Sardar Ali, Nagendra Nath Bose and others) which treat the right of appeal as arising from the commencement of original proceedings and not merely from the date of filing the appeal or the date of decision. Interpretation and reasoning: The Court observed that a 'lis' arises when a party's proposition is opposed, which can occur on filing the return or when the authority calls for evidence and commences hearings. In the present facts the controversy (and thus the vesting of the right) arose before the amendment. Even if vesting were measured by assessment, proceedings had been initiated earlier so that the right was in existence prior to amendment. The Court emphasized that the critical date is the initiation of proceedings which eventually culminate in the appeal. Ratio vs. Obiter: Ratio - the relevant date for vesting of appeal rights is the date of initiation of the original proceedings (or the date when a lis first arises), not the date of filing the appellate paper; therefore amendments after that date cannot abridge the vested right unless expressly retrospective. Conclusion: The right of appeal in the case vested before the amendment; the date of initiation of proceedings (or earlier emergence of the lis) determines applicability of the amendment. Issue 4 - Jurisdiction of appellate authority to refuse admission for non-compliance with amended proviso Legal framework: Statutory provisos governing admission of appeals; limits on exercise of appellate jurisdiction when legislation is not expressly retrospective. Precedent treatment: The Court relied on prior rulings that when a right of appeal has vested under earlier law, the appellate authority must apply the law that created that right; subsequent non-retrospective changes do not divest the authority of power to admit the appeal under the earlier terms. Interpretation and reasoning: Because the pre-amendment law continued to exist to support the pre-existing right, the appellate authority had to exercise jurisdiction under the old proviso. The authority therefore had no jurisdiction to refuse admission of an appeal arising from proceedings commenced prior to the amendment on the sole ground that the appeal lacked proof of payment required by the amended proviso. Ratio vs. Obiter: Ratio - where an appeal right has vested before amendment, the appellate authority must apply the pre-amendment conditions and cannot decline to admit the appeal on grounds created by a non-retrospective amendment. Conclusion: The appellate authority acted without jurisdiction in rejecting the appeal for failure to accompany proof of payment under the amended proviso; the appeal must be admitted and decided under the pre-amendment law. Disposition and Costs Conclusion of the Court: The appeal was allowed; the appellate authority was directed to admit the appeal and decide it according to law prevailing when the right of appeal vested. Costs of the appeal were awarded to the appellant.