Research › Search › Judgment

Gujarat High Court · body

2024 DIGILAW 1898 (GUJ)

Kandla Motors Pvt. Ltd. v. State Of Gujarat

2024-10-11

BHARGAV D.KARIA, D.N.RAY

body2024
JUDGMENT : (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. This Court by order dated 21.06.2023 has admitted Tax Appeals on the following substantial questions of law: “19(a) Whether on the facts and in the circumstances of the case the Gujarat Value Added Tax Tribunal is justified in not granting waiver of pre-deposit to the appellant without assigning any reasons for such decision? (b) Whether on the facts and in the circumstances of the case the Gujarat Value Added Tax Tribunal is justified in not granting waiver of pre-deposit to the appellant even though the entire demand is based upon Section 61 of the VAT Act which is wholly irrelevant to the issue of determination of “sale price”? (c) Whether on the facts and in the circumstances of the case the Gujarat Value Added Tax Tribunal is justified in not granting waiver of pre-deposit to the appellant even though adjustment of tax liability is clearly permissible under Section 8 of the VAT Act? (d) Whether on the facts and in the circumstances of the case the Gujarat Value Added Tax Tribunal is justified in not granting waiver of pre-deposit to the appellant even though the appellant has a strong prima facie case squarely supported by decision of Hon’ble Supreme Court in the case of Southern Motors (supra)?” 2. The appellant preferred Second Appeal before the Gujarat Value Added Tax Tribunal, Ahmedabad [for short ‘the Tribunal’] challenging the order of the Deputy Commissioner of State Tax, Appeal- 11, Rajkot, for assessment periods pertaining to 2010-11, 2011-12, 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 whereby, the first appeals were summarily dismissed as the appellant did not pay the pre-deposit. 3. The Tribunal passed common order dated 16.06.2022 in Second Appeal Nos. 373 to 379 of 2020 so far as assessment period 2010-2011, 2011-12 and 2012-13 is concerned. The Tribunal held that in view of the ratio laid down by this Court in case of Kavya Marketing vs. State of Gujarat in Special Civil Application No. 1027 of 2022, the Tribunal was of the opinion that no pre-deposit direction is required for the said period as the assessments were made under section 34(8A) of the Value Added Tax Act, 2003. However, for the remaining years, the Tribunal passed the order for pre-deposit of the amount specified in the common order. 4. However, for the remaining years, the Tribunal passed the order for pre-deposit of the amount specified in the common order. 4. As the appellant did not deposit the entire pre-deposit amount for the assessment period from 2013-14 to 2016-17, the Tribunal, by common order dated 18.11.2022, dismissed the appeals for the entire period from 2011-12 to 2016-17 oblivious of the fact that the Tribunal did not pass an order for pre-deposit for the assessment period 2010-11 to 2012-13. 5. Learned advocate Mr. Sheth submitted that admittedly, the Tribunal passed the order at the time of admission for the period from 2010-11 to 2012-13 giving no pre-deposit direction and therefore, Second Appeal No. 373 to 379/2020 for the said period could not have been dismissed for non-compliance of the direction of pre-deposit passed by the Tribunal. 6. On perusal of the order dated 16.06.2022 passed by the Tribunal it is apparent that the Tribunal in para 5 of the said order has categorically observed as under: “Now to determine reasonable predeposit for the financial years 2013-14, 2014-15, 2015-16 and 2016-17, Ld. G.R. has submitted detail pursis along with ledger account of particular purchaser. After taking consideration submission of Ld. G.R. and necessary documents, it is a fit case for determination of pre-deposit as per section 73 of GVAT Act and as per ratio laid down by the Hon. High Court in the case of Kavya Marketing. Keeping in mind all the facts, discussion and ratio of Hon. High Court, the appellant is directed to deposit Rs.14,00,000/-against the tax demand of Rs.67,23,758/-for the financial year 2013-14, Rs.18,00,000/-against the tax demand of Rs.91,22,027/-for the financial year 2014-15, Rs.28,00,000/- against the tax demand of Rs.1,40,36,979/-for the financial year 2015-16 and Rs.50,00,000/-against the tax demand of Rs.2,27,54,672/-for the financial year 2016-17 within one month. On payment of aforementioned amount of pre-deposit, the stay against recovery proceedings shall come into operation. 7. For the assessment period from 2013-14 to 2016-17, determined the pre-deposit amount as under: “Details of year wise pre-deposit direction are as under: Years Tax Demand Pre deposit directed 2010-11 48,41,035/- No pre-deposit direction is passed 2011-12 86,68,038/- No pre-deposit direction is passed 2012-13 87,51,174/- No pre-deposit direction is passed 2013-14 67,23,758/- 14,00,000/- 2014-15 91,22,027/- 18,00,000/- 2015-16 1,40,36,979/- 28,00,000/- 2016-17 2,27,54,672/- 50,00,000/- 8. This Court in case of Kavya Marketing (supra) has held as under: “8. This Court in case of Kavya Marketing (supra) has held as under: “8. Section 73(4) of the VAT Act, 2003 reads as under: “73(4). No appeal against an order of assessment shall ordinarily be entertained by an appellate authority, unless such appeal is accompanied by satisfactory proof of payment of the tax in respect of which an appeal has been preferred : [Provided that an appellate authority may, if it thinks fit, for reasons to be recorded in writing, entertain an appeal against such order- (a) without payment of tax with, penalty (if any) or, as the case may be, of the penalty, or (b) on proof of payment of such smaller sum as if may consider reasonable, or (c) on the appellant furnishing in the prescribed manner, security for such amount as the appellate authority may direct.]” 9. The aforesaid provision apparently makes it clear that ordinarily no appeal against an order of assessment shall be entertained by the appellate authority, unless an appeal is accompanied by satisfactory proof of payment of tax in respect of which an appeal has been preferred. The proviso to clause 4 makes the picture further clear. The said proviso explicitly gives discretion to the appellate authority to entertain an appeal against the orders as provided under clause (a) or (b) or (c) of sub section 4 of section 73 of the act. Thus, the legislation in its wisdom has reposed discretion upon the appellate authority to entertain an appeal without payment of tax with penalty or in appropriate case on proof of the payment of a smaller sum as the appellate authority may consider reasonable or in an appropriate case on furnishing security by the appellant for such an amount which the appellate authority may direct. Obviously, at the stage of deciding the issue of admitting an appeal based on the payment of pre-deposit amount, the Tribunal is expected to venture into the merits of the case, wherein considering prima facie case which may very from case to case, the appellate authority may entertain the appeal accordingly. From the language of the statute, one can carved out in a given situation, the appellate authority may admit the appeal even without insisting for payment of tax with penalty or even a smaller sum or may not even insisting for furnishing of security. 10. From the language of the statute, one can carved out in a given situation, the appellate authority may admit the appeal even without insisting for payment of tax with penalty or even a smaller sum or may not even insisting for furnishing of security. 10. In the case on hand, while going through the order dated 22.11.2021 passed by the Tribunal, the only reason assigned by the Tribunal as recorded in paragraph 5 of the said order is that the hearing of the matter has been prolonged from the year 2019 on the aspect of pre-deposit and stay and the first appeal being summarily dismissed without going into the merits of the case. Thus, the Tribunal deemed it fit to direct the appellant to pay the amount of Rs.20,00,000/- towards the pre-deposit. 11. We find that such an approach of the Tribunal of not addressing prima facie case of the writ applicant at the pre-deposit stage is erroneous. In fact, having gone through the relevant provisions provided under the VAT Act, it is expected that the first appellate authority to exercise its discretion judiciously and should not have insisted for pre-deposit when the appellant has been able to make out strong prima facie case in his favour. 12. This Court on number of occasion has come across the identical facts of the case vis-a-vis admitting of appeal at the stage of payment of predeposit. We have noticed that while deciding the admission of appeals on merits, the first appellate authority summarily dismissed the appeal on the ground of non payment of pre-deposit, and when such order is challenged in second appeal before the Tribunal, it is incumbent upon the Tribunal to examine the prima facie case and thereafter, to arrive at the decision with regard to insistence of payment of pre-deposit for entertainment of appeal. This Court has time and again in identical cases has held that Tribunal is obliged to consider a prima facie case, which the appellant may be in position to highlight. It a strong prima facie case is made out, then in such circumstances, there should not be any difficulty in entertaining the appeal even without insisting for payment of tax penalty or even smaller amount. 13. It a strong prima facie case is made out, then in such circumstances, there should not be any difficulty in entertaining the appeal even without insisting for payment of tax penalty or even smaller amount. 13. In light of the aforesaid facts, we find that the Tribunal committed serious error of law by not taking note of the prima facie case of the writ applicant while examining the aspect of payment of pre-deposit. Therefore, we are of the view that in the facts and circumstances of the case, the order passed by the Tribunal dated 22.11.2021 is hereby quashed and set aside. We further direct the Tribunal to hear the matter on merits so far as the issue of grant of stay pending appeal is concerned, taking into consideration the Circulars issued by the CBDT bearing No.1914, dated 02.02.1993 as modified by instructions dated 29.02.2016, which permits 15% of the disputed demand to be deposited for stay by way of a general condition. Thus, even the instructions issued by the CBDT itself suggests an inbuilt-mechanism to either decrease or increase the percentage of disputed tax demand to be deposited by an assessee to enjoy stay pending the appeal. Indisputably, the instructions are in the nature of guidelines to enable the Assessing Officer and Commissioner to exercise such discretionary powers uniformly. 14. In the result, the present writ application succeeds and is hereby allowed. The impugned order passed by the Tribunal dated 22.11.2021 is hereby quashed and set aside. The second appeal is ordered to be restored its original file before the Tribunal. The Tribunal is further directed to expeditiously hear the appeal within a period of two months from the date of receipt of copy of writ of this order. The respondents are hereby directed not to take any coercive actions pending the second appeal before the Tribunal.” 9. However, the Tribunal, without considering the prima facie case of the appellant, has determined the amount of pre-deposit which is evident from the above observations of the Tribunal. 10. Learned advocate Mr. The respondents are hereby directed not to take any coercive actions pending the second appeal before the Tribunal.” 9. However, the Tribunal, without considering the prima facie case of the appellant, has determined the amount of pre-deposit which is evident from the above observations of the Tribunal. 10. Learned advocate Mr. Uchit Sheth for the appellant submitted that the Tribunal has ignored the decision of the Hon’ble Supreme Court in case of Southern Motors vs. State of Karnataka and ors reported in (2017) 3 SCC 467 wherein it is held that the actual quantification of the trade discount depending on the nature of the trade and related stipulations in any contract with regard thereto, may be deferred till the happening of a contemplated event so much so that the benefit thereof is extended at a point of time subsequent to that of the original sale/purchase. The Apex Court has further held that the reference of the discount in the tax invoice or bill of sale to qualify it for deduction has to be construed in relation to the transaction resulting in final sale/purchase price and not limited to the original sale sans the trade discount. It was submitted that the appellant has issued the retail tax invoice and also issued the credit note however, the Assessing Officer rejected the trade discount which is part of the retail invoice only on the ground that the appellant did not issue tax invoice. 11. It was therefore submitted that there is prima facie case in favour of the appellant which is not taken into consideration by the Tribunal. 12. On the other hand, learned AGP Ms. Shah for the respondent could not controvert the submissions made by learned advocate Mr. Uchit Sheth that the Tribunal has not considered the prima facie case of the petitioner to determine the amount of predeposit as per the decision of this Court in case of Kavya Marketing (supra). 13. Considering the above submission and on perusal of the impugned order passed by the Tribunal dated 16.06.2022 as well as the order dated 18.11.2022 dismissing second appeals on the ground of non-payment of pre-deposit, we are of the opinion that the Tribunal has admittedly not considered the prima facie case of the appellant while determining the amount of pre-deposit which ought to have been considered as per the decision of this Court in case of Kavya Marketing (supra). 14. The impugned order passed by the Tribunal is accordingly quashed and set aside. The appeals are therefore allowed by remanding the matter back to the Tribunal to consider the prima facie case of the appellant for deciding the quantum of pre-deposit, if required. No order as to costs.