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Kasturi Commodities Pvt. Ltd. v/s State of Gujarat

    Tax Appeal Nos. 1132, 1133 of 2013 & Civil Application Nos. 727, 728 of 2013

    Decided On, 25 April 2014

    At, High Court of Gujarat At Ahmedabad

    By, THE HONOURABLE MR. JUSTICE SONIA GOKANI & THE HONOURABLE MR. JUSTICE ABDUL HAMID KURESHI

    For the Appellant: Megha Jani, Advocate. For the Respondent: Jaimin Gandhi, Additional Government Pleader, Advocate.



Judgment Text

Akil Abdul Hamid Kureshi, J.

1. Heard learned counsel for the parties for final disposal of the appeals. Since the facts are common, we may record those arising in Tax Appeal No. 1133 of 2013.

2. The appellant was a registered dealer under the VAT Act and the Central Sales Tax Act, Certain purchases made by the appellant came under the scanner of the VAT authorities. A show-cause notice was issued alleging that such purchases were made from Taxraj Reality which was an unregistered dealer, in which case, the assessee would have to pay purchase tax and would be denied tax credit thereof. To avoid such a situation, the assessee created bogus purchase bills from registered dealers and availed of tax credit on the sales tax shown to have been paid by them. On such basis, recovery of tax, interest and penalty were confirmed by the assessing officer by his order dated December 20, 2011.

3. Under the VAT Act, the assessee had to pay an amount of Rs. 49,11,219 with interest and penalty and under the Central Sales Tax Act, it has to pay an amount of Rs. 4,11,613 plus interest and penalty. When the assessee challenged such order before the Appellate Commissioner, the Commissioner insisted that the appellant should deposit a sum of Rs. 23,00,400 by way of pre-deposit. Since the appellant failed to do so, on January 17, 2012, the Commissioner dismissed the appellant's appeals. Against such order, the appellant filed two separate appeals before the VAT Tribunal. The Tribunal during the course of such appeals, directed the appellant to deposit a total sum of Rs. 10 lacs by order dated February 14, 2012. When the appellant complied with such direction, the Tribunal proceeded to examine the appeal on the merits of the order passed by the assessing officer and partially dismissed the appeal confirming the disallowance of input-tax credit and consequential levy of tax and interest. So far as the penalty is concerned, the same was remanded back to the assessing officer to examine the issue afresh after giving an opportunity of being heard to the appellant. Operative part of the order of the Tribunal reads as under:

These Second Appeal Nos. 46 and 47 of 2012 are partly allowed. The disallowance of input-tax credit is hereby confirmed and accordingly the levy of tax as well as the interest is also confirmed. So far as the levy of penalty is concerned, the matter is remanded back to the assessing officer to examine the whole issue and pass fresh order after giving an opportunity of being heard to the appellant.

4. It is this order which the appellant has challenged by filing two appeals.

5. We may recall that the order under challenge before the Tribunal was one passed by the Appellate Commissioner dismissing the appeals of the appellant for want of pre-deposit. The Commissioner insisted that the appellant must deposit Rs. 23,00,400 by way of pre-deposit. Scope of the appeal before the Tribunal was whether such condition imposed by the Commissioner was correct in law or not. If the Tribunal was of the opinion that the condition was validly imposed, it could have dismissed the appeals of the appellant. If on the other hand, the Tribunal, looking to the facts and circumstances of the case, was of the opinion that any lesser amount or no payment by way of pre-deposit was necessary, it could have provided so. If the appellant had fulfilled such modified condition of pre-deposit, the appellant's appeal would be ripe for hearing before the Commissioner. Under no circumstances, the Tribunal could have bypassed such first appellate authority and directly heard the appeals on merits of the order passed by the assessing officer. We say so for two reasons. Firstly, in terms section 73(4) of the VAT Act, no appeal would lie before the Commissioner against an order of assessment unless such appeal is accompanied by satisfactory proof of payment of tax in respect of which the appeal has been preferred. Proviso to sub-section (4) to section 73 enables the appellate authority, for reasons to be recorded in writing, to entertain such appeal without payment of tax and penalty or on proof of payment of smaller sum as may be considered reasonable or the appellant furnishing security for such amount as the appellate authority may direct. In terms of section 73(4) of the VAT Act, thus unless and until either the appellant pays the entire amount confirmed in the order appealed against or the appellate authority for the reasons to be recorded in writing relaxes such requirement in the manner noted above, it would not be possible for the appellate authority to entertain such appeal.

6. The Tribunal, therefore, simply had to decide whether the condition imposed by the Commissioner was proper and if not what further relaxation could be granted to the appellant. In the process, the Tribunal could not have examined the order of the assessing officer on the merits as the first appellate authority.

7. Second reason why we would not approve such approach is that the Tribunal is considered as the final fact-finding authority. When complex facts present themselves, as in the present case, the same would be first examined by the assessing officer upon which the statute provides first appeal before the Commissioner against whose order, person aggrieved approaches in a second appeal before the Tribunal. Essentially, therefore, in majority of the cases, the Tribunal is the second appellate authority. The decision which the Tribunal therefore renders would have been scanned by two quasi-judicial authorities previously. It would not be permissible in law nor would be prudent in the facts of the case to by-pass such first appellate forum and to hear the appeals before the Tribunal as if they were the first appeals.

8. In our judgment dated January 30, 2014, in Tax Appeal No. 688 of 2013 in the case of Anilkumar Ishwarlal Parmar Vs. State of Gujarat, , in somewhat similar situation, it was held and observed as under (pages 425 and 426 in 2 VST-OL):

3. We are of the opinion that the Tribunal committed serious error in examining the appellant's grievances on the merits of the order of assessment. The order of assessment was passed by the adjudicating authority, which was appellable by way of first appeal before the Appellate Commissioner. Section 73(4) of the Gujarat Value Added Tax Act, 2003, requires that no appeal against the order of assessment shall ordinarily be entertained by the Appellate Commissioner, unless such appeal is accompanied by proof of payment of tax in respect of which the appeal has been preferred. Proviso to section 73(4), however, provides that the 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, interest, if any or as the case may be, of the penalty, or (b) on proof of payment of such small sum as it may consider necessary, or (c) on the appellant furnishing in the prescribed manner security or such as the appellate authority may direct.

4. In view of section 73(4) of the Act, therefore, such appeal could not have been entertained unless in terms of proviso, the appellate authority for reasons recorded in writing relaxed the requirement of full pre-deposit. In the present case, the Appellate Commissioner exercised such powers and required the appellant to deposit 25 per cent of the amount confirmed by the adjudicating authority. When the appellant failed to fulfill such requirement, his appeal came to be dismissed. It was against this order that the appellant had preferred appeal before the Tribunal. The scope of the appeal before the Tribunal, therefore, had to be limited to the question of finding out whether the order passed by the Commissioner insisting on the appellant depositing certain amount by way of pre-deposit was valid or not and resultantly, his decision to reject such an appeal for noncompliance with such requirement was correct or not.

5. Unless and until the answers were given to such questions, the appellant's first appeal before the appellate authority was simply not maintainable and could not have been entertained. If that be so, the Tribunal could not have entered into merits and in the appeal before itself and given a judgment on the validity of the order of assessment. In the process, the Tribunal jettisoned the first appeal before the Appellate Commissioner and also waived the requirement of pre-deposit without passing any order to that effect. If the Tribunal was of the opinion that the condition imposed by the Appellate Commissioner was too onerous to be fulfilled by the appellant and the facts of the case warranted interference, the Tribunal could as well have done it. In such a scenario, the Tribunal ought to have placed appeal back to the Appellate Commissioner, on such condition that the Tribunal thought fit to impose on the appellant. In the present case, without expressing any opinion on the Appellate Commissioner imposing the condition of part pre-deposit on the appellant, the Tribunal accepted the appellant's second appeal as if mere was no intermediary stage of the appeal before the Appellate Commissioner or any requirement of pre-deposit under section 73(4) of the Act. We cannot lose sight of the fact that the appellant himself also substantially contributed to this complication. In the appeal, his main grounds were against the assessment order. His prayers pertained only to the issues on the merits about the adoptions made by the assessing officer. There was no prayer for setting aside the appellate order of imposing condition and subsequently, dismissing his appeal when he failed to fulfill such condition. Even if it were so, the Tribunal could have either permitted the appellant to suitably amend the prayer or if the appellant was not willing to do so, dismiss his appeal as not maintainable. In our opinion, the Tribunal could not have bypassed the first appellate authority and statutory requirement of pre-deposit, unless it was waived by an order in writing.

6. We are at pains to record our findings since we find that this is not an isolated case, where such order has been passed. This court has come across such orders of the Tribunal on more than one occasion.

7. In an order dated August 30, 2013 rendered in Tax Appeal No. 711 of 2013 in the case of State of Gujarat v. Tudor India Ltd. (2014) 2 VST-OL 288

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(Guj.), the Division Bench of this court had come across one such order of the Tribunal and made the following observations. . . 9. In the result, the impugned judgment of the Tribunal dated September 27, 2013 is quashed. We are informed that during the pendency of appeals before the Tribunal and thereafter before this court, the appellant has deposited a total sum of approximately Rs. 42 lacs. This is far in excess of the pre-deposit amount suggested by the Commissioner. The proceedings will now be placed before the Commissioner for consideration of the assessee's appeals against the assessment order. Till such order is passed by the Commissioner and subject to the same, said amount of Rs. 42 lacs deposited by the appellant with the Government shall remain with the State. It is clarified that the entire order of the Tribunal is set aside and therefore that portion of the order by which the appeals of the assessee were partly allowed would also not survive. Equally, the order remanding the penalty proceedings before the assessing officer also stands quashed. Both the tax appeals and the civil applications stand disposed of accordingly.
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