Oil and Natural Gas Corpn. Ltd. vs State of Gujarat

Mukesh R. Shah, J.—As common question of law and facts arise in these petitions and as such are between the same parties, all these petitions are disposed of by this common order. Special Civil Application Nos. 13564 of 2013 and 13574 of 2013 have been preferred by the petitioners herein-original appellants-ONGC challenging the impugned order passed by the learned Gujarat Value Added Tax Tribunal, Ahmedabad (hereinafter referred to as the "Tribunal") passed in Second Appeal Nos. 427 of 2013 and 428 of 2013, by which, the learned Tribunal has directed to the petitioners herein-original appellants to deposit a sum of Rs. 10 crores only as pre-deposit against the total demand of Rs. 279,27,61,029/- under the Gujarat Sales Tax Act and demand of Rs. 20,92,70,258/- under Central Sales Tax Act.

1.1. Special Civil Application No. 13567 of 2013 has been preferred by the petitioner herein-original appellant-ONGC challenging the impugned order passed by the learned Tribunal dated 31.7.2013 passed in Second Appeal No. 448 of 2013, by which, the learned Tribunal has directed the petitioner-original appellant to deposit a sum of Rs. 10 crores only as pre-deposit, against the total demand of Rs. 473,14,84,532 against the petitioner.

That the assessment order has been passed by the Assessing Officer for the assessment period 2008-09 under the Gujarat VAT Act as well as under the Central Sales Tax Act on 9.4.2013 and as a result thereof the total demand of Rs. 279,27,61,029 has been raised under the Gujarat VAT Act and a demand of Rs. 20,92,70,258 has been raised under the CST Act against the petitioners herein-original appellants. Being aggrieved and dissatisfied with the assessment order dated 9-4-2013, the petitioners preferred appeals before the Joint Commissioner of Commercial Tax. The said appeals have been dismissed by the Joint Commissioner of Commercial Tax vide order dated 2.5.2013. Feeling aggrieved and dissatisfied with the said order dated 2.5.2013, the petitioners have preferred Second Appeal Nos. 427 of 2013 and 428 of 2013. In the said appeals, the petitioner-original appellant submitted the application for stay/waiver of pre-deposit and by impugned order dated 29.7.2013, the learned Tribunal has directed the petitioner herein-original appellant to deposit a sum of Rs. 10 crores only as pre-deposit and on such deposit, the department is directed to not to take any coercive action against the appellant for recovery of outstanding demand.

2.1 Similar order has been passed by the learned Tribunal in Second Appeal No. 448 of 2013. Against the impugned orders of pre-deposit of Rs. 10 crores each, the petitioners herein -original appellant-ONGC have preferred present Special Civil Applications under Article 226 of the Constitution of India.

Shri Akshat Khare, learned advocate appearing on behalf of the respective petitioners has vehemently submitted that in the facts and circumstances of the case, the learned Tribunal has materially erred in directing the petitioner herein-original appellant-ONGC a Public Sector Undertaking to deposit a sum of Rs. 10 crores (in each appeals i.e. in all Rs. 20 crores) as pre-deposit. It is submitted that as such the learned Tribunal has not properly appreciated the fact that the appellant is a Public Sector Undertaking and is in Distribution of Oil and therefore, if the petitioners are directed to deposit of Rs. 20 crores, it may affect the public distribution system. It is submitted that in earlier appeals with respect to earlier assessment year, the earlier Tribunal granted unconditional stay on total waiver of pre-deposit.

3.1 Shri Akshat Khare, learned advocate appearing on behalf of the respective petitioners has heavily relied upon the decision of the Hon''ble Supreme Court in the case of Pennar Industries Ltd. Vs. State of A.P. and Others, as well as another decision of the Hon''ble Supreme Court in the case of Ravi Gupta Vs. Commissioner Sales Tax, Delhi and Another, in support of his prayer to quash and set aside the impugned orders of pre-deposit and direct the learned Tribunal to decide the appeal without insisting for deposit of any amount towards pre-deposit.

Present petitions are opposed by Shri Jaymin Gandhi, learned Assistant Government Pleader on behalf of the respondent. It is submitted that as such against the total demand of approximately Rs. 800 crores (in all these appeals) as such the learned Tribunal has directed the petitioners-original appellants to deposit a total sum of Rs. 20 crores only, which in the facts and circumstances of the case cannot be said to be illegal and/or perverse. It is submitted that as such the petitioners herein-original appellants have never pleaded any undue hardship and/or financial hardship, which are relevant consideration while deciding the application for waiver of pre-deposit.

4.1 Shri Gandhi, learned Assistant Government Pleader has heavily relied upon the decision of the Hon''ble Supreme Court in the case of Mehsana Dist. Co-op. Milk P.U. Ltd. Vs. Union of India (UOI), as well as decision of the Hon''ble Supreme Court in the case of Benara Valves Ltd. and Others Vs. Commissioner of Central Excise and Another, He has also relied upon the decision of the Division Bench of this Court in the case of Explosion Proof Electrical Control Vs. Commr. of C. Ex. and Customs, as well as recent unreported decision of this Court in the case of Aircomp Enterprise v. Union of India (Special Civil Application No. 13925 of 2013) in support of his prayer to dismiss the present petition.

Heard learned advocates for the respective parties at length. At the outset, it is required to be noted that by impugned orders, the learned Tribunal has directed the petitioners herein-original appellants to deposit a total sum of Rs. 20 crores against the total approximately demand of Rs. 800 crores, as pre-deposit and on such deposit further recovery of demand has been stayed. At the outset, it is required to be noted that as such the petitioners have never pleaded any undue hardship and/or any financial hardship. When the present petitions were preferred it was the case on behalf of the petitioners that the identical question with respect to earlier assessment years is pending before the Tribunal and the Tribunal had heard the appeals and the issue is recurring in nature, the Tribunal may be directed to hear the appeals without insisting for pre-deposit. However, during the pendency of the present petitions, the Tribunal has delivered the judgment in those appeals with respect to earlier assessment year and has held in favour of the revenue partly and partly in favour of assessee. It is fairly conceded by the learned advocate for the petitioners that even as per the decision of the Tribunal with respect to earlier assessment year that there may be liability of approximately Rs. 400 crores. Considering the above and when the petitioners have neither pleaded any undue hardships and/or financial hardship which are relevant consideration while deciding the application for waiver of pre-deposit, it cannot be said that the Tribunal has committed any error and/or illegality in directing the appellant to deposit a sum of Rs. 20 crores only as pre-deposit.

5.1 It is the case on behalf of the petitioner that if the petitioners are directed to deposit a sum of Rs. 20 crores, public distribution system may be affected. The aforesaid has no substance. It is not appreciable how on deposit of Rs. 20 crores by the Public Sector Undertaking like petitioner-ONGC the public distribution system is likely to be affected.

5.2 Relying upon the decision of the Hon''ble Supreme Court in the case of Pennar Industries Ltd. (supra) and Ravi Gupta (supra), learned advocate for the petitioner has submitted that as the petitioner is Public Sector Undertaking, there shall be a total waiver of pre-deposit. On considering the aforesaid decisions of the Hon''ble Supreme Court, it cannot be said that in the said decisions, the Hon''ble Supreme Court has laid down proposition of law that in respect of Public Sector Undertaking there shall be a complete waiver of pre-deposit. No such absolute proposition of law has been laid down by the Hon''ble Supreme Court in the said decisions. The decisions of the Hon''ble Supreme Court in the said cases are on facts and as stated above, no absolute proposition of law as sought to be canvassed on behalf of the petitioner has been laid down.

On the other hand, there is direct decision of the Hon''ble Supreme Court in the case of Benara Valves Ltd. (supra), the Hon''ble Supreme Court has carved out following principles for staying or dispensing with pre-deposit thus:

Principles relating to grant of stay pending disposal of the matters before the concerned forums have been considered in several cases. It is to be noted that in such matters though discretion is available, the same has to be exercised judicially.

The applicable principles have been set out succinctly in Siliguri Municipality and Others Vs. Amalendu Das and Others, and Samarias Trading Co. Pvt. Ltd. Vs. S. Samuel and Others, and Asstt. Assistant Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. and Others,

It is true that on merely establishing a prima facie case, interim order of protection should not be passed. But if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay should not be disposed of in a routine matter unmindful of the consequence flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest. Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens'' faith in the impartiality of public administration, interim relief can be given.

It has become an unfortunate trend to casually dispose of stay applications by referring to decisions in Silliguri Municipality and Dunlop India Ltd. cases (supra) without analysing factual scenario involved in a particular case.

Section 35F of the Act reads as follows:--

35F. Deposit, pending appeal of duty demanded or penalty levied -- Where in any appeal under the Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not against relates to any duty demanded in respect of goods which are not under the control of Central Excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied:

Provided that where in any particular case the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interest of revenue:

Provided further that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of its filing.

Two significant expressions used in the provisions are "undue hardship to such person" and safeguard the interest of revenue". Therefore, while dealing with the application twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interest of Revenue have to be kept in view.

As noted above there are two important expressions in section 35(f). One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient. It was noted by this Court in S. Vasudeva Vs. State of Karnataka and others, that under Indian conditions expression "Undue hardship" is normally related to economic hardship. "Undue" which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances.

For a hardship to be ''undue'' it must be shown that the particular burden to have to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it.

The word "undue" adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant.

The Apex Court in the case of Mehsana Dist. Co-op. Milk P.U. Ltd. Vs. Union of India (UOI), also considered this issue in the following manner:--

The issue here relates to the order passed by the Commissioner (Appeals), Central Excise and Customs u/s 35F of the Central Excise Act, 1944. By the impugned order, the appellants have been directed to deposit an amount of Rs. 30 lakhs by way of pre-deposit. The reasoning given in support of such order is wholly unsatisfactory. The Appellate Authority has not at all considered the prima facie merits and has concentrated upon the prima facie balance of convenience in the case. The Appellate authority should have addressed its mind to the prima facie merits of the appellants'' case and upon being satisfied of the same determined the quantum of deposit taking into consideration the financial hardship and other such relevant factors.

6.1 Relying upon the decisions of the Hon''ble Supreme Court in the case of Benara Valves Ltd. (supra) and other decisions of the Hon''ble Supreme Court in the case of Mehsana District Cooperative Milk P.U. Ltd. (supra) as well as another decision of the Hon''ble Gujarat High Court in the case of Special Prints Ltd. Vs. Union of India (UOI) and Another, , in the case of Explosion Proof Electrical Control (supra) has held that the conditions as to pre-deposit in appeal can be waived mainly on the ground of undue hardship/financial hardships.

Similar view has been expressed by this Court in the recent decision of this Court in Special Civil Application No. 13925 of 2013.

6.2. Considering the aforesaid principles carved out by the Hon''ble Supreme Court for staying or dispensing with the pre-deposit, and more particularly when the petitioners have neither pleaded any undue hardship and/or financial hardship which are relevant considerations for considering the application for waiver of pre-deposit, it cannot be said that the learned Tribunal has committed any error and/or illegality in directing the petitioner-original appellant to deposit a sum of Rs. 20 crores as pre-deposit.

In view of the above, all these petitions fail and they deserve to be dismissed and are accordingly dismissed. Notice discharged. At this stage, Shri Khare, learned advocate for the petitioners has requested to grant further four weeks time to the petitioners to comply with the order passed by the learned Tribunal. In the facts and circumstances of the case, the petitioners are granted further four weeks time from today to make deposit of pre-deposit as ordered by the learned Tribunal.