Satyasagar Industries vs State of Gujarat

Akil Abdul Hamid Kureshi, J.—Heard learned counsel for the parties for final disposal of the appeal on the following substantial question of

law :

Whether in an appeal filed by the assessee questioning the decision of the Appellate Authority to demand a portion of tax by way of pre-deposit,

the Value Added Tax Tribunal can go into the merits of the order of assessment without deciding the question of pre-deposit?

On the short ground of propriety of the Tribunal in deciding the question on merits when the sole question before the Tribunal in appeal filed was

regarding the pre-deposit, we are inclined to quash the order. Our reasons are as follows.

The appellant has challenged the judgment of the Value Added Tax Tribunal (hereinafter referred to as ''the Tribunal'') dated September 05,

2013 in Second Appeal No. 675 of 2011. Such appeal was filed questioning the judgment of the Deputy Commissioner of Commercial Tax,

Appeals-6, Bhavnagar, dated July 16, 2011. Such order was passed on an application for waiver of pre-deposit pending an appeal before the

said authority. The Appellate Authority insisted that the appellant must deposit the entire amount of the assessed tax by way of pre-deposit. Since

the appellant was unable to do so, the appeal was not entertained.

It was this order which the appellant challenged before the Tribunal The scope of appeal before the Tribunal, thus, was whether the Joint

Commissioner of Commercial Tax was justified in insisting that the appellant should deposit 100% of the amount by way of pre-deposit. In the

process of hearing the appeal, the Tribunal decided several issues pertaining to validity of the assessment order and allowed the appeal in part. The

Tribunal passed the following order:

This appeal is 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, in light of the directions given hereinabove.

It is against this order that the appellant has filed this Tax Appeal. In our opinion, the Tribunal committed serious error in examining the validity

of the assessment order in an appeal concerning the question of pre-deposit. The Tribunal was called upon to decide whether the appellant, to

maintain its appeal before the Appellate Commissioner, should be asked to deposit the entire amount of tax by way of pre-deposit or only part

thereof or none at all. The Tribunal had to answer such question as found appropriate. In our opinion, the Tribunal under no circumstances could

have bypassed the first appellate stage and decided the appeal as if it was a second appeal on merits before the Tribunal. Till the issue of

appropriate amount to be deposited by way of pre-deposit was sorted out and such amount was deposited by the appellant, the appeal before the

Deputy Commissioner was not even properly instituted. In a recent judgment dated January 30, 2014, in somewhat similar background, this Court

in the case of Anilkumar v. State of Gujarat [2014] 43 GST 696/42 taxmann.com 340, observed as under:

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 appealable 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.

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% of the amount confirmed by the adjudicating authority. When the appellant failed to fulfil 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 non-

compliance with such requirement was correct or not.

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 there was no intermediary stage of the

appeal before the Appellate Commissioner or any requirement of pre-deposit u/s 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 merits about the additions 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 fulfil 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.

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.

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. the Division

Bench of this Court had come across one such order of the Tribunal and made the following observations:

As we have noticed in number of matters, this unacceptable trend of deciding the appeals on merit, even when the first appellate authority has

rejected the case of assessee on the ground of predeposit, instead of considering the request of deposit of predeposit, such determination of the

entire appeal by the Tribunal at the such juncture, in our opinion, is not a desirable approach. We may not choose to interfere in all such cases

where the Tribunal has straightway chosen to decide the matter on merit instead of determining issue of predeposit which was at large before it.

However, so as to ensure that a dent is made in such practice followed consistently that we have chosen to remand this matter. Once, when

assessee chooses not to comply with the requirement of making predeposit or contest the matter on the ground of pre-deposit and either side

approaches the second appellate authority, there does not arise any question of circumventing the very stage and exercise the powers of first

appellate authority. We say so as the Statute provides that even on adjudication of the issue on merit by the first appellate authority, either side is

entitled to challenge such reasonings before the second appellate authority. Not only the parties and the second appellate authority would be

deprived of the reasonings of the first appellate authority but chance of either sides of availing the opportunity of appeal on merit also gets marred

by this process. Even if it is felt by the Tribunal that the issue is covered by the decision of the higher forum, it can always direct the parties to

agitate these aspects before the concerned authority [first appellate authority here],

We also need to take note of the fact that the intent of incorporating the provision of predeposit before proceeding with the appeal is well

carved out by the decision of the Apex Court in case of Benara Valves Ltd. and Others Vs. Commissioner of Central Excise and Another, .

8.1. If either side approaches the Tribunal, being aggrieved by the order of either grant or rejection of requirement of predeposit, it is open for the

Tribunal to take into consideration the law on the subject and decide the validity of the order of directing or not directing the amount of predeposit.

However, that would not ipso facto entitle the Tribunal to give a complete goodbye to the well laid down procedures of law as also such

requirement of predeposit and decide the matter on merit. We are also backed in our conclusion by another decision of the Apex Court rendered

in case of Commr. of C. Ex., Chandigarh Vs. Smithkline Beecham Co. Health C. Ltd., , wherein it is observed, thus--

This appeal is filed against an order passed by the Customs, Excise & Gold [Control] Appellate Tribunal dated 19th December 2002. The

Tribunal was hearing an appeal against an order dated 23rd April 2002 passed by the Commissioner of Central Excise [Appeals]. By that order,

the Commissioner [Appeals] had merely dismissed the appeal because predeposit was not made. The Commissioner [Appeals] had not gone into

the merits. Therefore, the only question before the Tribunal was whether predeposit was required or not. The Tribunal has chosen to go into the

merits and decided the appeal on merits also. This should not have been done.

8.2. It is not the case of either side that an identical question of law was pending before the Tribunal in some other appeals concerning the very

assessee, or identical question of law in respect of very assessee for different assessment year was before the Tribunal and in such circumstances,

with the consent of the parties it chose to conclude on merit.

8.3. In view of the discussion held hereinabove, we therefore are of the opinion that this appeal deserves to be remanded back to the Tribunal so

as to emphasis the requirement of not permitting any such short circuiting of the process at any stage. We have chosen not to enter the arena of

merit of the case at all as is apparent from the discussion held hereinabove.

In the result, the judgment of the Tribunal is set aside. This will also have an effect on the portion of the judgment which was in favour of the

appellant. The entire second appeal would be heard afresh and decided only on the issues arising in the appeal out of the order of the appellate

authority challenged before the Tribunal. The present appeal is disposed of accordingly. There shall be, however, no order as to costs.