Gujarat H.C : Where AA had imposed penalty upon assessee and AC had dismissed appeal of assessee on ground that it had not deposited amount of pre deposit and Tribunal having found that assessee had deposited pre deposit amount decided penalty issue on merits, Tribunal had no jurisdiction to decide penalty issue on merits by itself

High Court Of Gujarat

State of Gujarat Vs. Hitarth Corporation

Section 107

Akil Kureshi And B.N. Karia, Jj.

Tax Appeal Nos. 836 & 837 Of 2017

Civil Application (Oj) Nos. 738 & 739 Of 2017

February 15, 2018


Akil Kureshi, J. – These appeals arise in common background. We may record facts from Tax Appeal No.836 of 2017.

2. Department has challenged the judgment of the Value Added Tax Tribunal dated 08.02.2016, by which, the appeal of the assessee came to be allowed and penalty imposed by the adjudicating authority came to be deleted.

3. Materials on record would suggest that against the adjudicating authority’s order, the department approached the Appellate Commissioner. The Appellate Commissioner imposed a certain requirement of predeposit as per the statutory provisions. Since the assessee did not fulfill this requirement, appeal was dismissed only on this ground. It was this order of the Commissioner which the assessee challenged before the Tribunal. In the course of hearing of the appeal, the Tribunal was informed that the assessee has deposited not only the predeposit amount but the entire principal tax with interest. The Tribunal thereupon proceeded to decide the legality of the penalty imposed by the adjudicating authority in the appeal before itself and after recording reasons, deleted such penalty.

4. Having heard learned counsel for the parties, we find a fundamental error in the judgment of the Tribunal in entertaining the issue of legality of the order of the adjudicating authority directly before itself. As is well known, the provisions of the VAT Act contain a detailed mechanism for assessment, reassessment and collection of tax. Such provisions include appeal and revision provisions before the specific authorities. Against the order of the Tribunal, further appeal would lie before the High Court only on question of law. The Tribunal is thus the final fact finding authority. In number of cases, the Tribunal would be second Appellate Authority, the statute having provided intermediary appeal before the Commissioner first before the Tribunal would be called upon to decide all questions of law and facts arising in the appeal.

5. In the present case, admittedly first appeal lied before the Commissioner and the Tribunal would be involved in deciding the contentious issues only after the Commissioner applied his mind. Such filtering of the issues is of paramount importance since when the High Court is finally called upon to judge the question of law, it is confident that the questions of facts have been properly threshed out by the Tribunal at first or second appellate stage as the case may be. The scheme of the Act would not permit the Tribunal to jettison the first appeal before the Commissioner and allow itself to act as first Appellate Authority. If the second appeal lies before the Tribunal and the Tribunal were to disregard the first appellate forum and convert itself into first Appellate Authority, the same would be froth with two difficulties. First is, the statute would not recognize any such interchanging or conversion of the appellate fora. In other words, if the Tribunal is second Appellate Authority, it can decide the matter only after the first Appellate Authority has spoken upon the subject and not before. The order of the Tribunal therefore after converting itself into first Appellate Authority quite possibly be argued to be without jurisdiction. Second and equally important aspect of the matter is when the Tribunal acts as a first Appellate Authority though the statute requires it to act as a second Appellate Authority, the consideration of questions of fact which by now well recognized principles attain finality at the level of the Tribunal, do not go through levels of scrutiny and filtration desired by law, leaving the High Court to accept all such findings of fact before the authorities prescribed by the statute have the opportunity to decide them. This is most disturbing and avoidable aspect of the matter on which we have in the past also commented.

6. In a judgment in case of State of Gujarat v. Tudor India Ltd. [Tax Appeal No.711 of 2013], the Court had made following observations:

‘7. 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 predeposit 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].

8. 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 Limited v. Commissioner of Central Excise, reported in 2006 [204] ELT 513 (SC).

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 gobye 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 Commissioner of C.Ex., Chandigarh v. Smithkline Beecham Co. Health C. Limited., reported in 2003 [157] ELT 497 (SC), wherein it is observed, thus

“2. 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 here in above, 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 alal as is apparent from the discussion held here in above.’

7. The appeal before the Tribunal in the present case involved only one question viz. whether the Commissioner was right in imposing certain predeposit condition and consequently right in rejecting the appeal upon the assessee failing to fulfill such condition. The Tribunal had all legal options at its command while considering this issue but certainly under no circumstances had the option of deciding all disputes between the parties on merits by itself, relegating the Commissioner to the position of mere appendage. We have in the past also deprecated this practice of the Tribunal.

8. In the result, the appeals are allowed. Impugned common judgment of the Tribunal is set aside. Now that the assessee has admittedly deposited an amount far in excess of predeposit condition imposed by the Commissioner, both the appeals be revived and placed back before the Commissioner for final decision on merits. Till then there shall be no further recovery.

9. Both appeals are disposed of accordingly. Connected Civil Applications (OJ) do not survive and also stand disposed of.

[Citation : 2018-Taxcaselaw-16-Gujarat-H.C-GST]

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