Condition of pre-deposit under PVAT is neither onerous nor harsh; Appellate Authority cannot override the requirement of pre-deposit prescribed by the statute: SC
A set of appeals before the Supreme Court of India challenged the judgment and order passed by the High Court of Punjab and Haryana at Chandigarh and all connected matters and raised questions about the validity of Section 62(5) of the Punjab Value Added Tax Act, 2005 (PVAT Act).The Punjab and Haryana High Court considered the relevant decisions of the Supreme Court as well as some of the...
A set of appeals before the Supreme Court of India challenged the judgment and order passed by the High Court of Punjab and Haryana at Chandigarh and all connected matters and raised questions about the validity of Section 62(5) of the Punjab Value Added Tax Act, 2005 (PVAT Act).
The Punjab and Haryana High Court considered the relevant decisions of the Supreme Court as well as some of the High Courts and observed that the State is empowered to enact Section 62(5) of the Act and the said provision is legal and valid. The condition of 25% pre-deposit for hearing first appeal is not onerous, harsh, unreasonable and violative of the provisions of Article 14 of the Constitution of India.
While considering the questions, the Punjab and Haryana High Court principally relied upon the decision of the Supreme Court in Income Tax Officer v. M. K. Mohammed Kunhi and various judgments of the High Courts. The High Court also referred to the decision in Commissioner of Income Tax v. Bansi Dhar & Sons and Others and concluded that even when no express power has been conferred on the first appellate authority to pass an order of interim injunction/protection, by necessary implication and intendment in view of various pronouncements and legal proposition expounded above and in the interest of justice, it would essentially be held that the power to grant interim injunction/protection is embedded in Section 62(5) of the PVAT Act. Instead of rushing to the High Court under Article 226 of the Constitution of India, the grievance can be remedied at the stage of first appellate authority.
The Punjab and Haryana High Court ruled that the State is empowered to enact Section 62(5) of the Act and the said provision is legal and valid. The condition of 25% pre-deposit for hearing first appeal is not onerous, harsh, unreasonable and violative of the provisions of Article 14 of the Constitution of India.
On appeal, the Supreme Court concluded that the State is empowered to enact Section 62(5) of the Act and the said provision is legal and valid. Further, provisions of Section 62(5) of the PVAT Act are directory in nature. Only when a strong prima facie case is made out will the first appellate authority consider whether to grant interim protection/injunction or not. Partial or complete waiver will be granted only in deserving and appropriate cases where the first appellate authority is satisfied that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the condition of pre-deposit to continue as a condition precedent to the hearing of the appeal before it. Therefore, the power to grant interim protection/injunction by the first appellate authority in appropriate cases in case of undue hardship is legal and valid.
The Supreme Court broadly classified its previous judgements:
1) The cases where the concerned statutory provision, while insisting on pre-deposit, itself gives discretion to the Appellate Authority to grant relief against the requirement of pre-deposit if the Appellate Authority is satisfied that insistence on pre-deposit would cause undue hardship to the appellant.
2) The decisions where the statute did not confer any such discretion on the Appellate Authority and yet the challenge to the validity of such provisions was rejected.
The Supreme Court relied on the decision in Seth Nand Lal case considered whether the requirement of pre-deposit would cause undue hardship. However considering that the liability in question and consequential requirement of pre-deposit was a meagre rate of the annual land-tax payable, the fetter imposed on the right of appeal/revision, even in the absence of a provision conferring the discretion on the appellate/revisional authority to relax or waive the condition was not found to be onerous or unreasonable.
The Supreme Court also quoted the case of Bengal Immunity Co. Ltd. v. State of Bihar where it was held that “if there is hardship in a statute it is for the Legislature to amend the law, but the court cannot be called upon to discard the cardinal rule of interpretation for mitigating a hardship.”
The Apex court thus concluded that the appellate authority cannot override the requirement of pre-deposit prescribed by the statute and go against it.
A bench of Justices Uday Umesh Lalit and Indu Malhotra presided over the case.