Punjab & Haryana High Court: “No Appeal Can Be Entertained Without Satisfactory Proof of Prior Minimum Payment.”

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On 2nd November 2020, a Single Judge Bench of Hon’ble Justice Daya Chaudhary heard the case of M/S Kelmar (India) Exports v. State of Punjab via video conferencing.
The petitioner filed this petition for quashing the order passed by the Punjab VAT Tribunal and the order passed by the respondent to deposit 10% of the total demand of Rs.27,76,882/-. A prayer had also been made for issuance of a writ in the nature of mandamus directing the respondent to adjudicate the appeal on merits without insisting upon an initial deposit of 25% as the petitioner is not in a position to pay the said amount of 25%.

Facts of the case

The Petitioner firm, i.e., M/s Kelmar (India) Exports, was registered under Punjab Value Added Tax Act, 2005 (PVAT Act), and Central Sales Tax Act, 1956 (CST Act). The firm dealt in the trade of Iron and Steel goods. Notice for assessment under Section 29(2)(Assessment of tax) of the PVAT Act was issued by the Excise and Taxation Officer-cum-Designated Officer, Ludhiana-II. The petitioner firm’s authorized representative appeared before the concerned authority and produced the invoices as well as other relevant documents. The respondent passed the order and created a demand for Rs.27,76,882/-, which is under challenge in the present petition.
Aggrieved by the said order, the petitioner firm filed the first appeal before the Deputy Excise and Taxation Commissioner (Admin), Ludhiana 1 of 5 Division, Ludhiana, Punjab, along with an application for exemption of prior deposit of 25%. A direction was issued by the respondent to the petitioner to deposit 10% of the total demand of Rs.27,76,882/-, which comes to Rs.2,77,688/- by relaxing pre-condition of deposit of 25%. However, in spite of directions issued by the respondent, the petitioner did not deposit the said amount, and ultimately, the appeal was dismissed.
Being aggrieved by the said order, the petitioner filed an appeal before the Punjab VAT Tribunal, which was also dismissed on the ground of non-deposit of 25% of the total demand. Thus, the petitioner approached the present Court by way of filing the present petition.

Contentions of the petitioner

Learned counsel for the petitioner submitted that the submissions made by the petitioner firm were not considered as there was a financial problem in depositing 10%. Learned counsel also submitted that there was no requirement of pre-deposit in case there was merit in the appeal. The amount of pre-deposit could have been reduced.
Learned counsel for the petitioner in support of his arguments had relied upon the judgments of:
M/s Tecnimont Pvt. Ltd. Vs. State of Punjab, 2019
M/s Chadha Super Cars Pvt. Limited, Ludhiana vs. State of Punjab and others, 2019

Contentions of the Respondent

Learned counsel for the respondents, Mr.Pankaj Gupta, Additional Advocate General (Punjab) had opposed the submissions made by learned counsel for the petitioner by submitting that pre-deposit of 25% was a mandatory requirement as per provisions of Section 62(5) of the PVAT Act (Appeal accompanied by satisfactory proof of the prior minimum payment).
He also submitted that nothing was mentioned in the petition and the appeals that it was a case of financial hardship. Mr. Gupta had also relied upon the judgments:
Tecnimont Pvt. Ltd. Vs. State of Punjab and others 2019 SCC OnLine SC 1228
Larsen & Toubro Limited vs. The State of Haryana and others 2011
wherein it was held that the appellate authority had no power to waive off the pre-deposit amount. Learned State Counsel also submitted that the condition of 25% pre-deposit for a hearing of the appeal was not harsh, unreasonable, and arbitrary.

Court’s Analysis

The Court observed that the petitioner had a remedy under Article 226 (Power of High Courts to issue certain writs) of the Constitution of India for seeking any relaxation or waiving off the amount for hearing of the appeal. The Court further stated that specific grounds had not been taken for showing the financial hardship, but it had been mentioned in the second prayer that due to financial loss in business, the petitioner could not deposit the amount of 25% as pre-deposit.
The Court stated that it was not disputed that the Appellate Authority directed the petitioner to deposit 10% instead of 25% as pre-deposit for the hearing of the appeal, but the petitioner could not deposit the said amount as well. However, the petitioner was ready to deposit 10% of the total demand so that his appeal could be heard on merit.

Court’s Decision

The Court considered the interest of justice and also the fact that the petitioner was ready to deposit 10% as pre-deposit instead of 25% of the total demand before the Appellate Authority within some reasonable period for deciding his appeal on merits. The Court, therefore, disposed the petition and directed the petitioner to file an appeal within a period of two weeks before the Deputy Excise and Taxation Commissioner (Admin), Ludhiana Division, Ludhiana decide the same in accordance with law within a period of four weeks thereafter on depositing of 10% of the total demand.


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