Indian Oil Corporation Ltd. Vs. State of Haryana and ors. - Court Judgment

Excerpt:
sales tax - recovery - injunction of - haryana value added tax act, 2003 - petitioner was company - during assessment year authority levied tax at higher rate and rejected stock transfer from one state to other state in absence of c forms under act - petitioner filed appeal - appeal allowed and matter remanded back for reconsideration - authority reconsider matter and levied tax and issued notice for recovery of tax - petitioner filed appeal and prayed for stay from recovery of tax during pendency of appeal - appellate authority with assessing officer pressurized petitioner for recovery of tax - petitioner filed petition for stay before high court - court directed appellate authority to decide stay application - application dismissed by appellate authority - hence, present petition -.....orderrajesh bindal, j.1. this order will dispose of c. w. p. nos. 2718, 3244 and 4938 of 2008, as common questions of law are involved.2. the facts have been taken from c. w. p. no. 2718 of 2008.3. challenge in the present petition is to the vires of section 33(8) of the haryana value added tax act, 2003 (for short, 'the vat act') and further for quashing of order (annexure p-10) passed by the joint excise and taxation commissioner (appeals), rohtak [for short, 'jetc(a)'j.4. briefly, the facts as stated in the petition are that the petitioner is a public limited company. for the assessment year 2003-04, return under the vat act showing a turnover of rs. 59,54,99,40,369 was filed. it included inter-state sales as well as intra-state sales. a sum of rs. 1,34,72,10,807 calculated as tax.....

Judgment:
ORDER

Rajesh Bindal, J.

1. This order will dispose of C. W. P. Nos. 2718, 3244 and 4938 of 2008, as common questions of law are involved.

2. The facts have been taken from C. W. P. No. 2718 of 2008.

3. Challenge in the present petition is to the vires of Section 33(8) of the Haryana Value Added Tax Act, 2003 (for short, 'the VAT Act') and further for quashing of order (annexure P-10) passed by the Joint Excise and Taxation Commissioner (Appeals), Rohtak [for short, 'JETC(A)'J.

4. Briefly, the facts as stated in the petition are that the petitioner is a public limited company. For the assessment year 2003-04, return under the VAT Act showing a turnover of Rs. 59,54,99,40,369 was filed. It included inter-State sales as well as intra-State sales. A sum of Rs. 1,34,72,10,807 calculated as tax payable on the turnover so declared was voluntarily paid by the petitioner-company. As was the practice in the earlier years, the petitioner sent certain goods on stock-transfer basis to its sale depot situated at Parwanoo in Himachal Pradesh. For this transaction, the claim was that it was a transfer of goods otherwise than by way of sale. Statutory F forms were duly received and were submitted to the Assessing Authority. In addition to this, various other transactions of stock transfer had been shown to other depots including air force stations. For the purpose of carrying highly inflammable/explosive material, the same is required to be carried in specially designed containers which are approved as per the standard laid down by the Explosive Department.

5. In fact, the petitioner-company has its Divisional Office in the State of Himachal Pradesh at Shimla and its depot at Parwanoo. The Divisional Office at Shimla analyses the requirement of various dealers located throughout the State and on the basis of which indent is given at Ambala Terminal for supply of the material. On receipt of such a requisition, the required supply is made to the depot at Parwanoo. The freight for the transportation of product from Ambala to Parwanoo is paid by Ambala Terminal, whereas from Parwanoo depot to the place of dealer/customer in Himachal Pradesh, the same is paid by Parwanoo depot. Some of the dealers of the petitioner-company are also carrying on the business of transport who carry the product from Ambala Terminal for Parwanoo depot which, in turn, is supplied to various customers in Himachal Pradesh. At Parwanoo depot, the seals/locks of tankers are opened and the transit loss of the quantity is topped up. After checking of density/temperature of the product in the vehicle and after re-sealing the same, the product is supplied to the customer as per his requirement. The transfer of material from Ambala Terminal to Parwanoo Depot was claimed to be stock transfer by the petitioner-company.

6. During the course of assessment, the transfer of stock from Ambala Terminal to Parwanoo depot was disputed by the Assessing Authority opining the same to be despatch of goods in pursuance to pre-existing contract and thus taxed as inter-State sales from Haryana to Himachal Pradesh. In fact, even during the previous years, such dispute had been raised by the Assessing Authority which was pending consideration before the Haryana Tax Tribunal. During the year in question, the Assessing Authority, vide order dated March 16, 2007, raised a demand of Rs. 170,80,55,315 by rejecting the stock transfer from Ambala Terminal to Parwanoo depot and in the absence of 'C' forms levied tax at higher rates. The contention is that the demand was raised towards the end of the financial year to accelerate the figure of revenue collection, otherwise there was no substance therein.

7. Aggrieved against the order, the petitioner-company filed an appeal before JETC (A) who, vide his order dated August 6, 2007, set aside the order and remanded the case back to the Assessing Authority for re-calculation of the tax liability after due opportunity of hearing to the petitioner-company. In remand again, certain quantity of stock transfers were rejected by the Assessing Authority, thereby raising a demand of Rs. 64,26,44,426 vide order dated November 23, 2007. Along with the assessment order, a demand notice was served on the petitioner-company for payment of the aforesaid amount within a period of 30 days from the receipt of the notice, which was received by the petitioner-company on December 13, 2007.

8. In terms of the provisions of Section 33 of the VAT Act, the petitioner again filed an appeal before respondent No. 3 along with the prayer for stay of recovery during the pendency of the appeal. However, during the pendency of the appeal and the stay application, the Assessing Authority started pressurizing the petitioner-company to pay the amount, otherwise a threat was made for attachment of the bank account or recover the same as arrears of land revenue. The petitioner-company was granted time till January 31, 2008 to make the payment. Faced with the situation, the petitioner-company approached this Court by filing C. W. P. No. 1050 of 2008 seeking restraint against the Assessing Authority from recovering the amount of tax. However, this Court finding that application for stay was still pending before the appellate authority did not entertain the petition. However, a direction was given to the appellate authority to decide the stay application in accordance with law within a period of 15 days vide order dated January 23, 2008. The appellate authority decided the stay application filed by the petitioner-company vide order dated February 8, 2008 finding therein that in terms of Section 33(8) of the Act, the appellate authority has not been vested with any power to deal with the stay application. Accordingly, the application was found to be not maintainable and was dismissed. It is at this stage that the petitioner-company approached this Court by filing the present petition challenging the vires of Section 33(8) of the VAT Act as well as impugned order dated February 8, 2008 (annexure P-10).

9. Learned counsel for the petitioners submitted that the provisions of Section 33(8) of the VAT Act are clearly violative of the Constitution of India. The same are confiscatory. It is, in fact, a tool in the hands of various taxing authorities to harass the honest tax-payer.

10. The submission is that right of appeal, though a statutory right, but once created it is a substantial right meant to get one's grievance redressed. Once provided the same has to be effective and not illusory only. Providing no right to grant interim relief by the appellate authority would mean providing an ineffective remedy of appeal. Under the VAT Act, very wide powers have been conferred on the appellate authority including the power to enhance the tax but still the power is very basic in nature and goes to the root of the appellate jurisdiction, provide for remedy against illegal and arbitrary demands, has not been provided. Grant or non-grant of interim relief is a matter of judicial discretion of the appellate authority which is governed by settled principles, namely, (i) prima facie case, (ii) irreparable loss and (iii) balance of convenience. Any assessee will go in appeal only if he is aggrieved against the action of the assessing authority in raising illegal demand. If a remedy is provided, the authority designated to exercise the power should be given full play to exercise the same and any effort by the Legislature to curtail the exercise of power in a particular manner will amount to interference in the judicial process/discretion which can straight away be held to be arbitrary and violative of principles of natural justice. A condition asking the assessee to pay admitted tax for entertainment of appeal is understandable or even a bar on the appellate authority to grant stay qua that amount but depriving the assessing authority from granting stay under any circumstances will not amount to fair procedure which could stand judicial scrutiny in terms of the principles of law settled in various judgments by the honourable Supreme Court. After assessment, demand notice is issued for recovery of the tax granting time of 30 days for payment thereof and in case of failure, provisions of Section 26 of the VAT Act come into play providing for enforcing recovery as arrears of land revenue which includes process of attachment and sale of property and arrest of the defaulters.

11. It is further submitted that the working capital with a dealer is circulated in the business. The goods are converted into money and money is again utilised to manufacture goods or in case of trading, the same is used in buying and selling the goods. If a substantial portion of this money is taken away without any justifiable basis, it will be unreasonable restriction on trade to carry on business. In case an Assessing Authority in its wisdom opines that certain amount of tax is due from a person, the person aggrieved has the right to appeal as is provided for under the VAT Act. Depriving the appellate authority to grant interim stay under any circumstances and on the other hand requiring the dealer to pay the amount of tax so assessed would certainly be arbitrary, unreasonable and confiscatory. The procedure established in law to redress the grievance in appeal should be fair and effective. Judicial power cannot be circumscribed and bound down under limits in which it could be exercised. Providing a right of appeal but totally disarming the appellate authority from granting interim relief would be unjust, unfair and violative of articles 14,19(1) (g) and 21 of the Constitution of India. Mere application to the same authority for extension of time for payment of the amount and that too in case the person concerned is able to show that he is unable to pay the tax would mean only a remedy from Caesar to Caesar. An order passed by the Assessing Authority or the higher authority under Section 22(2) and (3) of the VAT Act is treated final and not appealable under Section 33 thereof.

12. Still further, it is submitted that there is no period prescribed under the VAT Act for deciding appeals by the appellate authority and even if such a period is prescribed, similar provisions in other statutes have been held to be directory in nature. Meaning thereby that after getting the amount of tax deposited the appeal can be kept pending for years together. As is generally seen the taxing authorities suffer from the disease of targeteria and to achieve the same they devise ways and means to levy taxes on the dealers in arbitrary fashion to inflate the figures of tax levied or recovered. Conferment of such an arbitrary and uncontrolled power on the departmental authorities without there being checks and balances would certainly result in harassment of the tax-payer. This Court can take judicial notice of the fact from various cases which come to the court as to how arbitrary, illegal, exorbitant demands are raised without any basis, and then appeals are not decided for long periods. To prolong the agony of the assessee even after acceptance of the appeal, the amount of tax is not refunded.

13. Learned counsel for the petitioners also referred to the facts of the case in hand and submitted that it is a glaring example of harassment at the hands of the Assessing Authority where year after year the demand is being created on the same issue and even after substantial amount of tax was deposited during pendency of the appeals, the same are still pending at various levels, as is evident from the following chart:

------------------------------------------------------------------------------Assessment Demand raised Amount paid Remarksyear year in Rs. in Rs.------------------------------------------------------------------------------1996-97 2,50,58,953 2,50,58,953 Matter pending before Haryana TaxTribunal------------------------------------------------------------------------------1997-98 13,63,21,402 Nil Matter pending before Haryana TaxTribunal relating to issue of stay and prior payment------------------------------------------------------------------------------1998-99 26,38,15,662 Nil -do-------------------------------------------------------------------------------2000-01 43,53,12,240 16,26,25,807 Remaining (amount has been stayedand matter on merits is pendingbefore the Haryana Tax Tribunal.------------------------------------------------------------------------------

14. For the current year, initially demand of Rs. 170,80,55,315 was raised which on remand by the appellate authority in fresh assessment proceedings was reduced to Rs. 64,26,44,426. It is further submitted that the provisions are violative of article 21 of the Constitution of India.

15. Without going into the merits of the issue of the vires of the provisions of Section 33(8) of the VAT Act but considering the conduct of the appellate authority and the Assessing Authority in the present case where though the deposit of tax is not a condition precedent for entertainment or hearing of appeal on merits but still the appeals even for earlier years and for the year in question have been kept pending, which could very well be decided without waiting for result of stay application or where the demand is huge the same could be disposed of at the earliest, in view of the peculiar facts and circumstances of the case, in our considered opinion, the ends of justice in the present case will be met in case the recovery of the amount of disputed tax remains stayed during the pendency of the appeals before the appellate authority. We order accordingly.

16. The writ petitions are disposed of in the manner indicated above.