MANDATORY PAYMENT FOR FILING APPEAL AND ESCAPE THEREFROM

INTRODUCTION

Laws are being so drafted nowadays that even for
preferring an appeal against an order passed by Revenue authorities the
aggrieved assessee has to shell out a minimum 10% or maybe even a higher
proportion of the dues.

In other words, the law makes it compulsory that
for filing / entertaining an appeal, the appellant must pay a minimum amount
upfront.

For example, under the MVAT Act payment of 10% of
tax dues has been made compulsory from 15^th April, 2017. Although
litigation on the said issue is on before the Hon. Bombay High Court, but as of
today no appeal is being admitted without payment of minimum 10% of tax dues.

Recently, the above issue has been dealt with by
the Hon. Supreme Court in the case of Tecnimont Pvt. Ltd. vs. State of
Punjab (67 GSTR 193)(SC).

FACTS OF THE CASE

The case arose from an order and judgment of the
Punjab and Haryana High Court. Under the Punjab Value Added Tax Act, 2005 (PVAT
Act), payment of 25% of additional demand was mandatory for entertaining an
appeal. This was challenged before the High Court.

The following questions arose before the Hon.
Punjab & Haryana High Court while deciding the case of Punjab State
Power Corporation Ltd. vs. State of Punjab (90 VST 66)(P&H):

‘(a) Whether the State is empowered to enact
section 62(5) of the PVAT Act?

(b) Whether the condition of 25% pre-deposit for
hearing first appeal is onerous, harsh, unreasonable and, therefore, violative
of Article 14 of the Constitution of India?

(c) Whether the first appellate authority in its
right to hear appeal has inherent powers to grant interim protection against
imposition of such a condition for hearing of appeals on merits?’

The Court decided the first two issues in favour of
the State, i.e., the State is empowered to make the provision as it has done
and that the provision is not in violation of Article 14 of the Constitution.

However, regarding the third issue, i.e., whether
the appellate authority is empowered to use its discretion for a lower amount,
the Hon. Punjab & Haryana High Court held in the affirmative, observing as
under:

‘It is, thus, concluded that even when no express
power has been conferred on the first appellate authority to pass an order of
interim injunction / protection, in our opinion, 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. As a sequel, it would follow that the provisions of
section 62(5) of the PVAT Act are directory in nature, meaning thereby that the
first appellate authority is empowered to partially or completely waive the
condition of pre-deposit contained therein in the given facts and
circumstances. It is not to be exercised in a routine way or as a matter of
course in view of the special nature of taxation and revenue laws. 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. As a result, question (c) posed is answered
accordingly.’

The above judgment was challenged by the State on
the issue of the answer to question (c) and by the assessee in respect of the
answers to the first two questions.

The Hon. Supreme Court decided the issue under Tecnimont
Pvt. Ltd. vs. State of Punjab (67 GSTR 193)(SC).

CONSIDERATION BY SUPREME COURT

In its judgment, the Supreme Court referred to
various precedents on the issue. The indicative observations of the Supreme
Court can be noted as under:

‘15. In Har Devi Asnani 11 the
validity of proviso to section 65(1) of the Rajasthan Stamp Act, 1998
came up for consideration in terms of which no revision application could be
entertained unless it was accompanied by a satisfactory proof of the payment of
50% of the recoverable amount. Relying on the earlier decisions of this Court
including in Smt. P. Laxmi Devi the challenge was rejected and
the thought expressed in P. Laxmi Devi 10 was repeated in Har
Devi Asnani 11 as under:

“27. In Govt. of A.P. vs. P. Laxmi Devi 10 this
Court, while upholding the proviso to sub-section (1) of section 47-A of the Stamp Act introduced by the Andhra Pradesh Amendment Act 8
of 1998, observed (SCC p. 737, para 29):

29. In our opinion in this situation it is always
open to a party to file a writ petition challenging the exorbitant demand made
by the registering officer under the proviso to section 47-A alleging
that the determination made is arbitrary and / or based on extraneous
considerations, and in that case it is always open to the High Court, if it is
satisfied that the allegation is correct, to set aside such exorbitant demand
under the proviso to section 47-A of the Stamp Act by declaring the
demand arbitrary. It is well settled that arbitrariness violates Article 14 of
the Constitution (vide Maneka Gandhi vs. Union of India 17). Hence,
the party is not remediless in this situation.

…

28. In our view, therefore, the Learned Single
Judge should have examined the facts of the present case to find out whether
the determination of the value of the property purchased by the appellant and
the demand of additional stamp duty made from the appellant by the Additional
Collector were exorbitant so as to call for interference under Article 226 of
the Constitution.”

16. These decisions show that the following
statements of law in The Anant Mills Co. Ltd. have guided
subsequent decisions of this Court:

The right of appeal is the creature of a statute.
Without a statutory provision creating such a right the person aggrieved is not
entitled to file an appeal… It is permissible to enact a law that no appeal
shall lie against an order relating to an assessment of tax unless the tax had
been paid. It is open to the Legislature to impose an accompanying liability
upon a party upon whom legal right is conferred or to prescribe conditions for
the exercise of the right. Any requirement for the discharge of that liability
or the fulfilment of that condition in case the party concerned seeks to avail
of the said right is a valid piece of legislation…’

Observing as above, the Hon. Supreme Court upheld
the validity of two provisions.

In respect of question (c), that is, in spite of
such provisions, whether the appellate authority has discretion, the Hon.
Supreme Court observed as under:

‘18. It is true that in cases falling in second
category as set out in paragraph 11 hereinabove, where no discretion was
conferred by the Statute upon the appellate authority to grant relief against
requirement of pre-deposit, the challenge to the validity of the concerned
provision in each of those cases was rejected.

But the decision of the Constitution Bench of this
Court in Seth Nand Lal was in the backdrop of what this Court
considered to be meagre rate of the annual land tax payable. The decision in Shyam
Kishore attempted to find a solution and provide some succour in cases
involving extreme hardship but was well aware of the limitation. Same awareness
was expressed in P. Laxmi Devi and in Har
Devi Asnani and it was stated that in cases of extreme hardship a writ
petition could be an appropriate remedy. But in the present case the High Court
has gone a step further and found that the appellate authority would have
implied power to grant such solace, and for arriving at such conclusion,
reliance is placed on the decision of this Court in Kunhi 1.

19. Kunhi 1 undoubtedly laid down
that an express grant of statutory power carries with it, by necessary
implication, the authority to use all reasonable means to make such grant
effective. But can such incidental or implied power be drawn and invoked to
grant relief against requirement of pre-deposit when the statute in clear
mandate says no appeal be entertained unless 25% of the amount in question is
deposited? Would not any such exercise make the mandate of the provision of
pre-deposit nugatory and meaningless?

20. While dealing with the scope and width of
implied powers, the Constitution Bench of this Court in Matajog Dubey vs.
H.C. Bhari also touched upon the issue whether exercise of such power
can permit going against the express statutory provision inhibiting the
exercise of such power. The discussion was as under:

“Where a power is conferred or a duty imposed by
statute or otherwise, and there is nothing said expressly inhibiting the
exercise of the power or the performance of the duty by any limitations or
restrictions, it is reasonable to hold that it carries with it the power of
doing all such acts or employing such means as are reasonably necessary for
such execution. If in the exercise of the power or the performance of the
official duty, improper or unlawful obstruction or resistance is encountered,
there must be the right to use reasonable means to remove the obstruction or
overcome the resistance. This accords with common sense and does not seem
contrary to any principle of law. The true position is neatly stated thus in Broom’s
Legal Maxims, 10th Ed., at page 312: It is a rule that when the law
commands a thing to be done, it authorises the performance of whatever may be
necessary for executing its command.

(Emphasis added)”’

Relying upon the above precedents, the Hon. Supreme
Court held that once there is a specific provision, the appellate authority
cannot have discretion and cannot forgo such condition nor lower the amount.

AN ALTERNATIVE

The Hon. Supreme Court, while deciding the issue,
has also given a solution about cases where such condition cannot be complied
with. The said observations are available at many places and in precedents
reproduced by the Hon. Supreme Court.

In the paragraph reproduced above from the judgment
of Har Devi Asnani it can be seen that in case of exorbitant
demand, or in case of demand based on extraneous considerations, it is open to
approach the High Court under its inherent powers for deletion of such demand
as violative of Article 14.

The High Court can consider such a plea. Even in
the present case, the Hon. Supreme Court concluded as under:

‘25. As stated in P. Laxmi Devi and
Har Devi Asnani, in genuine cases of hardship recourse would
still be open to the concerned person. However, it would be a completely
different thing to say that the appellate authority itself can grant such
relief. As stated in Shyam Kishore, any such exercise would make
the provision itself unworkable and render the statutory intendment nugatory.’

Thus, an inference can be drawn that in case of
arbitrary demand one can approach the High Court by writ petition. It can also
be stated that in case of inability to pay the minimum amount, supported by
necessary documents and reasons, one can approach the High Court by writ
petition to waive the condition.

CONCLUSION

The law is now becoming very clear. Once there is a
condition of minimum payment, the appellate authority has no discretion in
spite of great prejudice to the assessee. However, if the circumstances exist,
the assessee can approach the High Court by way of writ petition to waive the
condition or set aside the demand itself.

As of today, the laws are
becoming mechanical and discretions are being done away with. The only hope for
justice will be from the Hon. High Courts in deserving cases.