ADDITIONAL GROUND IN APPEAL: WHEN PERMISSIBLE?

INTRODUCTION

Under tax
laws, remedies are provided against orders passed by lower authorities.
Normally, the remedy is either rectification or appeal. While rectification has
a limited scope because it is restricted to correction of apparent mistakes,
appeal has a very wide scope and is a useful right with the assessee. An
aggrieved assessee can file an appeal to the designated higher authority
against unfavourable order/s. Normally, there is also a scheme for filing a
second appeal before the Tribunal or such higher authorities as may be
prescribed.

However,
it may be noted that the rights to appeal are subject to certain conditions.
Generally, there are appeal forms which are to be filled up and in the same the
grounds about the issues raised in appeal are required to be mentioned. It is
expected that the assessee will take proper care while raising the grounds of
appeal. Under fiscal laws, the grounds can be amended or new grounds can be
added in the course of an appeal. If the matter is in first appeal, then the modification
/ addition of the grounds is normally not objected to. However, if the appeal
is before the Tribunal and if any new ground is to be raised, then the issue is
not that simple. The power of the Tribunal to allow the additional ground is
discretionary and it may allow it subject to its satisfaction.

RECENT CASE LAW

Recently, the Hon. Bombay High Court had occasion to deal with such an
issue in the case of Bombay Dyeing & Mfg. Co. Ltd. vs. the
Commissioner of Sales Tax (68 GSTR 58) (Bom.) under the BST Act. The
factual position involved is narrated by the High Court in the following words:

…..

‘7.   When all the aforementioned four second
appeals were fixed for hearing, the applicant sought permission to raise an
additional ground relating to levy of sales tax on the surrender of Exim
Scrips. This additional ground was with reference to the second appeals that
were filed pertaining to the F.Y. 1995-96. The additional ground sought to be
raised was thus:

“That the
lower authorities have erred in levying sales tax on surrender of Exim Scrip
and therefore such levy be set aside in view of the judgement of the Hon’ble
Tribunal in the case of M/s Agra Engineering Works (Second Appeal No. 185
of 1997, dated 30/4/2002).”

8.    It was submitted on behalf of the applicant
that since this is a pure question of law, it could be raised at any time in
the appeal proceedings and therefore the said additional ground be allowed to
be raised before the MSTT.

9.    This was however vehemently opposed by the Revenue.
It was pointed out that this ground was never taken up either in the first
appellate proceedings or even in the grounds before the MSTT.

According
to the Revenue, the adjudication on this ground involved verification of the
relevant documents and therefore the said ground could not be allowed at such a
late stage of the proceedings.

10. Hearing the parties on this preliminary issue,
the MSTT opined that the applicant had not given any details of the particular
transactions, the levy in respect of which was now disputed through the
additional ground. It recorded that the assessment order for the period 1995-96
was also silent as regards whether any such transactions had been assessed to
tax. It was also not clear as to whether the transaction, if any, in respect of
the Exim Scrips constituted any surrender or sale. Having regard to these
facts, the MSTT agreed with the Revenue that adjudication in the context of
this ground would involve verification of relevant evidence so as to ascertain
the true nature of the transactions and therefore there was no case made out to
allow this additional ground to be raised at such a late stage. The MSTT
therefore declined to entertain the additional ground. Question (I) reproduced
by us earlier arises from this additional ground.’

…..

The above
matter came before the High Court by way of Sales Tax Reference. Long-drawn
arguments were made before the Court from both the sides. So far as the
assessee was concerned, it was submitted that the Tribunal is the last fact-finding
authority, and therefore it should have allowed the additional ground. It was
further submitted that the appellate powers under the BST Act are wide enough
to allow additional ground and even if additional evidence was required, still,
it could have been allowed.

Per contra,
on behalf of Revenue it was submitted that the additional ground sought to be
raised was not purely a question of law but was a mixed question of fact and
law and accordingly it was submitted that the rejection is justified.

The High
Court thereafter referred to the discussion by the Tribunal on the above ground
and came to a conclusion as follows:

…..

‘19.       As
can be seen from the aforesaid paragraphs, the MSTT (third Bench) on a
consideration of all the relevant facts had taken a conscious decision not to
entertain the additional ground relating to levy of tax on the transactions of
Exim Scrips. Thereafter, the fourth Bench of the MSTT itself examined the files
for the relevant financial years. It perused the files submitted by the
applicant in the assessment proceedings which contain statements of sales /
purchase, declarations and other relevant documents like transport receipts,
sales bills, etc. On going through all these files, the fourth Bench of the
MSTT opined that they did not contain any documents to conclusively show that
the Exim Scrips were surrendered to the Government of India or the designated
bank. On the contrary, in the statements of sales, the said transactions of
Exim Scrips have been specifically shown to be “Exim Scrips sold.”

Even in
the assessment order, the transactions were categorically mentioned to be
“sale” of Exim Scrips. After examining all this material, the MSTT opined (in
the referral order) that it was beyond any doubt that the assessment records
did not contain any document to conclusively show that the impugned
transactions constituted surrender of Exim Scrips and which was the additional
ground that was sought to be raised by the applicant. In this view of the
matter, it was absolutely clear that the adjudication on the said point before
the MSTT would have certainly involved perusal, verification and appreciation
of additional evidence and that is why the MSTT declined to adjudicate the said
issue. This was for the simple reason that no material on this additional
ground was ever produced. Over and above this, the MSTT in paragraph 21
(reproduced above) also examined certain documents which the applicant had
claimed to have submitted in the assessment proceedings. On examining the documents
mentioned in paragraph 21, the MSTT found that, in fact, at least part of the
Exim Scrips were admittedly sold by the applicant to one M/s Agrawal Traders of
Bombay.

As far as
the contention of the applicant regarding surrender of Exim Scrips is concerned,
the MSTT opined that the documents submitted by the applicant in relation to
certain cheque receipt entries in support of the receipt of cheques from the
Joint DGFT, the MSTT was of the opinion that merely on the basis of these
documents, the claim of the applicant that the Exim Scrips were surrendered to
the Government could not have been legally allowable unless the other
supporting documents relating to the particular transactions were produced,
verified and appreciated. To put it in a nutshell, the MSTT was of the view
that the relevant documents available on record were not sufficient for
adjudication of the additional ground that was sought to be canvassed by the
applicant. It would have certainly required leading of additional evidence.

20. We find that the applicant never made any
application for leading any additional evidence to substantiate its claim that
the Exim Scrips were in fact surrendered to the Government and were not sold.
In fact, in the order of MSTT dated 8^th December, 2006 it was
specifically contended by the applicant that since the additional ground is a
pure question of law it could be raised at any time in the appeal proceedings
and therefore the MSTT ought to have entertained the additional ground. Having
found that the additional ground was not a pure question of law but required
additional documents and evidence which needed to be verified, produced and
appreciated, we do not think that the MSTT was unjustified in not entertaining
the additional ground regarding surrender of Exim Scrips. If the applicant did
not bring any material before the MSTT to substantiate its claim that it had
surrendered the Exim Scrips to the Government and therefore was not exigible to
tax, the MSTT necessarily could not have entertained the aforesaid ground as
there was no material brought on record to render a finding thereon.

In these
circumstances and peculiar to the facts of this case, we find that the MSTT was
legally justified in not adjudicating on the point regarding levy of tax on Exim
Scrips. In these circumstances, we have no hesitation in answering Question (I)
in the affirmative and against the applicant and in favour of the Revenue.’

…..

Thus, the rejection is justified by the High Court. From the above
observation it can be seen that if the additional ground is about a law point,
then allowability of the same is normal. However, if the issue involves factual
position, then it becomes discretionary and may require more persuasion.

CONCLUSION

Though the
above judgement is under the BST Act, the ratio will apply to other fiscal laws
also where the assessee wants to raise additional grounds before the appellate
authority. Amongst others, while trying to raise additional grounds it is
expected that the assessee will give all relevant material that is ready to
convince the appellate authority to allow the additional ground. Normally, care
should be taken to take the grounds with the appeal itself, but if at all a
situation arises for raising additional ground, then the assessee should take
more care to submit the relevant supporting ground along with the application.
The above judgement will be a useful guidance for future.