1. INTRODUCTION:
This article deals with the power of the Appellate Tribunal constituted u/s 4 of the Kerala Value Added Tax Act 2003 ( for short the Act) to dismiss an appeal for default without deciding on merits on the ground that the appellant failed to appear when the case was called up for hearing. According to the author the rule is very unreasonable especially in tax appeals.
The scope of this article is restricted to tax appeals which involve public revenue and author do not wish to deal with the scope of powers available to civil courts for dismissing suits or appeals for default which are essentially a lis or dispute between two private parties. The parties or in most cases their authorized representatives like advocates, Chartered Accountants, Tax consultants etc fail to appear mainly because of genuine reasons like lack of information about the date fixed for hearing or for want of proper service of notice by the Tribunal or hearing fixed in another court or office on the same day and time etc. In certain circumstances the parties may not get the time and opportunity to go to the Tribunal in person due to unexpected events or happenings etc and sometimes even though clear standing instructions are given to office staff to follow up the matter they fail to do so. The procedure adopted by the Tribunal is that only the first notice of hearing is served on the party in person and if there is a request for adjournment or adjournment by the Tribunal itself there will not be any notice regarding the date to which the case is adjourned. Therefore a party seeking adjournment will have to make arrangements to know the date to which his case is adjourned since there will not be any notice. In such cases if the party fails or forget to ascertain the date naturally he will not appear on the adjourned date and that may result in passing the order dismissing his case for default. The number of cases dismissed by the Tribunal for default in recent times has increased considerably and that is the immediate reason that provoked the author to write this article discussing about the powers and the legality of such orders. This article is very specific and confines itself to the provisions of 2003 Act and the Rules/Regulations ancillary thereto.
2. CONSTITUTION OF THE VAT TRIBUNAL
The tribunal is constituted vide section 4(1) of the Act and the power to appoint the tribunal is vested with the government. The tribunal is vested u/s 4(2) with the power to make regulations consistent with the provisions of this Act and the rules made there under for regulating its procedure and the disposal of its business and the same shall be published in the official gazette. The Tribunal as such made Kerala Value Added Tax Appellate Tribunal Regulations 2009 published vide notification No B1-378/2009 dated 29-5-2009.
3. POWERS ON DISPOSAL OF APPEALS
Let us see the powers of the tribunal under the Act in respect of disposal of appeals. The main provisions can be found under section 60(4) which are reproduced below for ease of reference. 60 (4) In disposing of an appeal, the Appellate Tribunal may after giving the parties a reasonable opportunity of being heard either in person or by a representative, -
(a) in the case of an order of assessment or penalty, -
(i) confirm, reduce, enhance or annul the assessment or penalty or both;
(ii) set aside the assessment and direct the assessing authority to make a fresh assessment after such further enquiry as may be directed; or
(iii) pass such other orders as it may think fit; or
(b) in the case of any other order, confirm, cancel or vary such order:
Thus the powers are very clearly specified in section 60(4) and in addition to the usual appellate powers, tribunal is also given the residual powers to pass such other orders as it thinks fit u/s 60(4) (a)(iii).The section do not grant specific powers to the tribunal to dismiss appeal for default by using clear words.
Therefore we have to interpret the provisions to ascertain whether the residual powers could be used as a source for the exercise of the power to dismiss appeal for default.
4. TRIBUNAL REGULATIONS 2009
As already noted the tribunal is vested with the power to frame regulations for regulating and disposal of its business with a clear limitation that the same should not be inconsistent with any of the provisions contained under the KVAT Act or KVAT Rules. Looking into the regulations we can find that Regulation 49 grants the power to dismiss the appeal for default and Regulation 50 for restoration. The said regulations along with Regulation 47 are reproduced below.
REGULATION 49. HEARING:-
1. Where on the date fixed for hearing or on any other date to which the hearing may be adjourned, any party does not appear when the proceeding is called on for hearing, the Tribunal may dispose of the proceedings ex-parte or dismiss the appeal or application, as the case may be, for default.
2. On the date fixed hearing or on any other date to which the hearing may be adjourned, the appellant or applicant shall ordinarily be heard first in support of the appeal or application. The respondent, if necessary, shall be heard next and in such a case the party beginning shall be entitled to reply.
REGULATION 50. RESTORATION:-
1. Where an appeal or application is disposed of under sub-regulation (1) of regulation 49 any absentee party, if aggrieved, may apply to the Tribunal, within 30 days from the date of communication of the order, for restoring such proceeding to the file and where it is shown to the satisfaction of the Tribunal that he was prevented by sufficient cause from appearing when the proceeding was called on for hearing, the Tribunal shall restore the same and proceed with it.
2. The provision of section 5 of the Limitation Act, 1963 shall be applicable to such applications.
REGULATION 47. ADJOURNMENT
On the date fixed for hearing any proceeding or on any other date to which the hearing may be adjourned, if it is found that notice to any party has not been served, fresh notice shall be ordered and the hearing of the case shall be adjourned to a convenient date.
1. If there is no sitting on the date fixed for hearing or if that day happens to be a holiday, the case or cases posted to that day shall be adjourned to a definite date by the chairman on the next working day and adjourned date or dates shall be notified in the notice board of the tribunal under the signature of the secretary.
2. The Tribunal may, either suo motu or the application of any party and at any stage, adjourn the hearing of any proceedings to a definite date.
3. Every adjournment granted at a sitting shall be announced forthwith and any adjournment otherwise granted by the Tribunal shall be noticed in the notice board of the Tribunal over the signature of the secretary.
4. The date fixed for hearing any proceedings may be advanced by the Tribunal, either suomotu or on the application of any party. Notice of such application shall be given to the opposite party before the application is heard and if the hearing is advanced to any date that date shall be announced at the sitting.
5. ANALYSIS OF THE TRIBUNAL REGULATIONS 2009
On a bare reading of the Regulations set out above the position that emerges can be summarized as under. The Tribunal would fix a date for the first hearing of the case as per Regulation 47 and it also makes a reference to adjourned date. Then Regulation 49 provides that on the first hearing date or on the adjourned date the party fails to appear then the case will be decided Ex-parte or dismissed for default.
Here we can take notice of an option given to the tribunal. It has the discretion either to decide Ex-parte on merits or dismiss the appeal for default. Thus power is given to tribunal to dismiss appeal for default as per Regulations and that point is beyond any doubt. Regulation 47 provides that if the hearing is adjourned on request by the party or by tribunal suo motu, then a definite date shall be announced by the bench. In case where such date is not announced by the bench then a date shall be notified in the notice board of the tribunal under the signature of the secretary of the tribunal. Regulation 50 provides that if the appeal is dismissed for default the aggrieved party may apply for restoration of the appeal provided he can show sufficient reason for non appearance on the date fixed for hearing or on the adjourned date. Thus there is a small relief available to the aggrieved party for restoration of his appeal.
The readers may take note of a small contradiction in Regulation 47 itself. Regulation 47 clearly provides that in case the party fails to appear on the date fixed for hearing or on the adjourned date and it is found that no notice is served on the party the tribunal shall order issue of a fresh notice. At the same time the Regulation provides that in the event of adjournment the date shall be either announced by the bench or put in the notice board. Suppose on the date so fixed a party fail to appear is it not obligatory for the tribunal to order fresh notice as provided in Regulation 47(1) since obviously the tribunal should take note that there is no service of notice as the date is fixed by the bench or put in the notice board? Therefore the author is of the view that in such circumstances the tribunal has no option but to order issue of fresh notice.
6. IS REGULATION 49 ULTRA VIRES KVAT ACT?
It is submitted that the power given to the tribunal vide Regulation 49 to dismiss the appeal is ultra vires the Kerala Value Added Tax Act 2003 besides being unreasonable and arbitrary. The author shall now provide the reasons in support of the submission.
7. FAILURE OF DUTY TO ENHANCE
The Regulation goes against the provisions of the Act conferring duties on the Tribunal to pass order on merits and therefore is inconsistent. The Act vide section 60 has given sweeping powers to the tribunal even to enhance the assessment or penalty. How can the tribunal exercise its power of enhancement if appeal is dismissed for default? A party who anticipates an enhancement may refrain from appearing and thereby invite the tribunal to dismiss his appeal for default. How can the tribunal discharge its duty to enhance if appeal is dismissed for default? Thus the Regulation is inconsistent with the Act.
8. FINAL FACT FINDING BODY
The tribunal is the final fact finding authority under the Act and its finding of facts are final subject of course to the condition that it should not be perverse or arbitrary. If this is the position of the tribunal how can it discharge that function without going into the merits of the case? Thus the Regulation is clearly in conflict with the well accepted position of the tribunal as the final fact finding authority.
9. CONFLICTS WITH SECTION 63
Section 63 provides for revision by the High court if Appellate Tribunal has either decided erroneously or failed to decide any question of law. How can the High court discharge its function as the revisionary authority unless the matter is decided on merits? The party is denied of his valuable right to move the High court u/s 63. Attention is now invited to the decision of the Hon Supreme court in CIT v S. Chenniappa Mudaliar, Madurai reported in 1969 AIR 1068(SC) wherein Income tax Appellate Tribunal Regulation No 24 providing for dismissal of appeal for default was held to be ultra vires section 33(4) of the Income Tax Act 1922. It shall be useful to take notice of the relevant portions of the Judgement which is reproduced below.
The scheme of the provisions of the Act relating to the Appellate Tribunal apparently is that it has to dispose of an appeal by making such orders as it thinks fit on the merits. It follows from the language of s. 33 (4) and in particular the use of the word "thereon" that the Tribunal has to go into the correctness or otherwise of the points decided, by the departmental authorities in the light of the submissions made by the appellant. This can only be done by giving a decision on the merits on questions of fact and law and not by merely disposing of the appeal on the ground that the party concerned has failed to appear. As observed in Hukumchand Mills Ltd v CIT 63 I.T.R. 232 (Bom) the word "thereon" in s. 33(4) restricts the jurisdiction of the Tribunal to the subject matter of the appeal and the words "pass such orders as the Tribunal thinks fit" include all the powers which are conferred upon the Appellate Assistant Commissioner by S. 31 of the Act.
The provisions contained in s. 66 about making a reference on question of law to the High Court will be rendered nugatory if any such power is attributed to the Appellate Tribunal by which it can dismiss an appeal, which has otherwise been Properly filed, for default without making any order thereon in accordance with S. 33 (4). The position becomes quite simple when it is remembered that the assessee or the Commissioner of Income tax, if aggrieved by the orders of the Appellate Tribunal, can have resort only to the provisions of s. 66. So far as the questions of fact are concerned the decision of the Tribunal is final and reference can be sought to the High Court only on questions of law. The High Court exercises purely advisory jurisdiction and has no appellate or revisional powers. The advisory jurisdiction can be exercised on a proper reference being made and that cannot be done unless the Tribunal itself has passed proper order under s. 33(4). It follows from all this that the Appellate Tribunal is bound to give a proper decision on questions of fact as well as law which can only be done if the appeal is disposed of on the merits and not dismissed owing to the absence of the appellant.
Thus looking at the substantive provisions of the Act there is no escape from the conclusion that under s. 33(4) the Appellate Tribunal has to dispose of the appeal on the merits and cannot short circuit the same by dismissing it for default of appearance. Attention is invited to the decision of the Andhra Pradesh High court in Overseas Mica exports v Secretary, sales tax appellate tribunal reported in 1970 25 STC 425 (AP) where the Hon court on a challenge to the tribunal regulation held that Section 21(4) of the Act does not authorise the Appellate Tribunal to dismiss an appeal for default of appearance of the appellant; it must dispose of the appeal on merits irrespective of the fact whether the appellant appears on the date of hearing or not.â€. The Hon court followed the decision in Chenniappa case and rejected the attempt by the counsel to distinguish Chenniappa on the ground that the word "thereon" appearing in section 33(4) is absent in the Andhra Pradesh General Sales Tax Act. Please note that the legal provisions including the regulations are almost identical with the Kerala Act and Regulations.
10. RIGHT TO GET A DECISION
The Act provides for payment of fee for the appeal and for the interlocutory applications filed before the tribunal. Therefore the tribunal is duty bound to dispose the appeal on merits and the author is of the opinion that it is the right of a party to get a decision from the tribunal on merits since he pays for the same. It is settled law that a fee is collected by the authority for services rendered or to be rendered. There should be quid pro quo (something for something). Therefore clearly a right is conferred on a party paying fee and the corresponding duty on the tribunal to render the statutory service of deciding the disputes brought before it by the party.
11. RIGHT OF HEARING
A party is given the right of hearing before his case is decided and that is only a right given to him by law. It is for the party to decide whether to avail and exercise that right or not. The tribunal is least concerned with his actual exercise of the right. It is for his benefit. The party has already raised the grounds on which he challenges the orders of the lower authorities and might have already filed sufficient evidences necessary for the disposal of the case. In such a situation there is no need for a party to appear and simply repeat what is clearly written in the grounds of appeal. The party may appear if he has some additional evidences or to elaborate on the grounds raised by him. Of course it will be of great help to the tribunal if the party appears and assist. Therefore the author is of the opinion that his appearance or absence should not influence the ultimate disposal of the appeal on merits.
12. POWER TO DECIDE ON MERITS ONLY
There is no power as such given to the tribunal to dismiss the appeal for default u/s 60. The residual power under section 60 (4) (iii) is ejusdem generis the powers enumerated in clause (i) and (ii) of the said section. The power to pass such orders as it thinks fit is subject to the condition that it should be on merits only. The decision of the Andhra Pradesh High court in overseas Mica exports case has clearly dealt with this matter and gave the ruling that the same should be on merits.
The author is of the view that absence of the word "thereon" does not make any difference so as to distinguish Chenniappa case. The provision for restoration would not also help or in any way reduce the gravity of the arbitrary power of dismissal for default.
13. THE REGULATION ITSELF
The regulation making power of the tribunal is restricted to the areas of procedures and regulating its business as per section 4(2) already reproduced above. The power of dismissal is not a procedure or a matter relating to regulating its business. The procedures and business are all necessary to lead to a decision and will not include the decision itself. This matter has also been dealt with by the Hon AP High court in Overseas Mica exports case referred above. 14.
CONCLUSION
In view of the forgoing discussion the irresistible conclusion can only be that the Regulation 49 is ultra vires the Act in so far as the same is inconsistent with the Act. The power is arbitrary. It is to be taken note that in tax matters the lis is not between two private individuals. It affects the revenue of the state and extracts the money from the tax payer also.
Therefore the power given to civil courts to dismiss appeals for default cannot be applied to tax appeals. Please note that the legislature has vide section 4(2) of the Act has given the power to frame regulation subject to the clear condition that it should not be inconsistent with the provisions of the KVAT Act or Rules. Considering the scheme of the Act especially the provision relating to revisionary power of the High court the author is of the view that the regulation 49 to the extend it grants power to dismiss appeal for default should be declared ultra vires and unconstitutional by a court of competent jurisdiction.
SIVADAS CHETTOOR
B.COM FCA LLM
Chartered accountant,
Palakkad, Kerala
Siva208@yahoo.com
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