SC disposes appeal challenging constitutional validity of pre-deposit under the provisions of TNVAT Act

The Hon'ble Supreme Court of India in M/S. V.V.V. And Sons Edible Oil Ltd. v. The State of Tamil Nadu &Ors. [Civil Appeal No. 3964 of 2020 dated December 04, 2020] disposed of the appeal filed against the judgment passed by the Hon'ble Madras High Court, wherein, the Assessee had challenged the constitutional validity of pre-deposit contained under the provisions of the Tamil Nadu Value Added Tax Act, 2006 (“TNVAT Act”) and held that, since the matter is still at the first appellate stage, the Appellant would, therefore, be obliged to deposit 25% of the demanded sum.

Facts

This appeal filed by M/S. V.V.V. And Sons Edible Oil Ltd. (“Assessee/Appellant”) challenges the judgment and order passed by the Hon'ble Madras High Court in W.P. (MD) No. 21856 of 2016dated February 26, 2020.

The aforesaid writ petition was filed by the Appellant challenging the validity of second proviso to Section 51(1) of the TNVAT Act and second proviso to Section 58(1) of the TNVAT Act. Under Section 51(1) of the TNVAT Act, the Appellant at the first appellate stage is obliged to deposit 25% of the difference in the amount of tax assessed by the assessing authority and the tax admitted by the Appellant whereas under Section 58(1) of the TNVAT Act, the Appellant at the second appellate stage is required to deposit the sum ordered by the appellate authority. The constitutional validity of these provisions were under challenge in the aforesaid writ petition and the challenge having been negatived, this appeal has been preferred.

Issue

Constitutional validity of pre-deposit contained under second proviso to Section 51(1) of the TNVAT Act and second proviso to Section 58(1) of the TNVAT Act.

Held

The Hon'ble Supreme Court of India in Civil Appeal No. 3964 of 2020 dated December 04, 2020 held as under:

· Noted that the matter insofar as the case of the present Appellant is concerned, is still at the first appellate stage.

· Held that, in terms of second proviso to Section 51(1) of the Act, the Appellant would, therefore, be obliged to deposit 25% of the demanded sum.

· Observed that, a sum of Rs. 13 crores has already been deposited by the Appellant before the authorities in question vide order dated, September 04, 2020 by this court, which satisfies the requirements of deposit of 25% of the sum.

· Stated that, since on facts, the matter arises from the first appellate stage, the court does not deem it appropriate at this stage to consider that in case the Appellant does not succeed at the first appellate stage, the question may still arise about the liability and how much money should be deposited at the second appellate stage. In case, the occasion to advance the submissions with regard to the validity of second proviso to Section 58(1) of the TNVAT Act arises, the Appellant shall be at liberty to take appropriate measures.

Comments:- Relevant Provisions of Pre-Deposit under the GST law

Under GST, as per Section 107 of the of Central Goods and Services Tax Act, 2017 (“CGST Act”), the aggrieved taxpayer who wishes to contend against the order passed by the adjudicating authority, can file an appeal before the first appellate authority, within three months of receiving the order. No appeal shall be filed unless the taxpayer have paid:

· Such part of tax demanded in the order that the taxpayer admits being liable for; and

· 10% of the remaining part of tax demanded in the order as a pre-deposit amount or Rs. 25 crores (i.e., totaling to INR 50 crores for CGST and SGST/UTGST or IGST), whichever is less.

Similarly, in case the taxpayer is not satisfied with the order passed by the first appellate authority, he may approach the appellate tribunal as a next resort, to file appeal within three months under Section 112 of the CGST Act. No appeal shall be filed unless the taxpayer have paid:

· Such part of tax demanded in the order that he admits being liable for; and

· 20% of the remaining part of tax demanded in the order as a pre-deposit amount or Rs. 50 crores (i.e., totaling to INR 100 crores for CGST and SGST/UTGST or IGST), whichever is less, in addition to what was deposited before the first appellate authority.

The above pre-fixed deposit amount shall be refunded in case the aggrieved taxpayer succeed in the disputed matter(s).

Relevant Provisions

Section 51(1) of the TNVAT Act:

"51.Appeal to Appellate Deputy Commissioner.-

(1) Any person objecting to an order passed by the appropriate authority under section 22, section 24, section 26, sub-sections (1), (2), (3) and (4) of section 27, section 28, section 29, section 34 or sub-section (2) of section 40 other than an order passed by an Deputy Commissioner (Assessment) may, within a period of thirty days from the date on which the order was served on him, in the manner prescribed, appeal to the Appellate Deputy Commissioner having jurisdiction:

Provided that the Appellate Deputy Commissioner may, within a further period of thirty days admit an appeal presented after the expiration of the first mentioned period of thirty days if he is satisfied that the appellant had sufficient cause for not presenting the appeal within the first mentioned period:

Provided further that in the case of an order under section 22, section 24, section 26, sub- sections (1), (2), (3) and (4) of section 27, section 28 or section 29, no appeal shall be entertained under this sub-section unless it is accompanied by satisfactory proof of the payment of the tax admitted by the appellant to be due or of such instalments thereof as might have become payable, as the case may be, and twenty-five per cent of the difference of the tax assessed by the assessing authority and the tax admitted by the appellant.”

Section 58(1) of the TNVAT Act:

"58. Appeal to Appellate Tribunal.

(1) Any officer prescribed by the Government or any person objecting to an order passed by the Appellate Deputy Commissioner under sub-section (3) of section 51, or by the Appellate Joint Commissioner under sub-section (3) of section 52, or by the Joint Commissioner under sub-section (1) of section 53, may,--

(a) within a period of one hundred and twenty days, in the case of an officer so prescribed by Government.

(b) within a period of sixty days, in the case of any other person, from the date on which the order was served, appeal against such order to the Appellate Tribunal:

Provided that the Appellate Tribunal may, within a further period of one hundred and twenty days in the case of an officer prescribed by Government and sixty days in the case of any other person, admit an appeal presented after the expiration of the first mentioned period of one hundred and twenty days or sixty days, as the case may be, if it is satisfied that the appellant had sufficient cause for not presenting the appeal within the first mentioned period:

Provided further that no appeal filed by any person objecting to an order passed,-

(a) under sub-section (3) of section 51 or under sub-section (3) of section 52 shall be entertained unless it is accompanied by satisfactory proof of the payment of the tax as ordered by the Appellate Deputy Commissioner or by the Appellate Joint Commissioner, as the case may be;

(b) under sub-section (1) of section 53, unless it is accompanied by satisfactory proof of the payment of the tax admitted by the appellant to be due or of such instalments thereof as might have become payable, as the case may be, and twenty-five per cent of the difference of the tax ordered by the Joint Commissioner under section 53 and the tax admitted by the appellant:

Provided also that no appeal shall be admitted against an order, passed by the Appellate Deputy Commissioner under section 51 or by the Appellate Joint Commissioner under section 52, as the case may be, setting aside the assessment and directing the assessing authority to make a fresh assessment."