GYSCOAL ALLOYS LTD. vs. STATE OF GUJARAT

C/SCA/14977/2019 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 14977 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 14978 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 14979 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 14980 of 2019

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? =============================================================== GYSCOAL ALLOYS LTD. Versus STATE OF GUJARAT ============================================================================= Appearance: UCHIT N SHETH(7336) for the Petitioner(s) No. 1 MR SOAHAM JOSHI, AGP (1) for the Respondent(s) No. 1 =============================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Date : 26/02/2020

COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE BHARGAV D. KARIA, J.) 1. Rule, returnable forthwith. Mr.Soaham Joshi, the Page 1 of 8

C/SCA/14977/2019 JUDGMENT learned Assistant Government Pleader waives service of notice of rule on behalf of the respondent. 2. Since all the petitions are arising from the common order, passed by the Gujarat Value Added Tax Tribunal (for short ‘the Tribunal’), the same are heard analogously and are being disposed of by this common judgment. 3. For sake of convenience, the Special Civil Application No.14977 of 2019 is considered as a lead matter. 3.1. The petitioner is a Public Limited Company, engaged in business of manufacture and sales of iron and steel angles, patta-patti, channels, sections, flats, bars, etc. 3.2. It is the case of the petitioner that the petitioner also executes job work contracts and is duly registered under the Value Added Tax Act, 2003 (for short ‘the VAT Act’)and the Central Sales Tax Act, 1956 (for short ‘the CST Act’). 3.3. The Officers of the Commercial Tax Authorities visited the premises of the petitioner on 07.01.2011 and the accounting records were seized. The petitioner was called upon to show as to why the input tax credit claimed by the petitioner should not be disallowed. Page 2 of 8

C/SCA/14977/2019 JUDGMENT 3.4. It appears that thereafter, the assessment proceedings were under taken for the years 2011-12 and 2012-13. The Commercial Tax Officer, for the year 2011-12, disallowed the input tax credit, in respect of the purchase made from four vendors, whose Registration Certificates were cancelled ab-initio. 3.5. So far as the Assessment Year 2012-13 is concerned, the Assessing Authroity without giving any intimation regarding the name of the vendor whose Registration Certificate was cancelled with retrospective effect and without raising any dout with regard to genuineness of the purchases made by the petitioner, disallowed the input tax credit raising a demand under the VAT Act as well as under the CST Act. However, total dues demanded under the VAT Act and the CST Act, for the years 2011-12 and 2012-13, are as under: Year Tax Interest Penalty Total 2011-12 VAT 3,22,59,787 2,27,43,150 9,70,70,952 15,20,73,889 2011-12 CST 5,34,175 3,76,593 8,01,262 17,12,030 2012-13 VAT 4,27,22,957 3,46,05,464 8,07,12,053 15,80,40,312 2012-13 CST 2,15,133 1,74,258 43027 4,32,418 Total 7,57,31,890 5,78,99,465 17,86,27,294 31,22,58,649 3.6. The petitioner, being aggrieved by the Page 3 of 8

C/SCA/14977/2019 JUDGMENT assessment orders, preferred appeals before the First Appellate Authority. The First Appellate Authority demanded payment of pre-deposit of 30% of total dues as a condition precedent for admission of the First Appeals for the year 2011-12 and for the year 2012- 13, demand was raised without quantifying the amount of pre-deposit. 3.7. As the petitioner expressed inability to make payment of pre-deposit, the First Appeals were dismissed summarily for non-payment of pre-deposit. 3.8. The petitioner therefore went in appeal before the Tribunal. The Tribunal, by impugned order dated 29.04.2019, directed the petitioner to make the payment of Rs.1 Crore towards pre-deposit as against total demand of Rs.31,22,58,649/-. The Tribunal, for passing such order of pre-deposit, observed as under:- “10. Considering the submissions of both the parties in light of the aforementioned aspects before this Tribunal arrives at any decision for the direction of pre-deposit it is necessary to see that the intention of Legislature to enact Section 73(4) of the GVAT Act, for direction of pre-deposit is only that basic minimum tax liability of the appellant at the end of litigation must be ensured and safeguarded. Here in the case of present Second Appeals there is a turnover growth of Rs.100 Crores compared to the assessment year 2010-11, therefore, prayer to continue the direction based on the assessment year 2010-11 cannot be accepted by this Tribunal. It also appears that out of total input-tax credit claimed in the returns by the appellant for both the assessment years 2011-12 and 2012-13, 30 to 40% input-tax Page 4 of 8

C/SCA/14977/2019 JUDGMENT credit is of such dealers who where indulged in

Bogus

billing,

therefore,

their Registration Certificates were cancelled with retrospective effect. It also appears from the face of assessment orders as well as appeal order that the appellant has failed to establish the genuineness of his purchases by producing evidences pertaining to movement of goods and real transactions. Compared to the assessment year 2010-11 (SA Nos.1124 & 1125 of 2017) the turnover in the assessment year 2011-12 and 2012-13, have been progressively shoot up by Rs.100 and appellant is praying to continue the pre- deposit direction as it was passed for the assessment year 2010-11 is how far logical and rational is not explained by the appellant. (11) We find the substance in the submissions

learned

Government Representative that if mechanical pre- deposit order is passed as per the earlier assessment year 2010-11 (SA Nos.1124 & 1125 of 2017) then it will lead the State Economy to the de-growth position and resultantly it would adversely affect the aim and object of the welfare democracy. We recollect the words of the learned international fame Economist Mr.Gunnar Myrdal who has written in his book-”Asian Drama”, wherein he has stated that “The theory of deficit finance if used as “Mobil” (Unjan),it can mobilize the Economy but if it is used as fuel then it can vanish the Economy. (12) This theory of learned Economist Mr.Gunnar Mydral is accepted worldwide by developed and under developed countries as “thumb mark” while preparing budget of nation. (13) In our view, to reduce Fiscal stress, Fiscal deficit and uncontrollable inflation, better and progressive tax revenue is only source of healty economy and happy State, therefore, to bring up the index of happiness of the State, better and effective, tax compliance is key remedy, therefore, we have prima-facie merits and reasons to pass the progressive pre-deposit direction. (14) Since the order of the First Appeal is summarily dismissed without gone into the Page 5 of 8

C/SCA/14977/2019 JUDGMENT merits of the case, therefore, this Tribunal cannot enter into the details merits of the case except to decide the amount of pre- deposit and to remand the case to the First Appellate Authority. Hence we do not enter into the detailed merits of the case, except to decide the pre-deposit on merits and send it back to the First Appellate Authority for a fresh hearing. (15) Considering the above stated facts and reasons, present Second Appeals are admitted

condition

appellant depositing Rs.1,00,00,000/- towards pre- deposit as against the total demand of Rs.31,22,58,649/- within one month towards pre-deposit. On payment of aforementioned amount the stay against recovery shall come into operation.” 3.9. The petitioner has therefore challenged the aforesaid order of the Tribunal by this petition. 4. The Co-ordinate Bench of this Court, on 05.09.2019, passed the following order: “Let Notice be issued to the respondent returnable on 24th October, 2019. Let there be an ad-interim relief in terms of paragraph 20(B). Direct service is permitted.” 5. Mr.Uchit N. Sheth, the learned advocate for the petitioner submitted that the Tribunal did no follow its earlier order of the year 2010-11 on the ground that there is turn over growth of Rs.100 Crores compared to the year 2010-11 and accordingly, the prayer to continue the directions for pre-deposit for the Assessment Year 2010-11, was not accepted. It was submitted that the petitioner is ready and willing to Page 6 of 8

C/SCA/14977/2019 JUDGMENT pay, by way of pre-deposit, at the rate of 5% of the total tax demand as similar order was passed for the year 2010-11 for entertaining the Appeal of the petitioner by the Tribunal. 6. On the other hand, Mr.Soaham Joshi, the learned Assistant Government Pleader for the respondent submitted that in the matter of pre-deposit, no interference is required to be made as the Tribunal has used its discretion under Section 73(4) of the VAT Act. 7. Having heard the learned advocates appearing for the respective parties and having gone through the material available on record, we do not approve the line of reasoning of the Tribunal, as quoted herein above in paragraph No.10 of the impugned order passed by the Tribunal. 8. The Tribunal could not have ordered to pay an amount of pre-deposit on the basis of the turnover. The amount of pre-deposit is to corelate with the amount of tax demand and not with the amount of turnover of the assessee. 9. In that view of the matter, we modify the order passed by the Tribunal and substitute the amount of pre-deposit being 5% of the tax demand, as condition precedent of entertaining the appeal, under Section 73(4) of the VAT Act. Page 7 of 8

C/SCA/14977/2019 JUDGMENT 10. The petition therefore, succeeds and is allowed accordingly. Rule is made absolute to the aforesaid extend. No order as to costs. Direct service is permitted. (J. B. PARDIWALA, J) (BH`ARGAV D. KARIA, J) PALAK Page 8 of 8