G. Khanna & Company Vs Union of India (Bombay High Court)
The Bombay High Court considered a challenge to the order dated 19 September 2024 by which the Appellate Authority rejected the Petitioner’s appeal for alleged non-compliance with the mandatory requirement of pre-deposit of 10% of the tax amount.
The Appellate Authority had calculated 10% of the tax amount at approximately Rs.12,76,000/-, while the Petitioner had deposited Rs.8.62 lakhs. The Petitioner contended that there was no short deposit. In the alternative, relying upon JEM Exporter Vs Union of India and D N Polymers Vs Union of India & ors, the Petitioner submitted that the appeal could not have been rejected without an opportunity to establish that there was no shortfall or, if there was one, to make good the same.
The Respondents contended that the Petitioner had been personally heard by the Appellate Authority and that the 10% pre-deposit was mandatory. According to the Respondents, there was a genuine short deposit and no error had been committed in rejecting the appeal.
The High Court distinguished between a hearing on the merits of an appeal and an opportunity to respond to the separate ground on which the appeal was ultimately rejected. It found that the Petitioner had been heard on the merits, but had not been given notice that the appeal would be dismissed on the ground of alleged short deposit. Consequently, the Petitioner had no opportunity to establish that there was no shortfall or, alternatively, to cure the procedural deficiency.
The Court relied upon JEM Exporter Vs Union of India, where it was held that procedural requirements relating to an appeal should not result in denial of justice without an opportunity to rectify the procedural defects. The Court also followed the principle laid down in D N Polymers Vs Union of India & Ors., under which the petitioner should be informed about a pre-deposit shortfall and given a reasonable opportunity to make good the same. The Court noted that D N Polymers had also relied upon Delphi World Money Ltd. Vs Union of India in dealing with a similar issue.
Accordingly, the High Court set aside the impugned order dated 19 September 2024 and remanded the matter to the Appellate Authority. The Appellate Authority was directed to give the Petitioner an opportunity to satisfy it that there was no shortfall. If, after hearing the Petitioner, a shortfall was found, the Petitioner was to be granted approximately four weeks to make good the shortfall.
The Court further held that if the Petitioner failed to make good the shortfall, the Appellate Authority would be entitled to dismiss the appeal for non-compliance with the mandatory pre-deposit condition. If the shortfall was made good, the Appellate Authority was required to hear the Petitioner afresh and decide the appeal in accordance with law and on its own merits.
The High Court expressly clarified that it had not considered the parties’ contentions on the merits of the underlying dispute. All such contentions were therefore kept open.
Cases Discussed
- JEM Exporter Vs Union of India — relied upon for the principle that procedural defects should be capable of being cured after the appellant is given an opportunity to rectify them.
- D N Polymers Vs Union of India & ors. — relied upon for the requirement to inform the petitioner about a shortfall and grant a reasonable opportunity to make good the deficiency.
- Delphi World Money Ltd. Vs Union of India — referred to in connection with interference with an appellate order dismissing an appeal for alleged pre-deposit deficiency without a reasonable opportunity.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Heard learned counsel for the parties.
2. The Rule is made returnable immediately at the request of and with the consent of the learned counsel for the parties.
3. The challenge in this Petition is to the Order dated 19 September 2024 by which the Appellate Authority rejected the Petitioner’s Appeal on the ground of non-compliance with the mandatory condition of pre-deposit of 10% of the tax amount.
The Appellate Authority reasoned that 10% of the tax amount would come to approximately Rs.12,76,000/- and the Petitioner had deposited only Rs.8.62 lakhs.
4. Mr. Mahesh Raichandani, the learned counsel for the Petitioner, submitted that firstly, there was no short deposit. Secondly, and in any event, considering the law laid down by this Court in the case of JEM Exporter Vs Union of India1 and D N Polymers Vs Union of India & ors2, the Appeal could not have been rejected without giving the Petitioner an opportunity to satisfy the Appellate Authority that there was no short deposit and to make good the short deposit. He submitted that since such an opportunity was never granted to the Petitioner, the impugned order is liable to be set aside, and the matter remanded to the Appellate Authority for deciding the Petitioner’s Appeal on merits.
5. Ms. Bharucha, the learned counsel for Respondent Nos. 3 and 4 submitted that the Petitioner was heard by the Appellate Authority, as is evident from the impugned order dated 19 September 2024. She submitted that no such issue was ever raised on behalf of the Petitioner, and therefore, the contention regarding the denial of opportunity should not be entertained in the facts of this case. She submitted that this was indeed a case of short deposit, and since the deposit of 10% of the tax amount in dispute was a mandatory requirement, there was no error in the impugned order made by the Appellate Authority.
6. The rival contentions now fall for our determination
7. The records show that the Petitioner was personally heard in the matter. However, it is quite apparent that such a hearing was on the merits of the Appeal. The Petitioner does not even complain about any lack of hearing on the merits of the Appeal. The Petitioner’s complaint is that the Appeal was dismissed on a ground about which they were given no notice whatsoever, and consequently, no opportunity to satisfy the Appellate Authority that there was no short deposit and, in any event, to make good the procedural requirement, assuming that there was some short deposit.
8. Therefore, in the above circumstances, we are unable to accept Ms Bharucha’s contention. This contention proceeds on an incorrect understanding of the Petitioner’s case and the Petitioner’s contentions.
9. In the case of JEM Exporter (supra) the Coordinate Bench of this Court has made the following observations in paragraph 11:-
“11.The reasons given in paragraphs 5.4 to 5.6 of the order in appeal that is to say proof of pre-deposit having not been filed, certified copy of the order having not been filed and appeal having not been authenticated as per rule 26(a) is a procedural requirement for fling the appeal. In our view, justice cannot be denied for failure to comply with the procedure without giving an opportunity to the Appellant to rectify the procedural defects. In our view, the Commissioner (Appeal) ought to have issued a defect memo calling upon the Petitioner to produce the proof of pre-deposit of tax as per section 107(6) of the CGST Act, 2017section 107(6) of the CGST Act, 2017, for filing the certified copy of the order and for authentication of the appeal memo as per rule 26(2)(a). The Commissioner (Appeal) having not given an opportunity to the Petitioner for curing the procedural defect was not justified in rejecting the appeal. This would be contrary to the principal of natural justice.”
10. Similarly, in the case of D N Polymers (supra) this Court has held that the Petitioner should have been informed about the shortfall and even granted a reasonable opportunity to make good the shortfall, if any. This Court relied upon yet another decision in the case of Delphi World Money Ltd. Vs The Union of India and ors3 to interfere with a similar order of the Appellate Authority dismissing the Appeal for the alleged shortfall in deposit without granting the Appellant any reasonable opportunity.
11. For the above reasons and in accordance with the law laid down in the above cases, we set aside the impugned order dated 19 September 2024 and remand the matter to the Appellate Authority.
12. The Appellate Authority must give the Petitioner an opportunity to satisfy it that there was no shortfall. Further, if the Appellate Authority, after hearing the Petitioner, concludes that there was a shortfall, then a reasonable opportunity of making good that shortfall by granting the Petitioner about 4 weeks’ time to make good the shortfall must be granted to the Petitioner.
13. Despite all this, if the Petitioner fails to make good the shortfall, then the Appellate Authority would be entitled to dismiss the Petitioner’s Appeal on the ground of noncompliance with the mandatory condition of pre-deposit. If the shortfall is made good, needless to add that the Appellate Authority must, after hearing the Petitioner afresh, decide the Petitioner’s Appeal in accordance with law and on its own merits.
14. We clarify that we have not addressed either party’s contentions on the merits, even remotely. Therefore, all contentions of the parties on the merits of the matter are kept open for the decision of the Appellate Authority, should this issue of shortfall in deposit be resolved.
15. The rule is made absolute in the above terms. No costs.
16. All concerned must act on an authenticated copy of this order.
Notes:
1Writ Petition (L) No.25142 of 2022 decided on 02/08/2023
2 Writ Petition No.18007 of 2024 decided on 09/12/2024
3 Writ Petition (L) No.28914 of 2024
