Shiva TexFabs Ltd. Vs State of Punjab and ors. (Punjab and Haryana High Court)
The Punjab and Haryana High Court, in the case of M/s. Shiva TexFabs Ltd. v. State of Punjab and Ors. [CWP 2650 of 2022 dated October 3, 2023], demonstrated its power to alleviate financial hardship by reducing the pre-deposit amount required under the Punjab Value Added Tax Act. This landmark decision, dated October 3, 2023, highlights the court’s authority to modify pre-deposit conditions for tax appeals.
Hon’ble Punjab and Haryana High Court in above case reduced the amount of pre-deposit required under the Punjab Value Added Tax Act, 2005 (Punjab VAT Act) from twenty-five percent to ten percent due to financial hardship faced by the Petitioner thereby holding that, the High Court has inherent powers under Article 226 of the Constitution to waive or reduce the pre-deposit amount required at the time of filing the appeal.
Facts:
The Petitioner is engaged in the business of manufacturing and sale of yarn manufactured from PET bottles and is registered under the Punjab VAT Act. The Revenue Department (“the Petitioner”) inspected the office of the Petitioner and thereafter initiated assessment proceedings against the Petitioner under the Central Sales Tax Act by the issuance of a Show Cause Notice. The Respondent vide order dated June 25, 2018 (“the Order”) disallowed the ITC claimed by the Petitioner.
The Petitioner filed an appeal against the Order passed by the Petitioner before the Respondent Appellate Authority wherein the Petitioner was directed to deposit fifteen percent of the total demand raised for fulfilling the requirement of filing the appeal under Section 62(5) of the Punjab VAT Act. However, due to poor financial condition, the Petitioner was not able to pre-deposit the required fifteen percent. The appeal filed by the Petitioner was rejected vide Order dated July 18, 2019 (“the Order”).
Aggrieved by the Order passed by the Respondent Appellate Authority, the Petitioner filed an appeal before the Punjab VAT Tribunal (“the Tribunal”) wherein the Tribunal vide order dated November 3, 2020 (“the Order”) granted three months to the Petitioner to pre-deposit twenty-five percent of the additional demand otherwise the appeal filed would be dismissed.
Aggrieved by the orders passed by the Respondent and Tribunal, the Petitioner filed a writ petition before the Hon’ble Punjab and Haryana High Court on the ground that the Petitioner is not in a financial condition to comply with the condition of pre-deposit to the extent of twenty-five percent of additional demand.
Issue:
Whether the High Court have the power to reduce or waive the amount of pre-deposit to be paid at the time of filing the appeal due to financial hardship faced by the Assessee?
Held:
The Hon’ble Punjab and Haryana High Court in the case of CWP 2650 of 2022 held as under:
