M/S. A.P. Kakku Associates vs. Deputy Commissioner (Appeals) - Kerala High Court, 24 October 2018

Cause title — parties, addresses and appearances

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU WEDNESDAY,THE 24TH DAY OF OCTOBER 2018 / 2ND KARTHIKA, 1940 WP(C).No. 34618 of 2018 PETITIONER: M/S. A.P. KAKKU ASSOCIATES WARD NO. IV/436, UKKENS THEATRE MOVIE ROAD, CHEROOR, THRISSUR -680001 REPRESENTED BY ITS PROPRIETOR, MR.A.K VARGHESE BY ADVS. SRI.A.KUMAR JOB ABRAHAM SMTG.MINI(1748) SRI.AJAY V.ANAND SRI.P.J.ANILKUMAR SRI.P.S.SREE PRASAD RESPONDENTS: 1 DEPUTY COMMISSIONER (APPEALS) STATE GST DEPARTMENT, THRISSUR 680001 2 THE INTELLIGENCE OFFICER (INVESTIGATION BRANCH) OFFICE OF THE INSPECTING ASST. COMMISSIONER (INT), COMMERCIAL TAXES, THRISSUR-680 001. 3 COLLECTOR/AUTHORIZED OFFICER INSPECTING ASST. COMMISSIONER, COMMERCIAL TAXES, COMMERCIAL TAX COMPLEX, POOTHOLE, THRISSUR-680 001. 4 THE STATE TAX OFFICER (IB) OFFICE OF THE ASST. COMMISSIONER OF STATE TAX (INT), STATE GOODS AND SERVICES TAX, THRISSUR-680 001. GP DR. THUSHARA JAMES THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 24.10.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 34618 of 2018 2

JUDGMENT The petitioner, a dealer under the KVAT Act, faced proceedings under Section 67 of the KVAT Act. Aggrieved, the petitioner filed a statutory appeal. While entertaining the appeal, the 1st respondent, the Deputy Commissioner (Appeals), through the Ext.P2 order, directed the petitioner to pay 15% of the outstanding demand and to furnish sufficient security to the Intelligence Officer's satisfaction for the remaining amount.

As seen from the Ext.P3, the conditional stay granted through the Ext.P2 stood extended. Nevertheless, the petitioner assails that condition. According to the petitioner, the condition is onerous.

Sri A. Kumar, the petitioner's counsel, contends that Section 55 has two provisos. If the Appellant Authority invokes the second proviso, no discretion is left with him. Instead, if he invokes the first proviso and directs the appellant to deposit, say, 15%, to that extent the appellant, the counsel fairly submits, cannot have any grievance. But he strenuously attacks the remaining part of the condition; that is, security to the satisfaction of the Intelligence Officer (IB) for the remaining balance. And that security must be through bonds supported by solvency certificates from two sureties.

To sustain his submission, Sri Kumar has drawn my attention to the Ext.P8 judgment rendered by a Division Bench of this Court. According to him, under similar circumstances, the Division Bench has felt that the condition beyond the stipulation of depositing a part of the disputed tax needs modification. In fact, as he puts it, the Division Bench has dispensed with that condition. Therefore, he urges this Court to modify the Ext.P2. 5. Dr. Thushara James, the learned Government Pleader, on the other hand, contends that the First Appellate Authority has exercised his statutory powers under Section 55(4), proviso(1) of the KVAT Act. According to her, the Ext.P2 is well within the Appellate Authority’s discretionary power. And the order, according to her, is supported by sufficient reasons. She has also drawn my attention to Rule 85 of the Rules and Form-6A to stress that the Appellate Authority has only followed what has already been laid down under the statute; it is unexceptional.

Heard the learned counsel for the petitioner and also the learned Government Pleader.

Indeed, the petitioner does not deny the powers of the First Appellate Authority to impose conditions, while his granting a stay. The petitioner’s only grievance is about what it felt to be excessive conditions.

The order to the extent relevant reads:

“5. The collection of the balance amount as per the impugned demand for the year 2009-2010 is stayed subject to the condition that the appellant shall pay 15% of the outstanding demand and to furnish sufficient security to the satisfaction of the Intelligence Officer (IB)for the remaining balance within one month of receipt of this order. If the appellant has remitted any amount subsequent to the service of penalty order/demand notice, the same can be considered for the determining of the total outstanding amount payable under this order. If the conditions are not fulfilled the stay order passed will stand vacated automatically.”

Indisputably, the First Appellate Authority has invoked his power under the First Proviso to Section 55(4). The authority has felt it desirable to fix 15% as the conditional deposit so that he could entertain the petitioner's appeal. Besides that, the order wants the petitioner to comply with the other conditions to the satisfaction of the Intelligence Officer. It seems the Intellignece Officer wanted the petitioner to comply with Rule 85 of the KVAT Rules. And that rule reads:

85.

Furnishing of Security:- (1) Where it is provided in the Act that an appellant (or an applicant in revision proceedings) shall furnish security in regard to the payment of tax or fee or other amount, the appellant (or applicant) or any person on his behalf shall furnish security in any of the ways specified in sub-rule(2) of rule 19 or furnish personal property as secirity as the authority, before which the appeal or application is preferred, may, in its discretion, direct. The security bond shall be in Form No.6A, with suitable modification wherever necessary. (2) Where the order of the appellate or revisional authority does not speficy the form in which and the authority before which the security is to be furnished, the security shall be furnished before the authority passing the original order under appeal or revision, in such form as such authority may direct. (3) Where the security is furnished in the form of a security bond, the sureties furnished shall be solvent for the amount of security furnished."

10.

As seen, Form 6A unmistakably lays down how the security needs to be provided. The security the petitioner and the other two did provide, but the additional requirement concerns the solvency certificate. Solvency certificates, I reckon, are to show that the parties who offered the security are capable of fulfilling their security or surety obligations if a contingency arises. Nothing more.

11.

The Ext.P8 judgment of the learned Division Bench concerns the Second Appeal before the Appellate Tribunal. The Tribunal in its discretion imposed 30%. And pertinently the Division Bench has held that the Tribunal’s discretion calls for no interference. But on the facts of that case, the Division Bench has felt that the other conditions needs to be dispensed with. I am afraid, the Ext.P8 judgment turns on the facts that cannot be treated as precedential.

12.

Under these circumstances, I hold that the condition the First Appellate Authority imposed through Ext.P2 is unassailable and has had the full statutory backing. More particularly, it is a matter of legitimate exercise of discretion by an appellate authority; it does not fall foul of any established grounds of interference under Article 226 of the Constitution. Therefore, I dismiss the writ petition. DAMA SESHADRI NAIDU JUDGE APPENDIX PETITIONER'S EXHIBITS: EXHIBIT P1OF THE DEMAND NOTICE DATED 4.2.2017. EXHIBIT P2OF THE ORDER DATED 7.6.2018. EXHIBIT P3OF THE ORDER DATED 27.7.2018. EXHIBIT P4OF THE COMMUNICATION DATED 10.8.2018. EXHIBIT P5OF THE LETTER DATED 14.8.18 TO THE 3RD RESPONDENT. EXHIBIT P6OF THE LETTER DATED 14.8.2018 TO THE 2ND RESPONDENT. EXHIBIT P7OF THE NOTICE DATED 30.8. 18. EXHIBIT P8OF THE JUDGMENT IN O.P.(TAX) NO.9 OF 2018 DATED 6.8. 18. RESPONDENTS' EXHIBITS - NIL //// P.A. TO JUDGE