….Dr. Naveen Rattan,
LL.M. (Gold Medalist), Ph.D.
Amritsar, Punjab.
Right of Appeal:
Section 79 of GST of Act grants a right to any person to file an appeal against any decision or order passed by the adjudicating authority under this Act to the prescribed First Authority within the period of three months from the date of communication of order in the prescribed form after the verification in prescribed manner. This right is essential organ and ingredient of justice. Here, the appellant can raise his legitimate grounds of appeal before the higher authorities so as to set aside the unlawful order passed by the authorities below. It is also control unbridled powers of the officers under law. Appeal is basically a continuation of assessment proceedings and the appellate authority can correct the faults of the assessing authority committed in the course of proceedings and decide the appeal on the merits of the case.
The legislature has imposed basically two conditions for the exercise of right of appeal. Firstly, the appeal should be filed within the period of three months. It can be further extended by one month if the appellate authority is satisfied that the appellant was prevented by sufficient cause for not filing the appeal within the limitation period. Secondly, the appeal cannot be filed by the appellant without satisfying the condition of pre-deposit as prescribed under sub clause (4) of section 79 of GST Act. These two conditions are valid to some extent because right of appeal is basically a creature of statute i.e. GST Act and without these conditions such right cannot be exercised. However, in the absence of any special reason to be no legal and constitutional impediment to the imposition of such conditions. Hence, conditions on exercise of Right of appeal appear to be permissible.
The author of this article has made sincere efforts to highlight the various legal implications of the law relating to pre deposit apart from the codified provisions of the law. Section 79 of the GST Act specifically deals with this piece of legislation reproduced as under:
Section 79: Appeals to First Appellate Authority
(1) Any person aggrieved by any decision or order passed against him under this Act by an adjudicating authority, may appeal to the prescribed First Appellate Authority.
(2) Every appeal under this section shall be filed within three months from the date on which the decision or order sought to be appealed against is communicated to the person preferring the appeal
Provided that the First Appellate Authority may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of three months, allow it to be presented within a further period of one month.
(3) Every appeal under this section shall be in the prescribed form and shall be verified in the prescribed manner.
(4) No appeal shall be filed under sub-section (1) unless the appellant has deposited –
(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him, and
(b) a sum equal to ten percent of the remaining amount in dispute arising from the said order, in relation to which the appeal has been filed.
Explanation.- For the purposes of this sub-section, the expression “amount in dispute” shall include –
- amount determined under section 46 or 47 or 48 or 51;
- amount payable under rule——-of the GST Credit Rules 201…; and
- amount of fee levied or penalty imposed
Provided that nothing in this sub-section shall affect the right of the departmental authorities to apply to the First Appellate Authority for ordering a higher amount of predeposit, not exceeding fifty percent of the amount in the dispute, in a case which is considered by the Commissioner of GST to be a “serious case”.
Explanation .- For the purpose of this proviso, the expression “serious case” shall mean a case involving a disputed tax liability of not less than Rupees Twenty Five Crores and where the Commissioner of GST is of the opinion (for reasons to be recorded in writing) that the department has a very good case against the taxpayer.
(5) The First Appellate Authority shall give an opportunity to the appellant of being heard, if he so desires.
(6) The First Appellate Authority may, if sufficient cause is shown at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing.
Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.
(7) The First Appellate Authority may, at the hearing of an appeal, allow an appellant to go into any ground of appeal not specified in the grounds of appeal, if he is satisfied that the omission of that ground from the grounds of appeal was not willful or unreasonable.
(8) The First Appellate Authority shall, after making such further inquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order appealed against.
Provided that an order enhancing any fee or penalty or fine in lieu of confiscation or confiscating goods of greater value or reducing the amount of refund or input tax credit shall not be passed unless the appellant has been given a reasonable opportunity of showing cause against the proposed order.
Provided further that where the First Appellate Authority is of the opinion that any tax has not been paid or short-paid or erroneously refunded, or where input tax credit has been wrongly availed or utilized, no order requiring the appellant to pay such tax or input tax credit shall be passed unless the appellant is given notice to show cause against the proposed order and the order is passed within the time limit specified under section 51.
(9) The order of the First Appellate Authority disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision.
(10) The First Appellate Authority shall, where it is possible to do so, hear and decide every appeal within a period of one year from the date on which it is filed.
Provided that where the issuance of order is stayed by an order of a Court or Tribunal, the period of such stay shall be excluded in computing the period of one year.
(11) On disposal of the appeal, the First Appellate Authority shall communicate the order passed by him to the appellant and to the adjudicating authority.
(12) A copy of the order passed by the First Appellate Authority shall also be sent to the jurisdictional Commissioner of CGST or the authority designated by him in this behalf and the jurisdictional Commissioner of SGST or the authority designated by him in this behalf.
(13) Every order passed under this section shall, subject to the provisions of sections 80, 83, 87 or 88, be final.
Pre-Deposit at the time of Filing Appeal:
The crux is that the appellant cannot file the appeal unless the amount of pre-deposit as referred under sub clause (4) of Section 79 is made. The legislature has deliberately used the words that no appeal shall be filed without pre-deposit. Impliedly it means that the appeal should be accompanied by the proof of payment. The earlier law was under Punjab VAT Act, 2005 etc. was that no appeal shall be entertained without the pre-deposit of 25% of the tax, penalty and interest. It means the appellant could file an appeal without deposit of 25% but the same could not be entertained by the appellate authority. The appellate authority has to take up the matter at the time of hearing the appeal and after hearing the appellant, shall direct the appellant to deposit 25% and thereafter appeal will be taken up on merits. However, the law under GST is very clear that if the appellant has to file an appeal the proof of the payment must be attached at the time of filing the appeal not at the time of hearing of appeal.
Exact Amount of Pre-Deposit:
The appellant has to deposit the full amount of tax, interest, fine, fee and penalty arising from the impugned order if it is not disputed and is admitted by the appellant. Secondly, the appellant is required to deposit 10% of the remaining amount in dispute arising from the said order in relation to which appeal has been filed. There is a great change in law under the GST as comparison to earlier State Laws. Earlier, prior to the advent of GST Act the appellant was simply required to deposit 25% of tax, penalty and interest order. Now, he has to deposit the 10 % of the disputed amount and has to deposit full amount of tax, interest, fine, fee and penalty if he admits his liability.
Meaning of “Amount in Dispute”:
These words have special significance in the GST Law. The expression “Amount in Dispute” is referred in explanation of sub clause (b) of clause (4) of section 79. It says that:
The expression ‘Amount in Dispute” shall include:
- Amount Determined under section 46 or 47 or 48 or 51;
- Amount Payable under Rule _____ of the GST Credit Rules 201__; and
- Amount of fee levied or levied or penalty imposed.
There is also one proviso to this clause which says that the department has right to apply to the first authority for ordering the higher amount but it should not exceed the 50% of the amount disputed only in serious cases. Whether the case is “Serious” or not, it shall be determined by the Commissioner of GST. If the officer considers it a serious case then, the appellate authority may order for 50% of the amount in dispute instead of 10%. There is also explanation with regards to the expression “Serious Case” which says that the case will be serious if the tax liability which is in dispute is not less than 25 Crores and where the Commissioner is of the opinion that the department has a very good case against the tax payer. If he forms the opinion that the department has a good case against the tax payer, then the Commissioner of GST will record the reasons in writing. Meaning thereby, if he does not record the reasons after hearing the parties and the department then, the appellant cannot be directed to deposit 50% of the disputed tax liability.
Significance of Pre-Deposits:
The prime object of the pre deposit apparently appears require the appellant to deposit the full amount of undisputed amount of tax, interest, fine, fee and penalty is basically to ensure the speedy recovery of tax. Once, it is admitted by the appellant himself then there is no reason that the appellant should halt the legitimate recovery due under the Act merely by filing appeal. It will certainly prevent the delay in the payment of tax. Secondly, if any condition is imposed for pre-deposit that must be fulfilled. Right of appeal is neither absolute nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudications. The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant. It is not the law that adjudication by itself following the rules of natural justice would be violative of any right- constitutional or statutory, without any right of appeal, as such. If the statute gives a right to appeal upon certain conditions, it is upon fulfillment of those conditions that the right becomes vested and exercisable to the appellant. Reliance is placed upon Vijay Parkash D. Mehta and another V. Collector of Customs (Preventive) Bombay, AIR 1988 SC 2010.
Shortcomings and Black Spots:
The major lacuna left in the new law is that there is no power with the appellate authority to waive off the condition of pre-deposit in deserving cases. In identical law, under section 62(5) of the PVAT Act, 2005 the Hon’ble Punjab and Haryana High Court in Case Titled as Punjab State Power Corporation Ltd. V. State of Punjab vide CWP No. 26920 of 2013 decided on 23.12.2015 has considered the hardship caused to the appellant with regards to the pre-deposit of 25% and hence passed a detailed order and laid down the law after considering the landmark judgments of Supreme Court and High courts in various cases. The findings of the judgment of the Hon’ble High Court in Case Titled as Punjab State Power Corporation Ltd. V. State of Punjab vide CWP No. 26920 of 2013 decided on 23.12.2015 based upon the relative judgments followed as under:
“Provisions of section 62(5) of the PVAT Act are directory in nature and empower the first appellate authority to partially or completely waive the condition of pre-deposit in the given facts and circumstances of the case. It is not be excercised in a routine way as a matter of course in view of the special nature of taxation and revenue laws. Only when a strong prima facie case is made out then only the first appellate authority will consider whether to grant interim protection/injunction or not”.
The Hon’ble High Court has held that the power to grant interim protection/injunction by the first appellate authority in appropriates cases in case of undue hardship is legal and valid. Obviously it means that the appellant must establish that pre-deposit will cause hardship to him. It is not only the hardship but a special emphasis is given on word ‘undue’.
The Supreme Court in case of S. Vasudeva V State of Karnataka and Ors. (AIR 1994 S.C. 923) provides that under Indian conditions expression “Undue hardship” is normally related to economic hardship. Further, it was also observed that the word “Undue” means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. It was observed by the Court that Undue hardship is caused when the hardship is not warranted by the circumstances. In this respect, In the case of MonotoshSaha[2010 (18) S.T.R 81 (S.C)] It was observed by the Apex Code observe as follows:
‘For a hardship to be ‘undue’ it must be shown that the particular burden to have to observe or perform the requirement is out of proportion to the nature of requirement itself, and the benefit which is applicant would derive from compliance with it.’
The word “undue” adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant.
In this connection the ruling giving by the Hon’ble Supreme court in Ravi Gupta’s case- 2009 (237) E.L.T. 3 (S.C.) merits our attention and it was held in this case as under:-
“It is true that on merely establishing a prima facie case, interim order of protection should not be passed. But if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitioners for stay should not be disposed of in a routine matter unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this court has indicated the principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest. Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens faith in the impartiality of public administration, interim relief can be given.”
Hon’ble Apex Court in the case of UOI v Adani Export [2007 (218) ELT 164 (Supreme Court)] held that three aspects to be focused while dealing with the application for dispensing of pre-deposit: (a) prima facie case, (b) balance of convenience, and (c) irreparable loss. The discretion of stay has to be exercised judiciously by the Appellate authority. The following rules have been laid down in the case of v CCE [2012 (25) S.T.R. 113 (A.P)] for grant of stay by the Appellate authority:
“The following principles should be kept in mind while considering the application for stay or for dispensing with the requirement of pre-deposit under Section 35F of the Act:-
- Three aspects to be focused while dealing with the application for dispensing of pre-deposit are: (a) prima facie case, (b) balance of convenience, and (c) irreparable loss;
- Interim orders ought not to be granted merely because a prima facie case has been shown;
- The balance of convenience must be clearly in favour of making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the interest of public revenue;
- While dealing with the applications, the twin requirements of consideration i.e., consideration of undue hardship, and imposition of conditions to safeguard the interests of revenue must be kept in view;
- When the Tribunal decides to grant full or partial stay, it had to be imposed such conditions as may be necessary to safeguard the interests of the revenue. This is an imperative requirement; and
- An Appellate Tribunal, being a creature of the statue, cannot ignore the statutory guidance while exercising general powers of expressly conferred incidental powers. [Commissioner of Central Excise, Guntur v. Shri Chaitanya Educational Committee, (2011) 38 VST 292 (A.P.) = 2011 (22) S.T.R 135 (A.P)].
Logical Conclusion:
It can safely be concluded that even under GST Act, one authority i.e. First Appellate Authority must be given power to hear the case without pre-deposit in deserving cases. The appellate authority may waive off the condition of pre-deposit where the undue hardship is caused to the appellant by the pre-deposit for the hearing of the appeal on merits. It doesn’t mean that the appellate authority should grant stay in each and every case but must be given power to grant stay in deserving cases. The First Appellate Authority must see the financial position of the appellant as well as the merits of the case with a view to form the opinion with regards to the pre-deposit for hearing of the appeal under the GST Act.Inclusion of such provision relating to the power to relax pre-deposit partially or full, by the first appellate authority will certainly curb the corruption and speedy trial will be possible so as to impart the justice. Apart from this the multiplicity of appeals due to non-deposition of pre-deposit will be curbed. Last but not the least, the right of appeal will not be remained illusionary.