In a recent ruling, the Calcutta High Court held that section 84(1) of the West Bengal Value Added Tax Act, 2003 requiring pre-deposit of 15% of disputed tax for filing appeal is not ultra vires to the Constitution.
The bench was hearing a bunch of appeals preferred by various dealers under the Act challenging the vires of section 84(1) of the West Bengal Value Added Tax Act which mandates payment of tax in dispute as a pre-requirement for maintaining an appeal against an order in original.
The petitioners contended that the requirement of payment is an exaction rather than a pre-deposit. According to them, the Act does not postulate a pre-deposit. Since the word used is payment in the second proviso and the effect is an exaction of a tax, the same is beyond the legislative competence of the state legislature. It was therefore, submitted that an appellant cannot be taxed for preferring an appeal from an order of adjudication. When tax is not defined, it is to be understood to cover any levy.
Justice Debangsu Basak noted that there are three parts to the second proviso of Section 84(1) of the Act of 2003. The first part is that any appeal presented on or after April 1, 2015 must fulfil the rigors specified in that proviso. The second part is clause (a) of the second proviso which requires an appellant to deposit the entirety of the amount of tax, interest, penalty or late fee as the appellant admits to be due and payable. The third part is the requirement of payment of 15% of the amount of tax in dispute in such appeal. There is no dispute with regard to the second part of the second proviso of Section 84(1) of the Act of 2003.
“When one is making a deposit or a pre-deposit of money, as is required to prefer an appeal under Section 84 of the Act of 2003, one is called upon to pay a sum of money. Such payment would obviously await the disposal of the appeal. On the assessee succeeding in the appeal, such money is required to be either refunded with accrued interest or allowed to adjust against any liability of the assessee, as the case may be. Viewed from such perspective, the word “payment” is a genus in which deposit or the pre-deposit is a specie.”
“The word “payment” used in the second proviso guides both clauses (a) and (b). Clause (a) requires a payment and there is no dispute with regard thereto. So far as the clause (b) is concerned, it is contended that, the word “payment”does violence to such clause, as in effect, if the word “payment” is allowed to govern clause (b) then, the State is requiring an exaction from an assessee rather than asking the assessee to make a deposit or a pre-deposit. With respect, I am not in a position to accept such contention on behalf of the petitioners. No doubt the word “payment” governs both clauses (a) and (b) of the second proviso.”
Upholding the legality of the provision, the bench said, “However, the word “payment” is capable of different meanings in the context that it is used. The word “payment” can mean payment of a deposit or a pre-deposit in the context of clause (b) and the payment of a tax in the context of clause (a). Viewed from such perspective, there is no violence to the user of the words in the second proviso to Section 84(1) of the Act of 2003.”
Read the full text of the Judgment below.
