2023 (9) TMI 447 - HC - VAT and Sales Tax

Demand on pre-deposit even though it is accepted that no sales were made by the Appellant - demand of pre-deposit even though it is not in dispute that the fraudulent refund was pocketed by the consultant Mr. Sunil Shah through fraudulent bank account - demand of huge pre-deposit even though it was specifically pointed out that the business of the appellant is closed and it is facing financial crisis - HELD THAT - The matter is remanded back to the first appellate authority so as to decide the appeal filed by the appellant within a period of four weeks from the date of fulfilling of the aforesaid conditions. The appeal is accordingly disposed of.

Summary

Issues involved:
The issues involved in this case include:
1. Whether the Gujarat Value Added Tax Tribunal is justified in demanding pre-deposit despite no sales being made by the Appellant to M/s Standard Textile.
2. Whether the Tribunal is justified in demanding pre-deposit in a situation where a fraudulent refund was pocketed by a consultant through a fraudulent bank account.
3. Whether the Tribunal is justified in demanding a significant pre-deposit when the business of the appellant is closed and facing a financial crisis.

Summary of Judgment:
1. The tax appeal was filed challenging an order passed by the Gujarat Value Added Tax Tribunal in Second Appeal No. 938 of 2022 under Sec. 78 of the Gujarat Value Added Tax Act, 2003. The appellant, a partnership concern, appointed a consultant for VAT compliance, who misused trust to file false returns resulting in a substantial tax demand.

2. The Tribunal directed the appellant to deposit Rs. 70 lakhs (20% of the tax demand) as a pre-deposit, which the appellant found harsh. The appellant argued that the consultant fraudulently entered sales and purchases, leading to the tax demand. The sister concern repaid a portion of the input tax credit upon discovering the fraud.

3. The appellant was asked to file an undertaking to pay Rs. 5 lakhs as a pre-deposit and provide security through immovable property for the admission of the appeal. The matter was remanded back to the first appellate authority to decide the appeal within four weeks of fulfilling the conditions.

4. The appellant requested a stay on further actions by the respondent due to the property being under attachment. The respondent agreed not to take any further action pending the appeal's disposal by the first appellate authority.

5. The judgment focused on providing a fair chance for the appellant to present their case before the appellate authority, considering the circumstances and allegations of fraudulent activities by the consultant.