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Maruti Suzuki India Limited Versus Union of India and others

Pre-deposit requirement - Validity of Section 45- AA of the Employees State Insurance Act, 1948 as it imposes a condition of pre-deposit of 25% of the demanded amount for entertaining the appeal - Held that:- The requirement of pre-deposit under Section 45-AA is not mandatory and the Appellate Authority is empowered to waive, either partially or completely, the requirement of predeposit in the same circumstances and conditions as explained in detail in the PSPCL case (2016 (2)245 - PUNJAB AND HA .....

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ority is satisfied that the entire purpose of the appeal would be frustrated or rendered nugatory because of the condition of pre-deposit for hearing the appeal and a reasoned order would require to be passed. - Accordingly, the order dated 21.02.2014 (Annexure P-20) passed by the Appellate Authority is quashed. The matter is remitted to the first appellate authority where the petitioners may file an application for interim injunction/protection before the appeals are taken up for hearing by .....

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ion 45- AA of the Employees State Insurance Act, 1948 (hereinafter referred to as the 'ESI Act') in so far as it imposes a condition of pre-deposit of 25% of the demanded amount for entertaining the appeal. The petitioner has further prayed for quashing the order dt 30.12.2013 and demand notice dated 05.06.2014 (Annexures P-18 and P-21 respectively) demanding contribution for the period from October, 2009 to August 2010. Also impugned is the order dated 21.02.2014 of the Appellate Author .....

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apan. 4. Vide notification dated 25.11.1986 issued by the Government of India, Ministry of Labour (respondent No. 1), the petitioner company was exempted from the operation of the ESI Act, retrospectively w.e.f., 01.08.1986 till 31st July, 1987. The exemption was regularly extended and continued till September 30, 2008. Before the expiry of the exemption period, the petitioner applied for extension for another year. This request was declined by respondent No. 1 on 23.01.2009 on the ground that t .....

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, the petitioner requested that the exemption be extended for this period as well. On the matter being referred to it for opinion, the Central Government initially opined that after the amendment of Section 91-A of the ESI Act on 1.6.2010, exemption could only be granted prospectively. Respondent no.2 accordingly, vide letter dated 29.11.2011 rejected the case of the petitioner company for grant of exemption from 1.10.2008 to 22.8.2010. Thereafter the petitionercompany received a notice dated 14 .....

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opinion, the petitioner company again requested the State Govt for reconsideration of grant of exemption from 1.10.2008 to 22.8.2010. It is the case of the petitioner, that no decision on the said request has been taken or communicated to the petitioner. 7. Without waiting for the decision on exemption, the Deputy Director, ESIC, Sub-Regional office of the Employees State Insurance Corporation, Gurgaon (respondent No.5) passed order dated 30.12.2013 (Annexure P-18) demanding contribution of S .....

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pany. 9. Hence, this writ petition. 10. On an application for stay moved by the petitioner, order dated 16.7.2014 was passed and it was directed that the Recovery Officer may attach only the amount in dispute. The petitioner would be allowed to operate the account, if it is more than the disputed amount. 11. Ld. Counsel for the petitioner while assailing the requirement of deposit of 25% of the claimed amount, has argued that this condition is not to be treated as mandatory but the Appellate Aut .....

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licable in the present case. He has argued that in the PSPCL case the Court was construing Section 62(5) of the Punjab Value Added Tax Act, 2005 (for short VAT Act ). The Court interpreted the word 'shall' in Section 62(5) in the VAT Act to be directory. He argued that there is a distinct difference in terminology of Section 62(5) of the VAT Act and 45-AA of the ESI Act which would make a material difference to the interpretation. He argued that as per Section 45-AA of the ESI Act, the e .....

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interest as may be specified in the Regulation. He argued that in no other Statute or in any of the cases relied on in the PSPCL case there is any provision for return of the amount deposited with interest. In sum, he argued that in Section 62(5) of the VAT Act, as per the language of the Statute, first an appeal is provided and then the condition of pre-deposit is incorporated in the proviso. By contrast, in the ESI Act, the right of appeal is plainly conditional on deposit of 25% amount. Henc .....

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tioner responded by contending that the argument of the respondent lacks substance. It is nothing more than quibbling about words and an exercise in semantics. He argued that the consistent view of the Courts has been that any condition of pre-deposit has to be read down to incorporate within it inherent power of the appellate forum to grant interim relief regarding the pre-deposit in appropriate cases. 15. Heard Ld. Counsel for the parties and perused the records. 16. Section 45AA of the ESI Ac .....

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refund such deposit to the employer together with such interest as maybe specified in the regulation. Section 62 of the VAT Act, which was being considered in the PSPCL case is as under: 62. (1) An appeal against every original order passed under this Act or the rules made thereunder shall lie, (a) if the order is made by a Excise and Taxation Officer or by an officer-Incharge of the information collection centre or check post or any other officer below the rank of Deputy Excise and Taxation Com .....

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order of the Tribunal and subject only to such order, the order of the Commissioner or any officer exercising the powers of the Commissioner or the order of the Deputy Excise and Taxation Commissioner or of the designated officer, if it was not challenged in appeal or revision, shall be final. (4) No appeal shall be entertained, unless it is filed within a period of thirty days from the date of communication of the order appealed against. (5) No appeal shall be entertained, unless such appeal i .....

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appeal and send copies of the order to the appellant and the officer whose order was a subject matter of appeal. In PSPCL's case (supra), this Court had framed the following questions for consideration: 4. From the submissions made by learned counsel for the parties, the following questions emerge for our consideration:- (a) Whether the State is empowered to enact Section 62(5) of the PVAT Act? (b) Whether the condition of 25% pre-deposit for hearing first appeal is onerous, harsh, unreason .....

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fied. The requirement about the deposit of the amount claimed as a condition precedent to the entertainment of an appeal does not nullify the right of appeal and cannot be considered to be unconstitutional. 18. Among the decisions of the Hon ble Supreme Court considered were Govt. of A.P. v. P. Laxmi Devi , (2008) 4 SCC 720 and Har Devi Asnani v. State of Rajasthan, (2011) 14 SCC 160. Relevant extracts therefrom are being reproduced below: 19. In P. Laxmi Devi's case (supra), there is a refe .....

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rpn. of the City of Ahmedabad [(1999) 4 SCC 468] this Court referred to its earlier decision in Vijay Prakash D. Mehta v. Collector of Customs [(1988) 4 SCC 402] wherein this Court observed: (Vijay Prakash case [(1999) 4 SCC 468] , SCC p. 406, para 9) 9. Right to appeal is neither an absolute right 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 .....

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before the Bombay High Court was as to the validity of Section 217 of the Bombay Municipal Act which required pre-deposit of the disputed tax for the entertainment of the appeal. The Bombay High Court upheld the said provision and its judgment has been referred to with approval in the decision of this Court inGujarat Agro Industries Co. Ltd. v. Municipal Corpn. of the City of Ahmedabad [AIR 1968 SC 623] . This Court has also referred to its decision in Shyam Kishore v.Municipal Corpn. of Delhi .....

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to be deposited before the appeal could be entertained. The Supreme Court held that the provision did not violate Article 14 of the Constitution. 27. In view of the above, we are clearly of the opinion that Section 47-A of the Stamp Act as amended by A.P. Act 8 of 1998 is constitutionally valid and the judgment of the High Court declaring it unconstitutional is not correct. The relevant observations in Har Devi Asnani's case (supra) are as under: 9. The ground taken by the appellant in the .....

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nt for entertaining a revision petition was arbitrary, unreasonable and unconstitutional. 12. For appreciating the contentions of the learned counsel for the parties, we must refer to Section 65 of the Act. Section 65 of the Act is quoted hereinbelow: 65.Revision by the Chief Controlling Revenue Authority.-( 1) Any person aggrieved by an order made by the Collector under Chapters IV and V and under clause (a) of the first proviso to Section 29 and under Section 35 of the Act, may within 90 days .....

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f satisfying himself as to the legality or propriety of the order passed and as to the regularity of the proceedings and pass such order with respect thereto as it may think fit: Provided that no such order shall be made except after giving the person affected a reasonable opportunity of being heard in the matter. 13. The learned counsel for the appellant submitted that although sub-section (1) of Section 65 of the Act confers a right on a person to file a revision against the order of the Colle .....

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cision of this Court inMardia Chemicals Ltd. v. Union of India [(2004) 4 SCC 311] in which the provision requiring pre-deposit of 75% of the demand made by the bank or the financial institution in Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 has been held to be onerous and oppressive rendering the remedy illusory and nugatory and constitutionally invalid. 15. The learned counsel for the appellant submitted that assuming th .....

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P. v. P. Laxmi Devi [(2008) 4 SCC 720] . 16. The learned counsel for the respondents, on the other hand, submitted that a revision or an appeal is a right conferred by the statute and the legislature while conferring this statutory right can lay down conditions subject to which the appeal or revision can be entertained and that there is nothing unreasonable or arbitrary in the proviso to Section 65(1) of the Act requiring deposit of 50% of the recoverable amount before the revision application i .....

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tor of Customs [(1988) 4 SCC 402] and Gujarat Agro Industries Co. Ltd. v. Municipal Corpn. of the City of Ahmedabad [(1999) 4 SCC 468] . 18. The learned counsel for the respondents submitted that the decision of this Court in Mardia Chemicals Ltd. v. Union of India [(2004) 4 SCC 311] declaring the provision of Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, requiring deposit of 75% of the demand as constitutionally invalid d .....

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ute, cannot be said to be a reasonable condition. 19. The learned counsel for the respondents submitted that in the instant case, the first adjudicatory authority is the Collector and only after the Collector determines the amount of stamp duty payable on the documents, the affected party has a right of revision under Section 65(1) of the Act. He further submitted that the requirement of 50% of the amount determined by the Collector at the stage of filing of the revision is therefore not a requi .....

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f 1998. Sub-section (1) of Section 47-A, introduced by Andhra Pradesh Act 8 of 1998 in the Stamp Act, is extracted hereinbelow: 47-A.Instruments of conveyance, etc. how to be dealt with.-(1) Where the registering officer appointed under the Registration Act, 1908, while registering any instrument of conveyance, exchange, gift, partition, settlement, release, agreement relating to construction, development or sale of any immovable property or power of attorney given for sale, development of immov .....

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: Provided that no reference shall be made by the registering officer unless an amount equal to fifty per cent of the deficit duty arrived at by him is deposited by the party concerned. 21. Under sub-section (1) of Section 47-A quoted above, a reference can be made to the Collector for determination of the market value of property and the proper duty payable thereon where the registering officer has reason to believe that the market value of the property which is the subject-matter of the instru .....

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tion 47- A was challenged before the Andhra Pradesh High Court by P. Laxmi Devi and the Andhra Pradesh High Court held that this proviso was arbitrary and violative of Article 14 of the Constitution and was unconstitutional. The Government of Andhra Pradesh, however, filed an appeal by special leave before this Court against the judgment of the Andhra Pradesh High Court and this Court held in para 18 at p. 735 of Govt. of A.P. v. P. Laxmi Devi [(2008) 4 SCC 720] that there was no violation of Ar .....

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Mills Co. Ltd. v. State of Gujarat [(1975) 2 SCC 175] , Vijay Prakash D. Mehta v. Collector of Customs [(1988) 4 SCC 402] andGujarat Agro Industries Co. Ltd. v. Municipal Corpn. of the City of Ahmedabad[(1999) 4 SCC 468] in which this Court has taken a consistent view that the right of appeal or right of revision is not an absolute right and it is a statutory right which can be circumscribed by the conditions in the grant made by the statute. Following this consistent view of this Court, we hol .....

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] for rejecting the challenge to the proviso to Section 65(1) of the Act. We have perused the decision of the Division Bench of the High Court inChoksi Heraeus (P) Ltd. v. State [AIR 2008 Raj 61] and we find that the Division Bench has rightly taken the view that the decision of this Court in Mardia Chemicals Ltd. v. Union of India [(2004) 4 SCC 311] is not applicable to the challenge to the proviso to Section 65(1) of the Act inasmuch as the provision of sub-section (2) of Section 17 of the Sec .....

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onerous and oppressive. 24. In our considered opinion, therefore, the proviso to Section 65(1) of the Act is constitutionally valid and we are therefore not inclined to interfere with the order dated 16-11-2009 [Har Devi Asnani v. State of Rajasthan, Civil Writ Petition No. 14220 of 2009, order dated 16-11-2009 (Raj)] in DB CWP No. 14220 of 2009. The civil appeal arising out of SLP (C) No. 20964 of 2010 is, therefore, dismissed. 20. On the issue of constitutionality of the requirement of pre-dep .....

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ight to appeal is a statutory right and it can be circumscribed by the conditions in the grant. In other words, while granting this right, the legislature can impose conditions for exercise of such right and there is no constitutional or legal impediment to imposition of such a condition. The requirement about the deposit of the amount claimed as a condition precedent to the entertainment of an appeal does not nullify the right of appeal. All that the statutory provision seeks to do is to regula .....

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egislature to decide whether to make the right subject to any condition or not. In the light of the above enunciation, we proceed to examine Section 62(5) of the PVAT Act. A perusal of sub section (5) of Section 62 of the PVAT Act shows that pre-deposit of twenty five percent of the total amount of tax, interest and penalty is a condition precedent for hearing an appeal before the first appellate authority. Any challenge to the constitutional validity of this provision for pre-deposit before ent .....

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the said provision is legal and valid. The condition of 25% pre-deposit for hearing first appeal is not onerous, harsh, unreasonable and violative of the provisions of Article 14 of the Constitution of India . This Court then considered question (c ) as to whether the requirement of pre-deposit for entertaining the appeal, is a mandatory requirement or it should be read as directory, with an inherent power in the appellate authority to waive or reduce the amount where considered necessary. In t .....

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PVAT Act is mandatory or by implication would be read as directory meaning thereby whether the first appellate authority can grant partial or complete waiver of condition of pre-deposit; The legal position in this regard is being discussed hereinafter. 26. Taking up the issue of 'inherent powers of the Court', it may be observed that Constitution of India and the statutes confer different jurisdiction on the Court whereas inherent powers of the court are those necessary for ordinary and .....

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ntained therein is that where an Act confers a jurisdiction, it impliedly also grants the power of doing all such acts, or employing such means as are essentially necessary to its execution. Learned counsel for the petitioners vehemently argued that the provision has to be read down to include the right to waive the condition by the appellate authority in an appropriate case. Main emphasis was laid by the learned counsel for the petitioners on the judgment of the Apex Court in Income Tax Officer .....

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subject to there being a strong prima facie case and satisfaction that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue during the pendency of the appeal. … … ... 30. Adverting to the second facet of the argument as to whether a statute is mandatory or directory, the same depends upon the intent of the legislature and not upon the language in which the intent is clothed. The issue has been considered by a Ful .....

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ery case it shall have that effect, that is to say, unless the words of the statute are punctiliously followed, the proceeding or the outcome of the proceeding would be invalid. On the other hand, it is not always correct to say that where the word may has been used, the statute is only permissive or directory in the sense that non compliance with those provisions will not render the proceedings invalid. The relevant portion reads thus:- 6. Before proceeding further, we may notice some of the pr .....

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on Statutory Construction (Edition 1940, art. 261, page 516). (2) The use of the word "shall" in a statutory provision, though generally taken in a mandatory sense, does not necessarily mean that in every case it shall have that effect, that is to say, that unless the words of the statute are punctiliously followed, the proceeding or the outcome of the proceeding, would be invalid. On the other hand, it is not always correct to say that where the word "may" has been used, the .....

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would be more so if a literal construction of a particular clause leads to manifestly absurd and anomalous results which could not have been intended by the Legislature. (4) The principle that a fiscal statute should be construed strictly is applicable only to taxing provisions such as a charging provision or a provision imposing penalty and not to those parts of the statute which contain machinery provisions-CIT v. National Taj Traders [1980] 121 ITR 535 (SC) (headnote). 32. Before we record ou .....

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id Act with the Collector. This court after considering the entire case law on the point and by reading down the provision held that Section 13B of the said Act would be read down to incorporate within it the power in appellate authority to grant interim relief in an appropriate case by passing a speaking order even while normally insistence may be made on pre-deposit of the penalty. In such a case, the appellate authority would have to give reasons for granting interim relief of stay. 33. It is .....

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the Constitution of India, the grievance can be remedied at the stage of first appellate authority. As a sequel, it would follow that the provisions of Section 62(5) of the PVAT Act are directory in nature meaning thereby that the first appellate authority is empowered to partially or completely waive the condition of pre-deposit contained therein in the given facts and circumstances. It is not to be exercised in a routine way or as a matter of course in view of the special nature of taxation an .....

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, the power to grant interim protection/injunction by the first appellate authority in appropriate cases in case of undue hardship is legal and valid. As a result, question (c) posed is answered accordingly. 21. It was clearly and unequivocally concluded that provisions of Section 62(5) of the VAT Act were directory in nature and that the first appellate authority was empowered to partially or completely waive the condition of pre-deposit by necessary implication and intendment and in the intere .....

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he petitioner that there is no substance in the argument of the Ld. Counsel for the respondent that the judgment is distinguishable merely because Section 45-AA is not similarly worded as Section 62(5) of the Punjab VAT Act. The principle settled by various decisions relied on in the PSPCL case is that the requirement of pre-deposit for entertaining the appeal cannot be read to be mandatory and that the appellate forum would have inherent power to waive, completely or partially, this requirement .....

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