Our Legal Correspondent

Chennai , July 31

THE Madras High Court has asked the Tamil Nadu Government to amend the State General Sales Tax Act through an ordinance "forthwith", making a provision permitting waiver or stay by the appellate authority of the pre-deposit tax assessed in appropriate and genuine cases so that the tax-payers might not face hardship, and the alternative remedy of appeal might not become illusory.

In a significant order, the First Bench, consisting of Mr Chief Justice M. Markandey Katju and Mr Justice F.M. Ibrahim Kalifulla, said that Section 31 of the Act, as it stood now, did not allow such power of waiver or stay to the appellate authority, with the result that many cases were coming up directly by way of writ petitions in this Court challenging the assessment orders.

"We are not inclined to entertain such writ petitions because there is alternative remedy by way of appeal," the Bench said.

The Bench was disposing of a writ appeal by a Chennai company (Royal Insulations Pvt Ltd) which was assessed a tax to the tune of Rs 7,88,440.

The appellant contended that their factory was on strike and hence it could not furnish the requisite declaration forms, which ultimately resulted in the assessing authority (Commercial Tax Officer, Chennai) imposing the impugned order of assessment.

A single judge who heard the petition in his order dated June 11, 2005 set aside the assessment. However, the judge imposed a condition that the appellant should deposit a sum of Rs 3 lakh towards the assessment, apart from paying the entire tax component in respect of the assessment.

The appellant challenged the single judge's order, and the First Bench, modifying the order, directed the appellant to furnish personal bond for the entire tax liability imposed by the authority.

The assessing authority shall pass a fresh order of assessment, preferably within a month. The assessee should furnish the personal bond within two weeks.

The Bench said that in almost all tax laws, there was a provision of pre-deposit of some amount (25 per cent of the tax in dispute) subject to which alone the appeal could be entertained.

There was almost invariably a provision permitting waiver or stay by the appellate authority of the pre-deposit amount in genuine and appropriate cases.

In Tamil Nadu, there is no such provision in the State Act.

The Bench said that the 2nd appellate authority remedy under Section 36 could only be availed of if the entire tax amount was pre-paid vide second proviso (a) of Section 36.

Hence, the Bench recommended that there should be a similar amendment to Section 36 also.

In its opinion, the Bench said, there might be provision in the law permitting waiver or stay of the pre-deposit amount in appropriate and genuine cases because there might be cases where the assessee might not be able to deposit the pre-deposit amount for genuine reasons, or there might be a glaring mistake in the order, or where waiver or stay should be done for some other good and appropriate reason.

There might be cases where a huge demand was made arbitrarily by an assessment order, although the assessee could clearly satisfy the appellate authority that he was not liable to pay tax at all, or at a far lower amount.

Because of the absence of provision in Section 31, many cases were coming up directly by way of writ petitions to this Court.

The writ appeal was accordingly disposed of by the Bench.

© Copyright 2000 - 2009 The Hindu Business Line