Indian Appliances Company vs Appellate Tribunal Sales Tax
1998 Latest Caselaw 968 Del

ORDER

R.C. Lahoti, J.

1. The petitioner is aggrieved by the order passed under Section 43(5) of the Delhi Sales Tax Act, 1975 in the matter of pre-deposit as a condition precedent to the hearing of the appeals.

2. The petitioner has suffered best judgment orders of assessment for the period 1989-90, 1990-91 and 1991-92. It appears that the assessee did not co-operate in the proceedings for assessment and,therefore, the assessing officer proceeded to frame best judgement assessment under the Delhi Sales Tax Act and the Central Sales Tax Act. It also appears that there was some repot available from STO (Enforcement) on which the orders of assessment are founded. How the petitioner has been assesse and how his liability has been fixed can best be demonstrated by reproducing the following extracts from the order of assessment referable to the year 1989-90 which is as under :-

"There is one report available on record received from S.T.O.

(Enforcement), Sales Tax vide No. F.1(1475)/92-93/E/CST/650 dated 24.5.1993 wherein it has been stated that the above dealer received 782 Gas Compressors during the period from 12.7.88 to 9.9.89 from Kirloskar Bros Ltd, Karad, Distt. Sitara, Maharashtra for the manufacturing of water coolers. Presuming that out of 782 gas compressors 500 compressors were used for financial year 1989-90 and that further 500 gas compressors purchased from other sources the total purchase of gas compressors for the year 1989-90 would come to 1000 numbers. Dealer has been given sufficient opportunities to produce the books of accounts so much so that the notices have been sent to four addresses in Delhi and Haryana under registered cover. In absence of production of books of accounts by the dealer the presumption about purchase of 1000 gas compressors appeared to be easonable.

Further presuming that these compressors have been utilised for making water coolers. Approximately 1000 water coolers are estimated to be sold by the dealer in the financial year 1989-90. Presuming the sale price of one water cooler to be Rs. 22000/ the total sale for the year 1989-90 would come to Rs. 2,20,00,000/-. It is further presumed that half of the sale has been conducted towards interstate sale.

Assessment is framed as under :

      GTO                                Rs.2,20,00,000.00
     ISS                                     Rs.1,10,00,000.00
     Legal 10% taxable                       Rs.1,10,00,000,00
     Tax Assd                                Rs. 11,00,000.00
     Tax Pd                                  Rs nil
     Tax due                                 Rs 11,00,000.00
     Interest                                Rs. 8,36,000.00
     from mid of 1989-90)
     penalty                                 Rs. 22,00,000.00
     Net amount due                          Rs. 41,36,000.00
 

     In  view  of  the  above  dealer  is  directed  to  deposit   Rs. 41,36,000/-in terms of demand notice enclosed."
 

3. For the assessment year 1990-91 the assessing officer enhanced the figure of sales by 30% over the figure of sales for the year 1989-90. In the year 1991-92 the assessing officer again enhanced the figure of sales by 30% over the figure for the year 1990-91. A huge demand on account of tax has thus been created against the assessee.

4. The assessee filed six appeals, three each under the Local Act and the Central Act. He also prayed for the condition as to pre-deposit being dispensed with under Section 43(5) of the Act. The prayer was allowed in part and ultimately reached the Sales Tax Appellate Tribunal which by order, Annexure-C, directed the petitioner to deposit 10% of the demand subject to which the appeals may be heard. Feeling aggrieved the petitioner has approached this Court.

5. In Deepak Industries Vs. Sales Tax officer, New Delhi, 1998(4) AD(DELHI) 753, this Court has on a review of the available law on the point summed up the principles governing the best assessment judgment assessment as under :-

"(i) A best judgment assessment is not a wild assessment. Exclusion of arbitrariness and caprice is an obligation implicit in the power to assess to the best of judgment.

(ii) Assessment to the best of judgment must be founded upon some rational basis, relevant material and logic so that nexus between such basis or material and the figure of assessment arrived at can be objectively seen though some amount of guess work of estimation is to be allowed like a play in the joint.

(iii) Power to make best judgment assessment exercised bona fide, reasonably and rationally shall not be open to interference in judicial review.

6. Section 43(5) of the Delhi Sales Tax provides as under :-

"(5) No appeal against an order of assessment with or without penalty or against an order imposing the penalty shall be entertained by an appellate authority unless such appeal is accompanied by a satisfactory proof of the payment of tax with or without penalty, or as the case may be, of the payment of the penalty in respect of which the appeal has been preferred:

Provided that the appellate authority may, if it thinks fit, for reasons to be recorded in writing, entertain an appeal against such order-

a) without payment of the tax and penalty, on the appellant furnishing in the prescribed manner security for such amount as it may direct, or

b) on proof of payment of such smaller sum, with or without security for such amount of tax or penalty which remains unpaid, as it may direct:

PROVIDED FURTHER that no appeal shall be entertained by the appellate authority unless it is satisfied that such amount of tax as the appellant may admit to be due from him as has been paid."

7. Thus the amount of tax and penalty levied on an assessee has to be deposited by him before the appeal may be entertained by the appellate authority. However, the appellate authority has been given power to dispense with compliance of these provisions either wholly or in part depending on the facts and circumstances of each individual case. The provision does not lay down any guidelines. It confers a discretion on the appellate authority. Like all other discretions it has to be exercised reasonably and not by whim or caprice. The discretion has to be exercised when the circumstances warranting exercise thereof are shown to exist one way or the other. Generally speaking if the appellate authority may form an opinion that on the plea raised before it for decision, the appellant would not be liable even prima facie to pay the tax or penalty at all or not fully then in spite of such glaring infirmity having been demonstrated i.e. without entering into any long drawn argument then insistence on such amount being deposited may result into negating the right of appeal itself which the law does not really intend. So also in spite of the liability having been incurred, the appellant may be in a position to convince the Appellate Tribunal that in the financial condition in which the appellant and his business have unfortunately landed it would be well nigh impossible for him to satisfy the demand before the appeal being entertained, entertaining the appeal by giving a respite in the matter of deposit would better serve the object behind the provision and at the same time would not result in injustice to the appellant.

8. The impugned orders of best judgment assessment do not even prima facie satisfy the requirements of the principles laid down in Deepak Industries' case (supra). In our opinion, the present one is a fit case where the discretion should have been exercised either by dispensing the predeposit fully or requiring only a nominal amount to be deposited.

9. It is pertinent to note that according to the petitioner his business has closed down in the year 1991 and since then he is in private employment earning a salary of Rs. 5500/- per month left with no personal business and assets of any kind whatsoever. He was living in a rented house. Requisite evidence in this regard was filed before the Tribunal and the plea has been raised and substantiated by filing such evidence before this Court also.

10. In our opinion, the Tribunal has not exercised its discretion legally while disposing of the petitioner's application under Section 43(5) of the Act and that has occasioned a failure of justice.

11. The petition is allowed. The impugned order, Annexure-c, passed by the Tribunal is hereby quashed and set aside. Instead it is directed that the appeals filed by the petitioner shall be heard and disposed of on merits subject to petitioner depositing Rs. 5000/- in each of the appeals by way of pre-deposit under Section 43(5) of the Delhi Sales Tax Act 1975 within a period of two months from today. Thereafter the appeals shall be heard and disposed of on their own merits. No order as to costs.

12. Before parting we would like to state by way of abundant caution that whatever has been stated hereinabove has been so stated solely for the purpose of formulating an opinion on the question of pre-deposit and does not amount to an expression of opinion on the merits of the appeals which shall be heard and decided on their own merits without being influenced by any observation made in this order.