IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH MONDAY, THE 12TH JANUARY 2009 / 22ND POUSHA 1930 WP(C).No. 15659 of 2008(L) ---------------------------------------------- PETITIONER(S): ---------------------- VIANI PAPERS , COCHIN-18 A TRADER REGISTERED UNDER THE SALES TAX ACT REPRESENTED BY ITS MANAGER, FR.JAMES PERAPODAN. BY ADV. SRI.S.VIJAYAN NAYAR RESPONDENT(S): --------------------------- 1. FAST TRACK TEAM , COMMERCIAL TAXES, KALAMASSERY, REPRESENTED BY SALES TAX OFFICER I CIRCLE, KALAMASSERY. 2. STATE OF KERALA, REPRESENTED BY ITS CHIEF SECRETARY, SECRETARIATE, THIRUVANANTHAPURAM. BY GOVERNMENT PLEADER SHRI C.K. GOVINDAN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 15.7.2008, THE COURT ON 12.1.2009 DELIVERED THE FOLLOWING: K. M. JOSEPH, J. -------------------------------------- W.P.C. NO. 15659 OF 2008 L -------------------------------------- Dated this the 12th January, 2009 JUDGMENT The petitioner has approached this Court seeking the following reliefs: "i) Issue a writ of declaration that Section 17D of Sales Tax Act, 1963 inserted with effect from 1.4.2007 is discriminatory and violative of Article 14 of the Constitution of India and to strike down Section 17D and to restore the position before the amendment. ii) In the alternative to strike down Sub- section (5) of Section 17D requiring payment of entire tax amount to admit the only appeal before the Tribunal. iii) Declare by a writ or order that right accrued to a citizen to file two appeals against an order cannot be curtailed after the return was filed as all rights accrues when a matter is presented before the authorities and not after that event. iv) Declare that Section 17D, if at all valid, is only directory and not mandatory in view of the WPC. 15659/08 L 2 wording “may...........be completed under the fast track method” and that the jurisdiction of the assessing officer will remain in tact in spite of Section 17D. v) Issue a writ of certiorari to quash Exts.P5 (a), P5(b) and P5(c) assessment orders as those were not orders passed by Fast Track Team, but by a Single Officer. vi) Issue a declaration that no order like Ext.P5 order could be passed by Officers not sitting together and hearing and scrutinising the case and that counter signatories of the Officers will not validate the orders. vii) Issue a declaration that the orders, Exts.P5 (a), P5(b) and P5(c) are orders passed by the assessing officer herself under Section 17(e) and, therefore, appealable under Section 34 of the Sales Tax Act and that too, on payment of admitted tax.” 2. Briefly put, the case of the petitioner is as follows: Petitioner is an assessee under the Sales Tax Act. The main business of the assessee during the relevant years 2002 - 2003, 2003 - 2004 and 2004 - 2005 was printing and sale of newspapers, journals, periodicals, magazines etc. According to WPC. 15659/08 L 3 the petitioner, in the earlier years, petitioner used to sell papers when they did not have printing of news paper activity. It is stated that after acquiring a printing press, the petitioner started canvassing orders for printed newspapers, journals, magazines, etc. Except for a small amount for the period 2004 - 2005, there was no sale of paper. For the year 2004 - 2005, paper worth Rs.7,17,895/= was sold and tax was paid. Exts.P1(a), P1(b) and P1(c) are the sales tax returns for the years 2002 to 2004. From 1.4.2007, Section 17D was introduced and a new method of assessment as Fast Track was introduced. A paper publication was made. Petitioner appeared and produced all the Books of Account. The assessment was completed as per Exts.P2(a), P2 (b) and P2(c) for the assessment years as aforesaid. Appeals filed against them were not registered by the Tribunal. Petitioner filed W.P.(C). No.243/08 which was dismissed and the petitioner filed W.A. No.371/08 and this Court remanded the assessment orders to the Fast Track Team for completion of the assessments after complying with the conditions imposed in WPC. 15659/08 L 4 Circular No.17/07 dated 12.4.2007. Notice was issued by the Commercial Tax Officer, Ist Circle, Kalamassery purported to be on behalf of the First Track Team under Section 17D. Petitioner produced all the Books of Account. Petitioner claimed exemption for sales of printed books, journals and periodicals. But, in Ext.P1 series of Returns, each sale transaction of journals were shown in two heads "Value of paper" and "cost of printing" the journal. According to petitioner, those entries caused a wrong impression that there was sale of paper. With a view to project the transaction in the correct perspective, petitioner preferred Exts.P3(a), P3(b) and P3 (c) revised returns. It is stated that in both Ext.P1 series and Ext.P3 series, sales are exempted. All that is done is to show that the entire sale is one entry and the same in Ext.P3 series as two entries in Ext.P1 series. It is only by way of correcting a clerical error. On 27.3.2008, petitioner produced the Books of Account and the Commercial Tax Officer, Kalamassery issued notice under Section 17(3) of the Act. Petitioner sent Ext.P4 WPC. 15659/08 L 5 reply. It is stated that the petitioner was never given a hearing nor the petitioner appeared before any group of Officers known as Fast Track Team. There was no sitting of the Fast Track Team in the petitioner's case, and that the only Officer who examined the Books of Accounts and issued notices and heard the explanation tendered by the petitioner is Smt. S.K. Lathika, Commercial Tax Officer, Ist Circle, Kalamassery and no-one- else. Petitioner received Exts.P5(a), P5(b) and P5(c) assessment orders. The total tax claim became Rs.6,73,597/= as against Rs.4,29,489/= in Ext.P2. It is on these allegations that the petitioner has approached this Court. It is contended that the amendment to Section 17D providing for first appeal to the Tribunal and the requirement of paying the entire tax before admitting the Appeal before the Tribunal is hostile discrimination of two groups of assessees similarly situated, one group whose assessments were completed before 1.4.2007 and another group whose assessments were pending for no fault of such assessees. It is contended that in the first group, two WPC. 15659/08 L 6 Appeals are provided for and they need pay only admitted tax for filing Appeal and a further Second Appeal to Tribunal also, without paying disputed tax. This right is taken away in the second group. It is the further contention of the petitioner that in this case, in fact, there was no assessment as provided under Section 17D of the Act. This is for the reason that the assessment made in this case, is by a single Officer, namely Smt. S.K. Lathika, Commercial Tax Officer, Ist Circle, Kalamassery. According to petitioner, there must be an assessment by a team led by the Assistant Commissioner in the case of an ordinary circle. It is pointed out that though there was a hearing on 10.3.2008 by Smt. S.K. Lathika, there was no hearing by the Team as such. Petitioner further contends that though a notice under Section 17(3) was issued on 28.3.2008 and the petitioner filed reply, it is without the Team considering the reply and hearing the petitioner that the impugned assessment orders have been passed. Petitioner would therefore submit that this cannot be treated as an assessment done under WPC. 15659/08 L 7 Section 17D. 3. I heard Shri S. Vijayan Nair, learned counsel appearing for the petitioner and also the learned Government Pleader. A learned Single Judge of this Court has taken the view that Section 17D is valid and the said decision requires re- consideration, it is submitted. Counsel for petitioner further submits that, at any rate, the petitioner is raising the contention that Section 17D is invalid for the reason that it is violative of Article 14 of the Constitution of India. This is for the reason that as stated in Ground A of the Writ Petition, persons whose assessments were completed prior to 1.4.2007 and after 1.4.2007 are treated unequally. With regard to the assessments made as on 1.4.2007, the assessments were completed only under the regular provisions, and not under Section 17D and they could file first appeal before the Appellate Authority and if dissatisfied with the assessments, they could file a further Appeal and for both the appeals, it is not the law that they should deposit the entire amount for maintaining the Appeal. As far as the persons WPC. 15659/08 L 8 whose assessments are under Section 17D are concerned, they are put to the onerous condition which becomes very harsh in cases where huge amounts are demanded in particular, to deposit the entire amount to maintain the Appeal. There is no rationale for treating them unequally, it is contended. In this connection, counsel for petitioner drew my attention to the following decisions: (1) Suraj Mall-Mohta and Co. v. A.V. Visvanatha Sastri and another (AIR 1954 SC 545). (2) Himmatlal Harilal Mehta v. State of Madhya Pradesh and Others (AIR 1954 SC 403). 4. He would further contend that there are some pronouncements by the Apex Court, no doubt, which are primarily under the Municipalties Act, sustaining such laws enjoining of deposit of part of the amount. There, he would draw a line of distinction by pointing out that the amounts demanded under the municipal laws are relatively meagre and the decisions must be confined to the facts situation available WPC. 15659/08 L 9 therein. Those decisions are as follows: (1) Gujarat Agro Industries Co. Ltd. v. Municipal Corporation of the City of Ahmedabad and Others ((1999) 4 SCC 468). (2) U.P. State Road Transport Corpn. and Others v. Bhagwati Prasad Pathak ((2000) 10 SCC 425). (3) St. Mary's School and Others v. Cantonment Board, Meerut and Others ((1996) 7 SCC 484). The Court had in its mind the fact that the power of the High Court under Article 226 of the Constitution of India can be used in appropriate cases, to render justice where the demand for deposit of the amount under the law would result in manifest injustice, he contends. In this regard, he relied on the decision in State of Tripura v. Manoranjan Chakraborty and Others ((2001) 10 SCC 740). Therein, the Court, inter alia, held as follows: WPC. 15659/08 L 10 "Normally, the provisions of the Act would have to be complied with, but the availability of the writ jurisdiction should dispel any doubt which a citizen has against a high-handed or palpable illegal order which may be passed by the assessing authority." 5. Per contra, learned Government Pleader would point out the background for introduction of Section 17D. He would submit that the Kerala Value Added Tax Act came into force on 1.4.2005. Large number of assessments were pending under the earlier regime, namely the KGST Act, 1963. It is the value judgment of the legislature that the Appeals which are pending should be disposed of without any delay. He pointed out that it was in such circumstances, it was thought of that the assessments pending as on 1.4.2007 should be completed by the Team. In the case of Special Circle Team, it is to consist of the Deputy Commissioner etc. In the case of an ordinary Circle, there will be four officers and it will be led by an Assistant Commissioner. He would submit that the decision of the WPC. 15659/08 L 11 learned Single Judge of this Court in Alikunhi Haji V.C. & Sons v. State of Kerala & Ors. ((2008) 16 KTR 206 (Ker)) lays down the correct law and submit that it does not require any reconsideration and, at any rate, a review by a Single Judge may not lie. He would further submit that the right of appeal is a creature of the Statute. In no one it inheres as a right unless it is positively created by a legislative device, be it the parent legislation or subordinate legislation, he submits. It is open to the legislature to impose such conditions as it feel are suitable. In fact, there need not be any right of Appeal to render the Statute valid. A Statement is filed followed by Counter Affidavit. It is submitted that there was a Fast Track Team and they have considered the matter on 10.3.2008 and thereafter pre- assessment notice was issued and after considering the matter, it was decided to pass the assessment orders. What is required is unanimity under Section 17D among the Officers and there was such unanimity in this case. All the Officers, in fact, have spoken of their unanimity by assigning the signatures. He WPC. 15659/08 L 12 pointed out that it was after taking note of the revised returns filed by the petitioner that the assessments were completed and if the petitioner is aggrieved, it is for the petitioner to make use of the right given under Section 17D, namely to approach the Tribunal after depositing the amount of tax. 6. Shri S. Vijayan Nair, learned counsel for the petitioner would point out that the specific issue based on Article 14 of the Constitution of India was not considered by the learned Single Judge. 7. As far as the question whether Section 17D is constitutionally valid, it is necessary to notice the facts of the case reported in Suraj Mall-Mohta and Co. v. A.V. Visvanatha Sastri and another (AIR 1954 SC 545). That was a case where resort was made to Section 5(4) of the Taxation On Income (Investigation Commission) Act, 1947. Therein, the Court taking note of the provisions contained in Section 5(4) found that Sub-section (4) of Section 5 of the procedure prescribed by the impugned Act in so far as it affects the persons proceeded WPC. 15659/08 L 13 against, deprives of the right of appeal, second appeal and revision petition and it is a discriminatory legislation under Article 14 of the Constitution of India and is void and unsustainable. In that case, no doubt, the Commission was headed by a Judge of the High Court. The Court held as follows: "The procedure thus prescribed in this matter by the impugned Act is substantially prejudicial to the assessee than the procedure prescribed under the Indian Income-tax Act. It was not disputed by the learned Solicitor-General that the procedure prescribed by the impugned Act in sections 6 and 7 was more drastic than the procedure prescribed in sections 37 and 38 of the Indian Income-tax Act. Again, so far as the procedure for reference under sub-section (4) of Section 5 is concerned, it is also to a certain extent prejudicial to the assessee. There is no doubt that there is in this matter in the first stages some similarity in the procedure to be followed for catching evaded income both under section 34 of the Indian Income-tax Act and under the provisions of sub-section (4) of section 5 of the WPC. 15659/08 L 14 impugned Act; but the overall picture is that though under the Indian Income-tax Act the same Officer who first arrives at a tentative conclusion hears and decides the case, his decision is not final, but is subject to appeal, while under the provisions of sub- section (4) of section 5 the decision of the Commission tentatively arrived at in the absence of the assessee becomes final when taken in his presence, and that makes all the difference between the two procedures.” It is also noted that as far as Section 34 is concerned, the maximum period is eight years while under the provisions of Sub-section (4) of Section 5, it is not limited to any period. In paragraph 19 it is to be however stated as follows: “If there was a provision for reviewing the conclusions for the Investigation Commission when acting both as investigators and judges, there might not have been such substantial discrimination in the two procedures as would bring the case within Article 14; but as pointed out above, there is no provision of that kind in the impugned Act.” WPC. 15659/08 L 15 8. Undoubtedly there is a provision in the form of an appeal provided to the Tribunal as far as Section 17D is concerned. The decision reported in Shyam Kishore v. Municipal Corporation of Delhi ((1993) 1 SCC 22) dealt with property tax payable under the Delhi Municipal Corporation Act, 1957. There the provision provided for the condition to deposit the amount of tax in dispute. Though the court also took the view that it is not a sine qua non that for entertaining the appeal itself the amount of tax should be deposited and it was held that the appeal may be admitted and adjournment may be granted in appropriate cases to enable the appellant to deposit the tax, but it was made clear that the appellate authority has no jurisdiction to waive the condition or stay collection of tax. No doubt, in State of Tripura v. Manoranjan Chakraborthy ((2001) 10 SCC 740) the Apex Court took the view that when gross injustice is done justifying the interference then existence of alternate remedy is a bar to exercise writ jurisdiction. In the said case, Section 20(1) and 21(2) of Tripura Sales Tax Act WPC. 15659/08 L 16 provided that no appeal/revision against an order would be entertained unless the amount of penalty is levied. However, discretion was given to permit payment of not less than 50%. The court took the view that the impugned provisions are valid. Again in St.Mary's School v. Cantonment Board, Meerut ((1996) 7 SCC 484) the provision required deposit of disputed tax in court for maintaining an appeal against assessment under the Cantonments Act, 1924, the court applied the decision in Shyam Kishore's case already referred to. The decision in Gujarat Agro Industries Co. Ltd. v. Municipal Corporation of the City of Ahmedabad ((1999) 4 SCC 468) was also a case under the property tax under the Bombay Municipal Corporation Act and there the court held as follows: “Right of appeal is the creature of a statute and it is for the legislature to decide whether the right of appeal should be unconditionally given to an aggrieved party or it should be conditionally given. Right of appeal which is a statutory right can be conditional or qualified. It cannot be said that such a law would be violative of Article 14 of the WPC. 15659/08 L 17 Constitution. It if the statute does not create any right of appeal, no appeal can be filed. There is a clear distinction between a suit and an appeal. While every person has an inherent right to bring a suit of a civil nature unless the suit is barred by statute, however, in regard to an appeal, the position is quite opposite. The right to appeal inheres in no one and, therefore, for maintainability of an appeal there must be authority of law. When such a law authorises filing of appeal, it can impose conditions as well.” 9. Learned counsel for the petitioner would contend that these decisions related to payment of property tax where the amount involved would be invariably small and the burden may not be very harsh unlike a case like the present where huge demand is made. In Government of Andhra Pradesh v. P. Laxmi Devi ((2008) 4 SCC 720) the Apex Court was considering Section 47A of Stamp Act 1899 and the proviso thereto as amended by A.P. Act 8 of 1998. Section 47A provided for reference to the Collector for determination of the market value of the property in case of undervaluation suspected WPC. 15659/08 L 18 by registering officer. However the proviso stipulated that the persons must make a deposit of 50% of the deficit duty as a pre- condition for making the reference. The Apex Court held that the said provision is valid. The court held as follows: “As regard fiscal or tax measures greater latitude is given to such statutes than to other statutes. All decisions in the economic and social spheres are essentially ad hoc and experimental. Since economic matters are extremely complicated, this inevitably entails special treatment for special situations. The State must therefore be left with wide latitude in devising ways and means of fiscal or regulatory measures, and the court should not, unless compelled by the statute or by the Constitution, encroach into this field, or invalidate such law.” The court further held as follows: “Stamp duty is a tax, and hardship is not relevant in construing taxing statutes which are to be construed strictly. As is often said, there is no equity in a tax. If the words used in a taxing statute are WPC. 15659/08 L 19 clear, one cannot try to find out the intention and the object of the statute. Hence the High Court fell in error in trying to go by the supposed object and intendment of the Stamp Act, and by seeking to find out the hardship which will be caused to a party by the impugned amendment of 1998.” The court also held as follows: “However, a hypothetical case may be considered. Supposing the correct value of a property is Rs.10 lakhs and that is the value stated in the sale deed, but the registering officer erroneously determines it to be, say Rs.2 crores. In that case while making a reference to the Collector under Section 47A, the registering officer will demand duty on 50% of Rs.2 crores i.e., duty on Rs.1 crore instead of demanding duty on Rs.10 lakhs. A party may not be able to pay this exorbitant duty demanded under Section 47A proviso by the registering officer in such a case. In this situation it is always open to a party to file a writ petition challenging the exorbitant demand made by the registering officer under Section 47A proviso alleging that the determination WPC. 15659/08 L 20 made is arbitrary and/or based on extraneous considerations, and in that case it is always open to the High Court, if it is satisfied that the allegation is correct, to set aside such exorbitant demand under Section 47A proviso by declaring the demand arbitrary. Hence the party is not remediless in this situation. However, this would not mean that Section 47A proviso becomes unconstitutional. There is always a difference between a statute and the action taken under a statute. The statute may be valid and constitutional, but the action taken under it may not be valid. Hence, merely because it is possible that the order of the registering authority under Section 47A proviso is arbitrary and illegal, that does not mean that Section 47A proviso is also unconstitutional. This must always be kept in mind when adjudicating on the constitutionality of a statute.” 10. I do not think that there is merit in the contention based on violation of Article 14 on the ground f discrimination.. Section 17D was inserted with effect from 1.4.2007. Apparently WPC. 15659/08 L 21 there are large number of cases which were pending in relation to the Kerala General Sales Tax Act. The Value Added Tax Act came into force in the year 2005. There was a need to dispose of the cases pending under the KGST Act at the earliest. It may be true that if an assessment were completed earlier under the provisions of the KGST Act and not under Section 17D, the party may have had a right to file a first appeal thereafter to file a second appeal. However, it is to be noticed that the assessment which was completed under Section 17D is completed by a team of officers unlike an assessment under Section 17 of the Act. Therefore there is an assurance that when a team of officers consider the matter, the margin of error is reduced. Therefore if the legislature felt that it is not necessary to not provide for a right of appeal to the first appellate authority and to provide for a right of appeal conditioned by the requirement of payment of the entire amount it cannot be dubbed as arbitrary or discriminatory. There is a change in circumstance and there is