Niki Oil Mills vs State of Gujarat

Mukesh R. Shah, J.—The present Tax Appeal is ADMITTED to consider the following substantial questions of law;

(i) Whether in the facts and the circumstances of the case, the Appellate Tribunal was justified, in summarily disposing the application for condonation of delay and the appeal filed by the appellant?

(ii) Whether in the present facts and circumstances, service by affixation of notice would amount to a valid service under the Gujarat Sales Tax Act, 1969?

Shri Jaimin Gandhi, learned AGP waives service of notice of admission on behalf of the opponent.

In the facts and circumstances of the case and with the consent of the learned advocates appearing on behalf of the respective parties, the present application is taken up for final hearing today.

The present Tax Appeal has been preferred by the appellant-assessee challenging the impugned judgment and order passed by the Gujarat Value Added Tax Tribunal (for short ''the Tribunal'') dated 22/02/2013 in Second Appeal No. 1057/2012 by which the Tribunal has dismissed the said appeal confirming the order passed by the Deputy Commissioner of Commercial Tax, Appeal-3, Gandhinagar dismissing the appeal preferred by the appellant against the order passed by the Assessing Officer on the ground of delay.

The facts leading to the present appeal in a nutshell are as under:

4.1. The issue involved is with respect to the Assessment Year 1993-94. The assessment proceedings commenced in the year 2000. It appears that prior thereto in the year 1994, the factory premises/oil mill of the appellant was sealed by GIDC for non-payment of its dues. The sole proprietor of the appellant left the country in the year 1995. It also appears that in the year 1997, the possession of the oil mill was taken over by GIDC and thereafter the assessment proceedings with respect to the Assessment Year 1993-94 commenced in the year 2000. Notices for the same were issued by the Assessing Officer, however, notice upon the appellant/sole proprietor could not be served as the sole proprietor had settled in USA. Thereafter the Assessing Officer issued notice upon the appellant, which was affixed at the premises. Treating the same as valid service, the Assessing Officer passed the final assessment order and thereafter, the appellant preferred the appeal before the first appellate authority i.e. Deputy Commissioner of Commercial Tax, Appeal-3, Gandhinagar. The Commissioner of Commercial Tax, Modasa issued notice dated 03/01/2011 calling upon the appellant to pay the amount due and payable. There was a delay of approximately 10 years and 9 months in preferring the appeal. The appellant submitted the delay condonation application submitting that since 1994 the business is closed as GIDC has already taken over possession of the oil mills. The sole proprietor then shifted to USA and settled there since 19/11/1995 and thereafter they came to know about the proceedings only when they returned. It was submitted that nobody was aware of the aforesaid assessment proceedings and, therefore, it was requested to condone the delay.

4.2. Vide order dated 04/10/2012 the first appellate authority i.e. the Deputy Commercial Tax Commissioner, Appeal - 3, Gandhinagar dismissed the application for condonation of delay and consequently dismissed the appeal on the ground of limitation. Being aggrieved and dissatisfied with the order passed by the first appellate authority of not condoning the delay and dismissing the appeal on the ground of limitation, the appellant preferred Second Appeal No. 1057/2012 before the Tribunal and the Tribunal by impugned judgment and order has dismissed the said appeal confirming the order passed by the first appellate authority in rejecting the delay condone application and consequently dismissing the appeal on the ground of limitation. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Tribunal in dismissing the appeal and confirming the order passed by the first appellate authority in not condoning the delay and consequently dismissing the appeal on the ground of limitation, the applicant has preferred the present Tax Appeal raising the aforesaid questions of law.

Ms. Gargie Vyas, learned advocate has appeared for Wadia Ghandy & Co. for the appellant and Shri Jaimin Gandhi, learned AGP has appeared for the opponent.

Ms. Gargie Vyas, learned advocate appearing on behalf of the appellant has vehemently submitted that in the facts and circumstances of the case, the Tribunal has materially erred in dismissing the appeal and confirming the order passed by the first appellate authority in not condoning the delay and consequently dismissing the appeal on the ground of limitation. It is submitted by Ms. Vyas, learned advocate appearing on behalf of the appellant that the Tribunal has materially erred in not properly appreciating the fact that there was no deliberate delay on the part of the appellant in preferring the appeal belatedly. It is submitted that the Tribunal has not properly appreciated that by not preferring the appeal within the period of limitation, the appellant was not going to be benefited at all.

6.1. It is further submitted by Ms. Vyas, learned advocate appearing on behalf of the appellant that the Tribunal has not appreciated the fact that the factory was closed since 1994 and the possession of the oil mill was taken over by GIDC in the year 1997 and since 1995 the sole proprietor i.e. the appellant had settled in USA. It is submitted that the Tribunal has not properly appreciated the fact that in view of the fact that the factory was closed since 1994 and possession of which was taken over by GIDC in the year 1997 and in fact the property was sealed, there was no reason for the proprietor to come to the factory premises at which the notice with respect to the assessment was reported to be affixed. It is submitted that in view of the aforesaid facts and circumstances, the Tribunal has material erred in holding that the notice by affixation on the factory premises was a valid notice. It is submitted that in any case and considering the aforesaid facts and circumstances of the case, the Tribunal ought to have directed to condone the delay and ought to have remanded the matter to the first appellate authority to consider the appeal on merits. It is submitted by Ms. Vyas, learned advocate appearing on behalf of the appellant that on imposing reasonable cost, the Tribunal ought to have condoned the delay in preferring the appeal before the first appellate authority. It is submitted that the appellant is ready and willing to pay reasonable cost towards the delay condonation. Making the above submission, it is requested to allow the present application.

The present Tax Appeal is opposed by Shri Jaimin Gandhi, learned AGP appearing on behalf of the opponent. It is submitted that in the facts and circumstances of the case, more particularly, when there is a huge delay of 10 years and 9 months in preferring the appeal, no error has been committed by the tribunal in dismissing the appeal and confirming the order passed by the first appellate authority dismissing the appeal on the ground of limitation. It is submitted that when it was found that between 2000 and till the appeal was preferred, the proprietor had come to India on number of occasions, at that time he ought to have verified and/or known the proceedings. It is submitted that as such for the Assessment Year 1993-94 the proceedings were already initiated prior to 1994 and, therefore, as such the proprietor was aware of the assessment proceedings and, therefore, as and when he visited India he ought to have verified and/or known the process of the assessment proceedings. It is submitted that service of notice with respect to the assessment by affixing on the last known address is a known procedure and, therefore, when the said procedure was followed, the appellant cannot plead ignorance. It is submitted that therefore in the facts and circumstances of the case, no error has been committed by the Tribunal in not condoning the huge delay of approximately 10 years and 9 months in preferring the appeal before the first appellate authority and, therefore, it is requested to dismiss the present appeal.

Heard the learned advocates appearing on behalf of the respective parties at length and perused the impugned judgment and order passed by the Tribunal as well as the order passed by the first appellate authority. It is true that as such there is a delay of approximately ten years in preferring the appeal before the first appellate authority against the assessment order. However, it is required to be noted that the assessment order is with respect to the Assessment Year 1993-94 and the assessment proceedings commenced in the year 2000. It is the case on behalf of the appellant that the factory premises/oil mill was sealed by GIDC in the year 1994. Even according to the appellant and the department, the entire record was in the oil mill/factory premises, which was sealed by GIDC. It is also the case on behalf of the appellant that because of the financial difficulty, he closed the business in the year 1993-94 and left India and settled in USA in the year 1995. It has also come on record that in the year 1997 possession of the oil mill/factory premises was taken over by GIDC in the year 1997. As stated hereinabove, thereafter the assessment proceedings for the Assessment Year 1993-94 commenced in the year 2000 and the show-cause notice with respect to the assessment came to be affixed on the factory premises. It is true that between 1995 till filing of the appeal the proprietor of the appellant might have visited India on number of occasions. However, there might not had any reason and/or occasion for the proprietor to go to the factory premises, which was already sealed in the year 1993-94 and possession of which was taken over by GIDC in the year 1997. In the year 2011 the appellant came to know about the order of assessment and immediately the appeal has been preferred and by the time there is delay of approximately 10 years. Considering the aforesaid facts and circumstances of the case, it cannot be said that there is any belated delay. It cannot be said that there is any mala fide intention on the part of the appellant in not preferring the appeal within the period of limitation and/or by not preferring the appeal within the period of limitation the appellant was going to be benefited.

8.1. In the facts and circumstances of the case, we are of the opinion that on imposing reasonable cost the delay caused in preferring the appeal before the first appellate authority should be condoned and the appellant should be given an opportunity to submit the case on merits, which will be in the interest of justice and it will meet the ends of justice.

In view of the above and in the facts and circumstances of the case, the Tribunal has materially erred in dismissing the appeal and not condoning the delay in preferring the appeal before the first appellate authority. The Tribunal has not exercised the discretion judiciously and, therefore, the interference of this Court is called for. In view of the above and for the reasons stated hereinabove, in the facts and circumstances of the case, the present Tax Appeal is allowed. The impugned order passed by the Income Tax Appellate Tribunal dated 22/02/2013 in Second Appeal No. 1057/2012 as well as the order passed by the first appellate authority i.e. Deputy Commissioner of Commercial Tax, Appeal - 3, Gandhinagar in not condoning the delay in preferring the appeal against the order of assessment with respect to the Assessment Year 1993-94 are hereby quashed and set aside and the delay caused in preferring the appeal before the first appellate authority i.e. Deputy Commissioner of Commercial Tax against the order of assessment with respect to the Assessment Year 1993-94 is hereby quashed and set aside and the first appellate authority is directed entertain the appeal on condition that the appellant shall pay the cost to the Department, which is quantified at Rs. 10,000/- to be paid by Demand Draft within a period of three weeks from today and on such deposit the first appellate authority to entertain the said appeal and decide and dispose of the same in accordance with law and on its own merits, however, subject to compliance of the pre-deposit of the amount, which may be passed by the first appellate authority. It is made clear that the aforesaid amount of cost is towards the condonation of the delay, which has nothing to do with the pre-deposit and other requirements of pre-deposit, while entertaining the appeal by the first appellate authority and the same kept open, which shall be considered by the first appellate authority in accordance with law and on its own merits, without, in any way, being influenced by any of the observations made in the present order. It is also clarified that all the contentions, which may be available to the respective parties in the appeal, are kept open, inclusive of whether the affixing of notice on the factory premises of the assessee was a valid service of notice or not and any observations made by this Court be construed while considering the application for delay only. 12. With this, the present Tax Appeal is allowed to the aforesaid extent.