By TIOL News Service

HYDERABAD, APRIL 11, 2018: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether an interim order against a judgment can suspend the ratio decidendi or principle of law enunciated in such judgment. NO IS THE VERDICT.

Facts of the case:

THE assessee-company, engaged in executing works contracts within and outside the state of Andhra Pradesh, filed returns for the relevant AY. Herein, it reported an amount of exempted purchases and exempted sales. On audit for such AY, a notice was served to the assessee, proposing duty demand. A part of such amount was treated as liability u/s 4(8), treating the works contract receipts, as receipts towards hire charges for transfer of right to use goods in respect of the works executed for two companies. The other part of the proposed amount was treated as liability u/s 4(7) not covered by documentary evidence. Subsequently, the Department confirmed the duty demand. Subsequently, an amount was of penalty was imposed as well. Thereupon, the assessee's appeal before the Appellate authority was dismissed for not making the mandatory pre-deposit of 12.5% of the duty demanded. The assessee claimed to be unable to pay the pre-deposit due to financial constraints. Moreover, the Appellate Authority had relied on a judgment of this court when dismissing the assessee's appeal. Hence the assessee filed the present writ challenging the assessment order as well as the order of the Appellate Authority, primarily on grounds that the judgment relied upon by the Appellate Authority had been suspended by the Apex Court. The assessee also claimed that the original assessment order lacked jurisdiction, since the turnover taken into account included turnover relating to works executed in other states.

High Court held that,

++ on first principles, there cannot normally be an interim suspension of a principle of law enunciated in a decision. At the most, the interim relief granted by the Supreme Court in the Special Leave Petition filed by the Ideal Industrial Explosives Limited, can be taken to be an interim suspension of the consequences that flowed out of the judgment of this Court. By way of an interim order, the ratio decidendi of a judgment cannot be kept in suspended animation or in a state of limbo. Therefore, this court does not agree with the contention that the ratio of the decision in Ankamma Trading Company stands suspended. Assuming for a minute that this court is today entitled to independently deal with the issue, even then there is no reason to take a different view than the view taken in Ankamma Trading Company. All revenue statutes invariably contain a provision for making a pre-deposit, as a condition for entertaining an appeal. Some of the statutes like the Central Excise Act even enable the appellate authorities to order waiver of pre-deposit condition either in whole or in part. But after August, 2014, the element of discretion stands removed from some of the statutes. The amount quantified as pre-deposit condition, is normally determined by the law makers, to ensure that a balance is struck between the interests of the revenue and the rights of the assessee. Therefore, a prescription regarding pre-deposit condition cannot be made a dead letter;

++ in cases where an assessee chooses to challenge the original order of assessment, after his appeal is rejected for non-compliance with the statutory prescription, this Court will also see whether the assessee is guilty of delay and laches. In other words, the assessee falling under this category should satisfy this Court not only on the parameters of violation of natural justice or lack of jurisdiction but also on the parameters of delay and laches. Wherever it is found by this Court that an assessee has come up with a writ petition at the earliest point of time, without being guilty of delay and laches, this Court can certainly examine whether the original order of assessment was vitiated by a violation of the principles of natural justice or lack of jurisdiction on the part of the assessing authority. While the assessee claimed that the failure of the Asst. Commissioner to grant time upto the end of the month tantamounted to a violation of principles of natural justice, the Court disagrees with such contentions. While dealing with the question of violation of natural justice, this Court will normally go by broad parameters. If a SCN has been served and sufficient opportunity has been granted to file objections and if a personal hearing had been granted, then the Court cannot go beyond. This is especially so in cases where the assessee chooses to challenge the original orders of assessment, without availing the alternative remedy of appeal;

++ another objection to the original order of assessment is that in respect of the works carried out outside the State, the ACCT had no jurisdiction. But in support of this contention the assessee ought to have produced pending agreement copies. The other contention that the works executed by the assessee for AMR Constructions and Sushee Infratech Private Limited are in the nature of civil contracts for removal of overburden and that therefore the receipts cannot be considered as hire charges, is an argument that does not go to the root of the issue of jurisdiction. Therefore, this is not a case where this court would have entertained a writ petition as against the original order of assessment, even if the assessee had come up before the filing of a statutory appeal.

(See 2018-TIOL-659-HC-AP-VAT)