Pragati Enterprises vs Union of India & The State of Bihar

The Patna High Court has just made a crucial ruling in the Pragati Enterprises vs Union of India & The State of Bihar case. Let’s unpack what happened and why it matters. 

The Petitioner appealed against a tax order but hit a roadblock – the Appellate Tribunal under the Bihar Goods and Services Tax Act (B.G.S.T. Act) hadn’t been constituted yet. A catch-22 situation! 

As a result, the Petitioner couldn’t avail the stay on recovery of balance tax amount – a right granted under Section 112 (8) & (9) of the B.G.S.T. Act. State authorities acknowledged the issue and issued a notification to address it. 

The Patna High Court provided significant relief. They ruled that the Petitioner must deposit an additional 20% of the remaining disputed tax to get the statutory stay benefit under Section 112 of the B.G.S.T. Act.

The Court clarified this relief isn’t open-ended. 

The Petitioner will be required to file an appeal under Section 112 of the B.G.S.T. Act once the Tribunal is constituted and functional. 

The Court also added a caveat: if the petitioner doesn’t file the appeal within a certain period post-Tribunal constitution, the respondent authorities can proceed according to the law. 

This case underscores the judiciary’s role in balancing justice, equity, and operational practicalities of law. A landmark case that addresses the procedural challenges in the implementation of tax laws.

The instant writ petition has been filed under Article 226 of the Constitution of India seeking multifarious reliefs. 

The petitioner essentially is desirous of availing statutory remedy of appeal against the impugned order before the Appellate Tribunal (hereinafter referred to as “Tribunal”) under Section 112 of the Bihar Goods and Services Tax Act (hereinafter referred to as “B.G.S.T. Act”). 

However, due to non-constitution of the Tribunal, the petitioner is deprived of his statutory remedy under sub-section (8) and sub-section (9) of Section 112 of the B.G.S.T. Act. 

Under the circumstances, the petitioner is also prevented from availing the benefit of stay of recovery of balance amount of tax in terms of Section 112 (8) and (9) of the B.G.S.T Act upon deposit of the amounts as contemplated under sub-section (8) of Section 112. 

The respondent State authorities have acknowledged the fact of non-constitution of the Tribunal and come out with a notification bearing Order No. 09/2019-State Tax, S. O. 399, dated 11.12.2019 for removal of difficulties, in exercise of powers under Section 172 of the B.G.S.T Act, which provides that period of limitation for the purpose of preferring an appeal before the Tribunal under Section 112 shall start only after the date on which the President, or the State President, as the case may be, of the Tribunal after its constitution under Section 109 of the B.G.S.T Act, enters office. 

This Court is, therefore, inclined to dispose of the instant writ petition in the following terms:-

(i) Subject to deposit of a sum equal to 20 percent of the remaining amount of tax in dispute, if not already deposited, in addition to the amount deposited earlier under sub-section (6) of Section 107 of the B.G.S.T. Act, the petitioner must be extended the statutory benefit of stay under sub-section (9) of Section 112 of the B.G.S.T. Act. The petitioner cannot be deprived of the benefit, due to non- constitution of the Tribunal by the respondents themselves. The recovery of balance amount, and any steps that may have been taken in this regard, will thus be deemed to be stayed. It is not in dispute that similar relief has been granted by this Court in the case of SAJ Food Products Pvt. Ltd. vs. The State of Bihar & Others in C.W.J.C. No. 15465 of 2022. 

(ii) The statutory relief of stay, on deposit of the statutory amount, however in the opinion of this Court, cannot be open ended. For balancing the equities, therefore, the Court is of the opinion that since order is being passed due to nonconstitution of the Tribunal by the respondent- Authorities, the petitioner would be required to present/file his appeal under Section 112 of the B.G.S.T. Act, once the Tribunal is constituted and made functional and the President or the State President may enter office. The appeal would be required to be filed observing the statutory requirements after coming into existence of the Tribunal, for facilitating consideration of the appeal. 

(iii) In case the petitioner chooses not to avail the remedy of appeal by filing any appeal under Section 112 of the B.G.S.T. Act before the Tribunal within the period which may be specified upon constitution of the Tribunal, the respondent- Authorities would be at liberty to proceed further in the matter, in accordance with law.

With the above liberty, observation and directions, the writ petition stands disposed of.

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