2004 (6) TMI 604 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the High Court has the power to grant interim stay of recovery of tax pending disposal of a revision petition filed under section 23(1) of the Karnataka Sales Tax Act, 1957.

Issue-wise Detailed Analysis:

1. Power to Grant Interim Stay:
The primary issue referred to the Full Bench was whether the High Court has the power to grant an interim stay of recovery of tax pending the disposal of a revision petition under section 23(1) of the Karnataka Sales Tax Act, 1957. The petitioner sought a stay of recovery of the disputed tax amount, which the State opposed, arguing that the High Court lacks inherent power to grant interim orders in such cases.

Facts and Reason for Reference:
The petitioner challenged an order by the Karnataka Appellate Tribunal and filed for interim stay of tax recovery. The State contended that the High Court has no inherent power to grant such interim orders under sections 23 and 24 of the Act, citing the decision in M.E.C. Wires v. State of Karnataka [1999] 113 STC 391 (Karn).

Division Bench's View:
The division Bench questioned the decision in M.E.C. Wires, highlighting several reasons for reconsideration:
- Denial of interim stay could cause irreparable injury if the assessee is ultimately found not liable.
- The revisional power of the High Court includes incidental and ancillary powers necessary for effective exercise of such power, including granting interim stay.
- Section 23(6) does not prohibit the grant of interim stay.
- Previous decisions cited in M.E.C. Wires were based on differently worded statutes and were not applicable.

Rival Contentions:
The assessee's counsel argued that in the absence of an express prohibition, the High Court has inherent power to grant interim stay. The Government Advocate contended that inherent power cannot expand the court's jurisdiction and that the absence of a specific provision for stay indicates legislative intent against it.

Statutory Provisions:
Section 23(1) allows revision petitions to the High Court on questions of law. Section 23(6) mandates tax payment despite a pending revision petition but does not bar interim stay. Section 13(3) implies the possibility of interim orders by stating that no recovery proceedings shall continue if the revising authority has made an order regarding tax payment.

Analysis:
The court analyzed the concept of "inherent power," defined as necessary for the efficient exercise of jurisdiction. Supreme Court precedents (Manohar Lal Chopra, Arjun Singh, and Ram Chand) established that inherent power cannot conflict with express statutory provisions. The court referred to the Supreme Court's decision in Mohammed Kunhi, which held that appellate jurisdiction includes the incidental power to grant stay, and Bansi Dhar, which distinguished between appellate/revisional and advisory jurisdictions.

Conclusion:
The Full Bench concluded that the High Court has the inherent or incidental power to grant interim stay pending disposal of a revision petition under section 23 or an appeal under section 24. This power is not barred by section 23(6), which only prevents automatic stay upon filing a revision. The proviso to section 13(3) further supports the High Court's power to grant interim stay.

Other High Court Decisions:
The court reviewed decisions from Delhi, Bombay, and Andhra Pradesh High Courts, which recognized the incidental power to grant stay but were constrained by express statutory bars in their respective statutes. The Karnataka Act lacks such a bar, supporting the High Court's power to grant stay.

Final Judgment:
The Full Bench overruled M.E.C. Wires, holding that the High Court has the power to grant interim stay during the pendency of a revision petition under section 23 or an appeal under section 24 of the Karnataka Sales Tax Act, 1957. The High Court should exercise this power judiciously, imposing appropriate terms and conditions based on the case's specifics. The matter was remitted to the appropriate division Bench for further orders.