2007 (2) TMI 592 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Issuance of a writ under Article 226 of the Constitution of India.
2. Stay of recovery of tax demand pending appeal.
3. Financial hardship as a consideration for pre-deposit.
4. Legal principles regarding pre-deposit in fiscal statutes.
5. Prima facie case and balance of convenience in granting stay orders.

Issue-wise Detailed Analysis:

1. Issuance of a writ under Article 226 of the Constitution of India:
The petitioner sought a writ to stay the recovery of tax demand under Article 226 of the Constitution of India. The court emphasized that extraordinary powers under Article 226 should not be used to circumvent statutory requirements, including pre-deposit conditions for appeals.

2. Stay of recovery of tax demand pending appeal:
The petitioner argued that the financial condition was poor and that the pre-deposit would cause financial hardship. The Tribunal had modified the initial order, requiring a deposit of Rs. 2 crores instead of Rs. 4.20 crores. The court noted that the Tribunal's decision was reasonable, considering the financial position of the petitioner.

3. Financial hardship as a consideration for pre-deposit:
The petitioner contended that financial hardship should be considered, similar to provisions under Excise and Customs statutes. The court clarified that under the Sales Tax Act and DVAT Act, financial hardship is not a consideration. The requirement is the deposit of disputed amounts as a pre-condition for appeal.

4. Legal principles regarding pre-deposit in fiscal statutes:
The court reiterated that the right to appeal is statutory and can be circumscribed by conditions such as pre-deposit. Citing previous judgments, the court emphasized that pre-deposit conditions are valid and necessary to safeguard public revenue. The court referred to cases like Vijay Power Generators Ltd. v. Commissioner of Sales Tax and Shyam Kishore v. Municipal Corporation of Delhi to support this view.

5. Prima facie case and balance of convenience in granting stay orders:
The court examined whether the petitioner had a prima facie case and whether the balance of convenience favored granting a stay. It was noted that a prima facie case must be evident and compelling to justify waiving pre-deposit. The court found that the petitioner's arguments did not present an irrefutable prima facie case, and thus, the pre-deposit requirement was upheld.

Conclusion:
The court dismissed the writ petition, affirming the necessity of pre-deposit for maintaining appeals under the Sales Tax and DVAT Acts. It highlighted that financial hardship is not a relevant consideration under these statutes, and the balance of convenience and irreparable loss must be assessed carefully. The interim orders were recalled, and the application was dismissed without imposing costs.