2007 (11) TMI 577 - HC - VAT and Sales Tax

Exemption under section 8(5) of the CST Act - Held that - The intraocular lenses is exempt from tax and taking note of section 8(2A) of the CST Act, the petitioner has made out a prima facie case, and when the issue is pending before the appellate authority as regards the liability of the petitioner to pay the penalty, it would not be appropriate to impose stringent conditions on the petitioner. Having regard to the submissions that the petitioner has already paid 25 per cent of the disputed tax and complied with the first condition imposed in the conditional order of stay and the financial constraint expressed by the petitioner, it is suffice that the petitioner is directed to offer sufficient security in form of personal bond to the satisfaction of the assessing officer, in respect of the amounts due and payable towards balance of tax at ₹ 1,72,449 and penalty of ₹ 5,17,347, totaling of ₹ 6,89,796 (rupees six lakhs eighty nine thousand seven hundred and ninety six only), within a period of three weeks from today, failing which, the writ petition stands dismissed without further reference to this court.

Summary

Issues:
Challenge to the order of the Appellate Assistant Commissioner granting interim stay of original order of assessment, imposing certain conditions.

Analysis:
The petitioner challenged the order of the Appellate Assistant Commissioner granting interim stay of the original order of assessment, contending that the sale of intraocular lenses falls under an exemption from tax as per the Commissioner's clarification. The petitioner argued that the assessment order itself is contrary to statutory provisions. The appellate authority granted stay subject to conditions, including payment of tax and furnishing security. The petitioner contended that the assessment order is void ab initio due to the exemption and financial constraints prevent offering a bank guarantee. The petitioner sought to quash the conditional order of stay, emphasizing the exemption from tax on the goods sold.

The court considered the objection raised by the petitioner during the assessment, noting that no exemption was granted under the CST Act for inter-State sales of intraocular lenses. The court observed the relevant entry under Part B of the Third Schedule exempting intraocular lenses from tax. Considering the petitioner's compliance with the first condition of payment and financial constraints, the court directed the petitioner to offer sufficient security in the form of a personal bond. The court found that the petitioner had made out a prima facie case, and stringent conditions were not appropriate, given the pending issue before the appellate authority regarding the penalty. The court disposed of the writ petition with the direction to offer a personal bond for the remaining tax and penalty amounts within a specified period, failing which the petition would be dismissed.

In conclusion, the court considered the petitioner's contentions regarding the exemption from tax on intraocular lenses and the financial constraints preventing the offering of a bank guarantee. The court balanced the interests of the petitioner by directing the provision of a personal bond instead of stringent conditions for the stay of the assessment order. The court's decision aimed to address the petitioner's concerns while ensuring compliance with the tax obligations.