2014 (1) TMI 1154 - HC - VAT and Sales Tax

Stay application - 75% stay already granted to applicant - Held that - where a statutory appeal has been entertained or admitted for consideration and order impugned is likely to visit the party with civil consequences judicial approach requires that during the pendency of appeal the operation of such order must be suspended in order to avoid undue hardship to the party concerned and to preserve the rights of the parties pending adjudication of the lis - Court should not grant interim relief/stay of the recovery merely by asking of a party. It has to maintain a balance between the rights of an individual and the State so far as the recovery of sovereign dues is concerned. While considering the application for stay/ waiver of a pre-deposit, as required under the law, the Court must apply its mind as to whether the appellant has a strong prima facie case on merit. In case, it is covered by the judgment of a Court/ Tribunal binding upon the Appellate Authority, it should apply its mind as to whether in view of the said judgment, the appellant is likely to succeed on merit, if an appellant have strong prima facie case, is asked to deposit the amount of assessment so made or penalty so levied, it would cause undue hardship to him, though there may be financial restrain on the appellant running in a good financial condition. The argument that appellant is in a position to deposit or if he succeeds in appeal, he will be entitled to get the refund, are not the considerations for deciding the application. The order of the Appellate Authority itself must show that it had applied its mind to the issue raised by the appellant and it has been considered in accordance with law. The expression undue hardship has a wider connotation as it takes within its ambit the case where the assessee is asked to deposit the amount even if he is likely to exonerate from the total liability on disposal of his appeal. Assessee has already got the stay of the demand of 75%. Now, there is no justification to grant further stay in the matter - First Appellate Authority directed to decide the First Appeal within a period of two months from today. Till disposal of the appeal, the status quo, as on today, shall be maintained - Decided in favour of assessee by way of remand.

Summary

Issues:
1. Stay of disputed tax amount pending appeal.
2. Consideration of ITC benefit and VAT tax payment.
3. Applicability of previous judgments on granting stay.

Issue 1: Stay of disputed tax amount pending appeal:
The revisionist filed a Trade Tax Revision against the order of the Commercial Tax Tribunal, which directed the revisionist to deposit 25% of the total amount for the year 2011-12 and stayed only 75% of the VAT tax. The revisionist sought 100% stay of the recovery amount, arguing financial crisis. The High Court considered previous judgments emphasizing the need to suspend the operation of an order causing civil consequences during the appeal to avoid undue hardship. The Court directed the First Appellate Authority to decide the First Appeal within two months and maintained the status quo until appeal disposal.

Issue 2: Consideration of ITC benefit and VAT tax payment:
The revisionist's company engaged in the sale and purchase of Khali from registered dealers. Despite paying VAT tax and claiming Input Tax Credit (ITC), a show-cause notice was served instead of granting ITC benefit. The revisionist contended that they were not informed of the cancellation of a dealer's registration, thus entitled to ITC. The Tribunal imposed 75% stay on the disputed tax amount, leading the revisionist to challenge the order seeking full stay until appeal disposal. The High Court considered the submissions and directed the appellate authority to expedite the appeal process.

Issue 3: Applicability of previous judgments on granting stay:
The High Court referred to previous judgments emphasizing the need for a balanced approach in granting stay of recovery of sovereign dues pending appeal. The Court highlighted the importance of examining the prima facie case and appellate orders before deciding on the stay of disputed tax amounts. The Court stressed that undue hardship to the appellant must be considered, even if financial constraints exist. The standing counsel argued against further stay, citing the existing 75% stay granted. The High Court balanced the arguments and directed the appellate authority to decide the appeal promptly while maintaining the status quo until its disposal.

In conclusion, the High Court disposed of the Trade Tax Revision by directing the appellate authority to decide the appeal promptly and maintaining the status quo until the appeal's conclusion. The judgment highlighted the importance of considering undue hardship to the appellant and balancing the rights of individuals and the state in matters of recovery of sovereign dues pending appeal.