2014 (4) TMI 495 - HC - VAT and Sales Tax

Disposal of Stay/interim relief - Liability of tax Tax on the sale of SIM cards and on the rentals received on the fixed telephone service Tax under U.P. Tax on Entry of Goods in the Local Area Act, 2007 Held that - Judgment in I.T.C. Ltd. vs. Commissioner (Appeals), Custom & Central Excise, Meerut-I 2003 (10) TMI 70 - HIGH COURT OF JUDICATURE AT ALLAHABAD followed - While considering the application for interim relief, the Court must examine all pros and cons involved in the case and further examine that in case recovery is not stayed, the right of appeal conferred by the legislature and refusal to exercise the discretionary power by the authority to stay/waive the pre-deposit condition would be reduced to nugatory/illusory - Undoubtedly, the interest of the Revenue cannot be jeopardized but that does not mean that in order to protect the interest of the Revenue, the Court or authority should exercise its duty under the law to take into consideration the rights and interest of an individual. Relying upon M/s Pennar Industries Ltd. vs. State of A.P. and others 2009 (2) TMI 457 - SUPREME COURT OF INDIA - SC observed that if on cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or even substantive part of the demand and the stay application should not be disposed of in a routine manner unmindful of the consequences - Appellate authority and Tribunal have not indicated its mind so far as the existence of the prima facie case on merits on appeal as well as the financial condition which are to be considered by them (appellate authority/tribunal) while passing the impugned orders on an application for stay pending in the first appeal - The said mandatory condition is to be taken into consideration while disposing of an application for interim relief moved by the assessee by the appellate authority as well as tribunal during the pendency of appeal - Therefore, revision is disposed of and Remitted back to the first appellate authority to decide the appeal filed by the assessee Decided in favour of Assessee.

Summary

Issues:
Assessment order for the assessment year 2007-08, levied tax on sale of SIM cards and rentals on fixed telephone service creating a huge tax liability. First appeal filed with application for stay. Interim stay granted by appellate authority for 50% tax. Second appeal filed, with Commercial Tax Tribunal granting interim stay for 80% tax. Lack of indication by authorities on prima facie case on merits and financial condition while passing impugned orders.

Analysis:
The judgment dealt with a case involving an assessment order for the assessment year 2007-08, where tax was levied on the sale of SIM cards and rentals on fixed telephone services, leading to a substantial tax liability for the revisionist. The revisionist filed a first appeal along with an application for stay, which was partially granted by the appellate authority, providing an interim stay for 50% of the tax amount. Subsequently, the revisionist filed a second appeal, resulting in the Commercial Tax Tribunal granting an interim stay for 80% of the tax, with a direction to deposit the remaining 20% during the pendency of the first appeal.

The judgment referred to legal precedents to highlight the importance of considering the prima facie case on merits and the financial condition of the appellant while granting interim relief. It cited the case of I.T.C. Ltd. vs. Commissioner (Appeals), emphasizing that undue hardship to the appellant should be a crucial factor in deciding on stay applications. Additionally, the judgment referred to the case of Kribhco Shyam Fertilizers Ltd. vs. Commissioner of Commercial Taxes, where full stay was granted due to clear evidence against charging the disputed tax. The Supreme Court's stance in M/s Pennar Industries Ltd. vs. State of A.P. was also cited, emphasizing the need for a thorough examination before requiring payment of demands.

The judgment concluded by directing the first appellate authority to expedite the decision on the appeal within two months and ordered a stay on coercive measures against the assessee for the said period or until the appellate authority's decision, whichever is earlier. It highlighted the necessity for authorities to consider the prima facie case on merits and the financial condition of the appellant while deciding on applications for interim relief during appeal proceedings.