2014 (7) TMI 743 - HC - VAT and Sales Tax

Waiver of pre-deposit - Additional Commissioner has granted stay upto 60% of the disputed tax. The applicant not being satisfied with the said order of the Additional Commissioner (Appeals) preferred Second Appeal before the Commercial Tax Tribunal, Lucknow and the same was partly allowed thereby staying 80% of the disputed tax - Held that - 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. Trade Tax Revision is being disposed of by modifying the impugned order dated 28.04.2014 to the extent that if the revisionist deposits 10% of the total demanded tax within a period of one month, the 90% of the demanded tax shall be kept in abeyance till disposal of the appeal. The revisionist is further directed to furnish security of the stayed amount within one month to the satisfaction of the Assessing Authority - Decided partly in favour of assessee.

Summary

Issues:
- Trade Tax Revision against order of Commercial Tax Tribunal
- Interpretation of Central Sales Tax Act
- Granting of stay for disputed tax amount
- Legal principles governing stay of tax demands

Trade Tax Revision against Commercial Tax Tribunal Order:
The Trade Tax Revision was filed against the order of the Commercial Tax Tribunal, Lucknow, directing the applicant to deposit 20% of the total amount for the year 2010-11 and staying 80% of the VAT tax. The applicant, a Public Limited Company engaged in manufacturing motor vehicles, challenged the assessment order contending that the forms required under the Central Sales Tax Act were not filed within the stipulated time. The applicant argued that the transaction between the applicant and the bus body mounters should not be taxed under the Act, citing legal precedents to support their claim.

Interpretation of Central Sales Tax Act:
The assessing authority treated the transaction between the applicant and the bus body mounters as taxable under the Central Sales Tax Act, considering the offices of the applicant at Mumbai and Lucknow as separate entities. The applicant disagreed, citing a Supreme Court decision emphasizing that branch offices and head offices of a firm are not distinct legal entities. The tax liability calculated was substantial, leading to a demand of over &8377;65 crores, of which a significant amount was already deposited by the applicant.

Granting of Stay for Disputed Tax Amount:
The Additional Commissioner (Appeals) had initially granted a stay of 60% of the disputed tax amount, which was increased to 80% by the Commercial Tax Tribunal. The applicant sought a complete stay of the disputed tax amount, arguing that forms could still be filed post-assessment order completion. Legal precedents were cited to support the argument that undue hardship should be avoided, especially if the appellant is likely to be exonerated from the liability.

Legal Principles Governing Stay of Tax Demands:
The High Court considered various legal precedents emphasizing the need to balance the rights of the individual and the state in tax matters. The court highlighted the importance of examining the prima facie case on merits and staying recovery if the appellant has a strong case. The court modified the impugned order, directing the applicant to deposit 10% of the demanded tax within a month, keeping 90% in abeyance till appeal disposal. The applicant was also instructed to furnish security for the stayed amount within a month, with a deadline set for the First Appellate Authority to decide the appeal within three months from the order's receipt.

In conclusion, the Trade Tax Revision was disposed of with the court's directions regarding the deposit, stay, and appeal timeline, considering the legal principles governing tax demands and stays.