2017 (4) TMI 1071 - HC - VAT and Sales Tax

Initiation of recovery proceedings pending appeal and stay petitions - sub-section (4) of Section 55 of the KVAT Act, 2003 - Held that - the statute itself provides for a blanket stay on deposit of 20% of disputed amount of tax along with collected tax. The first appellate authorities then cannot go beyond the 20% as indicated in the proviso - the appellate authorities would consider the stay petitions in accordance with the proviso and the directions hereinabove, and pass orders within a period of two months, in which period the recovery proceedings would be kept in abeyance - petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Stay of recovery pending appeal under new proviso to Section 55(4) of the KVAT Act.
2. Compliance with proviso at the time of filing appeal.
3. Discretion of first appellate authorities in stay applications prior to the new proviso.
4. Implications of the new proviso on the powers of first appellate authorities.
5. Directions for appellate authorities regarding stay petitions and recovery proceedings.

Analysis:
1. The judgment addresses writ petitions where recovery proceedings were initiated pending appeal against assessment orders. The petitioners contested the initiation of recovery proceedings despite pending appeals and stay petitions.

2. The Government Pleader highlighted a new proviso in Section 55(4) of the KVAT Act, allowing a blanket stay of recovery if 20% of the disputed tax amount is paid. The proviso aims to reduce litigations and ease the burden on first appellate authorities.

3. The Government Pleader argued that the option to avail of the proviso must be exercised at the time of filing the appeal and not later. Compliance with the directions of the first appellate authority, even beyond the 20% payment, was emphasized.

4. The Court rejected the argument that the 20% payment must be made before filing the appeal, stating that the proviso mandates a stay of recovery until the appeal's disposal upon payment of the required amount. The assessee can exercise this option at any point.

5. The judgment discussed how the introduction of the proviso changes the consideration for stay applications in first appeals. The first appellate authorities are now bound by the 20% payment provision and cannot exceed this limit unless warranted by the merits of the case.

6. The Court clarified that the first appellate authorities must consider the merits of the matter to decide if further reduction from the 20% payment is justified. If not, the authorities can direct the deposit of the full 20% tax demanded for the stay.

7. The judgment directed the appellate authorities to consider stay petitions in line with the proviso and issue orders within two months. Recovery proceedings should be halted during this period, with further recovery based on the appellate authorities' orders. The petitioners were instructed to provide certified copies of the judgment, and the Government Pleader was tasked with forwarding the judgment to the Commissioner of Commercial Taxes.