2018 (8) TMI 1074 - HC - VAT and Sales Tax

Imposition of pre-condition to grant the stay - Held that - Unless the appellate authority volunteers to offer security, Section 55(4) cannot be invoked. In other words, there ought to be a specific reason mentioned why the appellant should meet the pre-condition of depositing any part of the disputed tax - matter remanded to the appellate authority for its consideration of the stay petition, afresh - appeal allowed by way of remand.

Summary

Issues:
1. Interpretation of Section 55(4) of the KVAT Act regarding the imposition of pre-conditions for granting stay on tax assessment orders.
2. Validity of the appellate authority's decision to impose a pre-condition of depositing 20% of the disputed tax for granting stay.
3. Compliance with the principles laid down in the judgment of Melvin Enterprises v. Assistant Commissioner(Assmt.) regarding stay applications in first appeals.

Analysis:
1. The petitioner, a registered dealer under the KVAT Act, filed statutory appeals and stay petitions after receiving assessment orders for certain years. Facing revenue recovery proceedings, the petitioner approached the High Court through a writ petition seeking relief from the appellate authority's decision. The High Court had previously directed the appellate authority to dispose of the stay petitions promptly.

2. The appellate authority, in its Ext.P5 series orders, granted an interim stay on further proceedings subject to the petitioner remitting 20% of the balance tax due and providing security for the remaining amount. The petitioner challenged this decision through the current writ petition, arguing against the mechanical imposition of the pre-condition of depositing 20% of the disputed tax.

3. The petitioner's counsel contended that the appellate authority acknowledged a prima facie case for granting stay and should not have mechanically imposed the pre-condition. Reference was made to the amended Section 55(4) of the KVAT Act and a previous judgment of the High Court. The Government Pleader, however, argued that the petitioner did not provide sufficient reasons to oppose the pre-condition in the stay petition, just citing financial difficulties.

4. In response, the petitioner's counsel highlighted that the stay petition also included grounds of appeal raising substantial questions on merits. The High Court heard arguments from both sides and referred to a judgment in Melvin Enterprises case, which discussed the interpretation of Section 55(4) and the discretion of appellate authorities in granting stays.

5. The High Court noted that the appellate authority should have provided specific reasons for imposing the pre-condition of depositing any part of the disputed tax, as per the principles outlined in the Melvin Enterprises judgment. As the Ext.P5 order lacked such reasoning, the High Court set it aside and remanded the matter to the appellate authority for fresh consideration of the stay petition.

6. The High Court disposed of the writ petition, directing that coercive steps by the respondent authorities be deferred until the appellate authority makes a new decision on the stay petition, considering the petitioner's contentions and the legal principles discussed in the Melvin Enterprises case.