2018 (9) TMI 298 - HC - VAT and Sales Tax

Furnishing an irrevocable Bank Guarantee for the outstanding amount - Stay against the recovery of the alleged amount due sought - Section 62(4)(c)(i) of the KVAT Act - Held that - Where Appellate Authority considers an application for an interim relief and decides to stay the payment of the alleged due amount, then it can give a stay only for 70% of the tax alleged to be due and the remaining 30% has to be paid by the appellant before it - Sub Section (i) of Section 62(4)(c) of the K.V. Act does not specifically mention that the Appellate Authority while granting stay of the impugned order for the remaining 70% of the alleged tax due can also call for the appellant to furnish any security including the Bank Guarantee for the said sum. Admittedly, the application filed by the petitioner herein before respondent No.2 as an appellant was not pending beyond a period of 30 days and that there was no deemed grant of an interim order of stay. As such, it is Section 62(4)(c)(i) of the K.V.A.T. Act is applicable, which does not specifically mention about furnishing of Bank Guarantee or other security for the remaining sum of 70% - requirement of furnishing of Bank Guarantee set aside - petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Appeal under Section 62 of the Karnataka Value Added Tax Act, 2003 challenging reassessment order.
2. Application seeking stay against recovery of alleged amount due.
3. Interim stay order issued by the authority with conditions.
4. Interpretation of Section 62(4)(c) of the K.V.A.T. Act regarding the requirement of Bank Guarantee.
5. Argument on the authority's power to demand security under the Act.
6. Decision on setting aside the condition of furnishing a Bank Guarantee.

Analysis:
The petitioner-company filed an appeal challenging a reassessment order under the Karnataka Value Added Tax Act, 2003. The appeal sought a stay against the recovery of an alleged amount due, with the petitioner providing proof of partial payment. The Joint Commissioner of Commercial Taxes granted an interim stay on the balance amount, requiring the petitioner to furnish a Bank Guarantee for the outstanding sum within 15 days. The petitioner contended that the authority could not demand a Bank Guarantee based on Section 62(4)(c) of the Act, which only specifies the payment percentages without mentioning security requirements.

The Court analyzed Section 62(4)(c) of the K.V.A.T. Act, noting that while the provision allows for a stay of 70% of the alleged tax due, it does not explicitly empower the authority to request security like a Bank Guarantee for the remaining 30%. The Court considered the absence of such a requirement in the relevant section and the specific circumstances of the case where the application for stay was not pending beyond 30 days. Consequently, the Court found that the provision did not support the authority's imposition of a Bank Guarantee condition and ruled in favor of the petitioner, setting aside the requirement for a Bank Guarantee.

In conclusion, the Court allowed the writ petition, determining that the condition imposed by the authority for furnishing a Bank Guarantee was not in accordance with Section 62(4)(c) of the K.V.A.T. Act. The judgment clarified the limitations on the authority's power to demand security in such cases, emphasizing the statutory provisions governing the payment and stay requirements under the Act.