2021 (3) TMI 792 - HC - VAT and Sales Tax

Rejection of request for absolute stay of the demands of tax, interest and penalty arising out of assessments framed in terms of the provisions of the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT - A perusal of the impugned order reveals the three vital aspects to be looked into while disposing stay applications, i) prima facie case, ii) financial stringency and iii) balance of convenience, have not been adverted to. Financial soundness of this petitioner is not in question and the balance of convenience can be ascertained only after examination of whether a prima facie case has been made out. The impugned order must be set aside for nonapplication of mind, to be re-done de novo after hearing the petitioner. For this purpose, the petitioner will appear before the first respondent on Wednesday, the 10 th of March, 2021 at 10.30 a.m. without expecting any further notice in this regard, along with supporting materials, if any, in support of its request for stay. Upon hearing the petitioner and considering materials, if any that may be filed, orders will be passed within a period of four (4) weeks thereafter, ie., on or before 09.04.2021 - Petition allowed.

Summary

Issues:
Challenge to interim orders rejecting absolute stay of tax demands under Tamil Nadu Value Added Tax Act, 2006 for 2011-12 to 2015-16.

Analysis:
The Writ Petitions challenged interim orders by the first respondent rejecting absolute stay of tax demands under the Tamil Nadu Value Added Tax Act, 2006 for the periods 2011-12 to 2015-16. The petitioner had pending first appeals against the assessments and had filed stay applications based on the prima facie case believed to be held and the grounds of appeal challenging the assessment orders. The first respondent, in rejecting the stay applications, referred to relevant case laws emphasizing that interim orders should not be granted solely on a prima facie case being shown. The first respondent directed the petitioner to remit a further 25% of the disputed tax and furnish a security bond or bank guarantee for the remaining tax and penalty within a specified time.

The petitioner argued that the impugned directions were fair and reduced the tax deposit amount, claiming no legal infirmity in the decision. However, the petitioner relied on a Supreme Court judgment in a similar case involving a Public Sector Undertaking (PSU) to support their position. This judgment highlighted the financial stability of the PSU and its commitment to pay the tax due if the statutory appeals failed. The petitioner contended that this judgment should apply to their case as well.

The court noted that the impugned order did not consider key aspects like prima facie case, financial stringency, and balance of convenience. It was observed that the financial stability of the petitioner was not in question, and the balance of convenience could only be determined after establishing a prima facie case. The court concluded that the impugned order lacked proper consideration and needed to be set aside for a fresh review. The petitioner was directed to appear before the first respondent to present their case and supporting materials for a reevaluation. The first respondent was instructed to pass orders within four weeks after the hearing, ensuring a fair and thorough reconsideration of the stay application.

In conclusion, the court disposed of the Writ Petitions with the direction for a fresh review of the stay application, emphasizing the importance of considering all relevant factors and ensuring a fair decision-making process. No costs were awarded, and connected Miscellaneous Petitions were closed.