2021 (5) TMI 126 - HC - VAT and Sales Tax

Validity of assessment order - application for interim protection - HELD THAT - The basis for decision in an application for interim protection would be the trifecta of whether there is a prima facie case, financial stringency and balance of convenience for grant of orders. The applications for stay filed by the petitioner are detailed and seeks to make out a case on the aspect of prima facie case as well as on balance of convenience citing the automatic charge created by virtue of Section 42 of the Act. As far as financial stringency is concerned, there is no quarrel on the position that the petitioner has sufficient resources to meet the liability, if and when such liability becomes confirmed and demand is raised. The first appellate authority proceeds to pass a rather mechanical order calling upon the petitioner to remit a further 25% of tax and furnish a bank guarantee for the balance. This is akin to orders that are routinely passed in stay applications and ought not to be passed, as a matter of rote. The impugned orders are set aside - Petition disposed off.

Summary

Issues:
Challenging orders passed by Joint Commissioner (CT)(Appeals) in stay applications under Tamil Nadu Value Added Tax Act, 2006 for the periods 2012-13 and 2013-14.

Analysis:
The petitioner challenged the orders passed by the Joint Commissioner (CT)(Appeals) regarding stay applications filed during the pendency of first appeals against assessment orders under the Tamil Nadu Value Added Tax Act, 2006. The petitioner had previously filed Writ Petitions related to the same assessment orders, which were disposed of by the court, directing the petitioner to pursue statutory appeals. Subsequently, the petitioner filed appeals along with stay applications, which were the subject matter of the present judgment. The court noted that the impugned orders were non-speaking and lacked reasoning regarding the decision-making process for granting interim protection. The petitioner had argued on the aspects of prima facie case and balance of convenience, citing the automatic charge created by Section 42 of the Act.

The petitioner relied on a Supreme Court judgment regarding the availment of Input Tax Credit (ITC) and its pro-rata applicability in cases where only a part of the manufactured product was taxable. Financial stringency was also discussed, with acknowledgment that the petitioner had sufficient resources to meet any confirmed liability. The court emphasized the importance of the three factors - prima facie case, financial stringency, and balance of convenience - in deciding on stay applications. It was noted that the first appellate authority did not provide a detailed reasoning for the decision, instead opting for a mechanical order requiring the petitioner to remit further tax and furnish a bank guarantee. This approach was deemed inadequate, and the impugned orders were set aside.

The court directed that fresh orders be passed on the stay applications within four weeks, allowing the petitioner to be heard before any recovery proceedings are initiated. The judgment concluded by disposing of the Writ Petitions in the aforementioned terms, without imposing any costs.