2014 (2) TMI 1046 - HC - VAT and Sales Tax

Execution of bank Guarantees for the balance amount of disputed tax - Held that - The petitioner has already deposited 25% of the disputed amount of tax pursuant to the direction given by the Appellate Deputy Commissioner. In addition to the deposit of 25%, the Appellate Deputy Commissioner, directed the petitioner to produce Bank Guarantee for the remaining amount of tax and penalty - This Court has passed several orders on earlier occasions substituting the condition with regard to execution of Bank Guarantee by permitting the concerned appellants to produce personal bonds, undertaking to pay the entire amount , in case the appeal is rejected - The petitioner in these three petitions is also similarly placed and therefore, I am of the view that the petitioner should be permitted to execute personal bonds instead of Bank Guarantees - Decided in favour of assessee.

Summary

Issues:
Challenge to imposition of Bank Guarantee condition during appellate proceedings.

Analysis:
The writ petitions challenged orders imposing a condition to produce Bank Guarantee during the pendency of appellate proceedings against assessment orders. The petitioner, a dealer in electronic goods, received incentives and discounts from suppliers. The dispute arose regarding the reversal of Input Tax Credit (ITC) due to these incentives. The petitioner contended that the ITC was adjusted against output tax payable on sales. The Appellate Deputy Commissioner directed the petitioner to produce Bank Guarantee for the balance tax amount, leading to liquidity issues for the petitioner due to blocked funds in unsold stock.

The petitioner argued that the Appellate Authority erred in not granting a stay on tax payment considering the pending matter before the Supreme Court and failed to consider the dealer's capacity to pay, merits of the case, and the amount involved. The High Court noted previous orders allowing personal bonds instead of Bank Guarantees in similar cases and held that the petitioner should be permitted to execute personal bonds for the disputed tax amounts. The Court modified the impugned orders to allow the execution of personal bonds within two weeks, maintaining the stay on tax payment till the appeal's disposal.

In conclusion, the High Court disposed of the writ petitions, directing the petitioner to execute personal bonds in place of Bank Guarantees for the disputed tax amounts. The Court emphasized the need to consider the dealer's financial constraints and permitted personal bonds as a suitable alternative to meet the security requirement during the appellate proceedings.