2016 (6) TMI 566 - HC - VAT and Sales Tax

Application for stay - Commercial Tax Tribunal, Bench-I, Lucknow granted the interim stay only to the extent of 80% tax directing the appellant to deposit 20% tax during the pendency of first appeal - Held that - In M/s Pennar Industries Ltd. vs. State of A.P. and others 2009 (2) TMI 457 - SUPREME COURT OF INDIA observed that if on cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or even substantive part of the demand and the stay application should not be disposed of in a routine manner unmindful of the consequences. Keeping in view the settled position of law on the point in issue and from the perusal of the appellate order passed by the appellate authority/appellate tribunal thereby passing the impugned orders, the said authorities have not indicated its mind so far as the existence of the prima facie case on merits on appeal as well as the financial condition which are to be considered by them (appellate authority/tribunal) while passing the impugned orders on an application for stay pending in the first appeal. The said mandatory condition is to be taken into consideration while disposing of an application for interim relief moved by the assessee by the appellate authority as well as tribunal during the pendency of appeal. For the foregoing reasons, the present revision is disposed of with a direction to the first appellate authority to decide the appeal filed by the assessee expeditiously say within a period of two months from the date of receiving a certified copy of this order.

Summary

Issues:
1. Application for stay of tax assessment order during appeal process.
2. Discrepancy in interim stay granted by different appellate authorities.
3. Compliance with legal requirements for granting interim relief.
4. Prima facie case on merits and financial conditions to be considered for stay application.
5. Direction for expeditious disposal of appeal and prohibition of coercive measures during the pendency of the appeal.

Analysis:
1. The case involves an application for stay of a tax assessment order during the appeal process. The revisionist challenged the assessment order dated 4.3.2016 for the Assessment Year 2013-14 (U.P.) and filed first and second appeals against the orders granting interim stay of tax payments during the appeal process.

2. Discrepancies arose in the interim stay granted by different appellate authorities. The first appellate authority granted interim stay of 60% of the tax, while the Commercial Tax Tribunal granted interim stay only to the extent of 80% tax, directing the appellant to deposit the remaining 20% during the pendency of the first appeal.

3. The judgment referred to legal requirements for granting interim relief. It emphasized the need for a balance between individual rights and state interests in the recovery of sovereign dues. The court highlighted the importance of considering a strong prima facie case on merit, financial conditions of the appellant, and the mandatory conditions to be taken into account by the appellate authority while disposing of an application for interim relief.

4. The court cited previous judgments to support the requirement of establishing a prima facie case on merits for granting stay of tax payments during the appeal process. It referenced cases where full stay was granted due to clear evidence that disputed tax was not to be charged or paid, and emphasized that demanding full payment without merit could be undesirable.

5. Consequently, the revision was disposed of with a direction for the first appellate authority to expeditiously decide the appeal within two months. Additionally, a prohibition on coercive measures against the assessee was imposed for three months or until the appeal decision, whichever is earlier, to ensure a fair process during the pendency of the appeal.