Cannanore County Club And Resorts PVT. LTD vs. The Assistant Commissioner Of State Tax

Facts

The appellant, Cannanore County Club and Resorts Pvt. Ltd., challenged an order dated 17.08.2019 by the Deputy Commissioner (Appeals), SGST Department, Kozhikode. The appellant filed a stay petition before the Appellate Tribunal, which granted a stay on recovery of the disputed amount. However, the stay was conditional upon the appellant depositing 30% of the modified demand and furnishing a simple bond for the balance within one month from 14.02.2020. The appellant challenged this 30% deposit condition in a writ petition. The learned Single Judge disposed of the writ petition with liberty to approach the Tribunal for instalments. Aggrieved, the appellant filed this Writ Appeal.

Held

The Court held that the Appellate Tribunal had rightly exercised its discretion in granting the stay and imposing a reasonable condition. While initially inclined not to interfere under Article 227 of the Constitution, the Court considered the appellant's claim of substantial financial loss. Consequently, the Court modified the condition imposed by the Tribunal. The recovery proceedings were stayed until the disposal of the appeal, subject to the appellant depositing 30% of the modified demand in three equal instalments, with the first instalment due by 30th April 2021. The appellant was also required to furnish a simple bond for the balance amount by the same date. The Court stipulated that failure to pay any instalment would result in the vacation of the stay. The ratio decidendi is that while the discretion of the Tribunal in imposing conditions for stay is to be respected, it can be modified by the High Court in writ proceedings if the appellant demonstrates substantial financial hardship and the condition appears unreasonable.

Key Issues

1. Whether the condition imposed by the Appellate Tribunal for depositing 30% of the modified demand as a pre-condition for granting stay of recovery is arbitrary and unreasonable, considering the appellant's stated financial difficulties? Petitioner's arguments: The appellant argued that while the Tribunal was right in granting a stay, the imposition of a 30% deposit was unreasonable and ignored their stated financial difficulties. They contended that this condition should be deleted entirely or replaced with a more reasonable condition to demonstrate their bona fides. Revenue's arguments: The Senior Government Pleader opposed the prayer, arguing that the appellant's stated circumstances were irrelevant to the imposition of the 30% deposit condition. They contended that interfering with such conditions would adversely affect tax recovery in all pending matters. Without conceding, the Revenue indicated that if the Court found the appellant's reasons compelling, instalments could be granted for the 30% deposit.