By TIOL News Service

MUMBAI, NOV 13, 2018: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether an inability to pay the amount directed for stay of the demand order on account of financial difficulty, should not result in the appeal itself becoming infructuous. YES IS THE VERDICT.

Facts of the case:

As per the assessment order, an aggregate amount of Rs.90.82 crores including tax & interest, was declared as recoverable from the assessees. Challenging the same, the assessee approached the FAA, who granted a stay till disposal of the appeal, on payment at Rs.12.69 crores out of the aggregate amount of Rs.90.82 crores. The FAA's direction was found on the basis that if the assessee had paid entry tax, then it would have been entitled to set off the same while making payment of VAT on the sale of its final goods. Thus, resulting in loss to the Revenue of Rs.12.69 crores in the aggregate i.e. Rs.9.11 crores of tax amount plus Rs.3.58 crores towards interest. On the said facts, the Tribunal found granting stay of assessment order on payment of Rs.12.69 crores reasonable. This confirmation order of ITAT had been challenged under present petition contending that it was a non-speaking order.

High Court held that,

++ it is found that the Tribunal has noted that it would require deeper consideration at final hearing and had factored in the same while holding that the payment of Rs.12.69 crores out of a confirmed demand of Rs.90.82 crores was reasonable. Thus, there is no merit in the submission of assessee that their contentions were not considered by the Tribunal. However, so far as submission viz. financial hardship making it impossible to deposit an amount of Rs.12.69 crores is concerned, it is noted that the order does record such submission. In fact, the assessee had already deposited an amount of Rs.2.69 crores out of Rs.12.69 crores as directed by the FAA but was finding it impossible to pay the balance amount of Rs.10 crores for the subject assessment year. However, after recording the submission, it is found that the Tribunal's order does not deal with the same while upholding the order of the FAA. Therefore, the submission of financial hardship urged by the assessee is not at all considered by the Tribunal;

++ an inability to pay the amount directed for stay of the demand order on account of financial difficulty should not result in the appeal itself becoming infructuous. This as the recovery proceedings should not result in the assessee's business coming to an end. The said submission has to be counter balanced by the fact that the Revenue should not loose the tax in its entirety merely because of the delay in recovering the same if in view of financial difficulty, the lapse of time may result in the business itself winding up. However, these are the issues which the order of the Tribunal should have addressed and taken a view while disposing of the assessee's appeal from the order of the FAA directing a deposit of Rs.12.69 crores. Therefore, the order of Tribunal is set aside only to the extent it has not dealt with assessee's contention with regard to financial hardship.

(See 2018-TIOL-2389-HC-MUM-VAT)