Judicial exercise of prepayment discretion in tax appeals: refusal to hear an appeal without payment can itself be appealable.

An appellate authority's discretion to insist on prepayment of disputed tax under a statutory proviso must be exercised judicially, not arbitrarily. Where the assessee had paid the undisputed tax, raised substantial issues, and offered security, refusal to entertain the appeal without considering that discretion was improper. An order declining to receive an appeal unless the disputed tax was paid was treated as an order under the appeal provision because it effectively rejected the memorandum for non-compliance with the payment condition. The appeals should therefore have been entertained on furnishing security, and the refusal was held appealable.

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Issues: (i) Whether an order of the Deputy Commissioner refusing to entertain an appeal unless the disputed tax was paid was appealable under the Mysore Sales Tax Act, 1957. (ii) Whether the refusal to entertain the appeals without payment of the disputed tax was arbitrary or capricious, and whether the appeals should have been entertained on furnishing security.

Issue (i): Whether an order of the Deputy Commissioner refusing to entertain an appeal unless the disputed tax was paid was appealable under the Mysore Sales Tax Act, 1957.

Analysis: The statutory scheme required payment of assessed tax with the appeal, but the proviso to section 20(3) empowered the appellate authority, for recorded reasons, to entertain the appeal without payment on furnishing security or on payment of a smaller sum. An order declining to entertain the appeal without payment was therefore an order made under section 20(3). In substance, it amounted to rejection of the appeal for non-payment of tax along with the memorandum of appeal. Such an order fell within the appellate provision in section 22.

Conclusion: The order was appealable under section 22.

Issue (ii): Whether the refusal to entertain the appeals without payment of the disputed tax was arbitrary or capricious, and whether the appeals should have been entertained on furnishing security.

Analysis: The power under the proviso to section 20(3) was not an unfettered power and had to be exercised judicially. Where the assessee had paid the undisputed tax, raised substantial questions in appeal, and offered security, refusal to entertain the appeal without considering the statutory discretion would be arbitrary. On the facts, the assessee disputed only the penal rate of tax and had produced the C forms with the appeal petitions. The appellate authority ought to have entertained the appeals on security.

Conclusion: The refusal was arbitrary, and the appeals should have been entertained on furnishing security.

Final Conclusion: The revision petitions succeeded, and the appellate authorities were directed to hear the assessee's appeals on compliance with the security requirement.

Ratio Decidendi: An appellate authority's power to insist on prepayment of disputed tax under a statutory proviso must be exercised judicially, and an order refusing to entertain an appeal without payment is itself an appealable order when it effectively rejects the appeal for non-compliance with the payment condition.

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