Conditional interim relief in tax proceedings: declaration forms, stay of revisional action, and revenue protection through security.

Conditional interim protection may be granted in tax matters where cancellation of registration is prima facie doubtful, no prior hearing was given, and refusal of declaration forms follows from that cancellation. The court may also stay pending revisional proceedings where allegations of mala fides against the same officer are not effectively denied, while allowing reassignment to another officer of the prescribed rank. To balance business hardship and revenue protection, declaration forms may be directed to issue only on cash deposit or bank guarantee covering the forms and the possible tax liability on disputed sales.

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Issues: (i) whether the petitioners had made out a prima facie case and balance of convenience for interim relief against the cancellation of registration and refusal of declaration forms; (ii) whether the pending revisional proceedings should be stayed and whether the respondents could be restrained from proceeding through the same officer alleged to have acted with mala fides; (iii) whether declaration forms should be directed to be issued pending the appeal on terms protecting the revenue.

Issue (i): Whether the petitioners had made out a prima facie case and balance of convenience for interim relief against the cancellation of registration and refusal of declaration forms.

Analysis: The cancellation of registration was founded on alleged discontinuance of business under section 7(6)(a) of the Bengal Finance (Sales Tax) Act, 1941, but the circumstances relied upon were not free from doubt. No opportunity of hearing had been given before cancellation, and the refusal of declaration forms flowed solely from that cancellation. The ground adopted for refusal was also not shown to be within the relevant rule governing refusal of declaration forms. In these circumstances, arguable issues existed and a prima facie case was established.

Conclusion: The issue was decided in favour of the petitioners.

Issue (ii): Whether the pending revisional proceedings should be stayed and whether the respondents could be restrained from proceeding through the same officer alleged to have acted with mala fides.

Analysis: The revisional proceedings had remained pending for an extended period, and the allegations of mala fides against the concerned revisional authority were not met by any effective denial. To preserve fairness and avoid the appearance of bias, the proceedings were ordered to remain stayed during the appeal, while preserving liberty for another officer of the prescribed rank to proceed under the relevant rule.

Conclusion: The issue was decided in favour of the petitioners to the extent of granting a stay, with liberty for reassignment of the matter.

Issue (iii): Whether declaration forms should be directed to be issued pending the appeal on terms protecting the revenue.

Analysis: The business was effectively stalled by non-availability of declaration forms, but the revenue's interest required protection because the underlying transactions were suspected to involve tax liability. The Court therefore balanced both sides by directing issuance of declaration forms only against cash deposit or bank guarantee for the value of the declarations and an additional deposit or bank guarantee for the possible tax liability on the disputed sales.

Conclusion: The issue was decided in favour of the petitioners subject to protective conditions in favour of the revenue.

Final Conclusion: Interim relief was granted in a limited form: declaration forms were to be issued on security, the revisional proceedings were stayed with a safeguard against the allegedly biased officer, and the impugned order was stayed to that extent.

Ratio Decidendi: For interim relief in tax matters, a court may grant conditional protection where the impugned action is prima facie doubtful, no prior hearing was given, the refusal of statutory forms is consequential upon that action, and the revenue's interest can be secured by deposit or bank guarantee; allegations of mala fides may justify staying proceedings before the same officer while permitting reassignment.

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