Interim stay on disputed tax recovery may protect the effectiveness of pending appeals against coercive collection

Where disputed tax demands are under appellate challenge, interim protection may be granted to preserve the effectiveness of the appeal if coercive recovery would defeat the remedy. The Court did not decide the vires challenge to section 33(8) of the Haryana Value Added Tax Act, 2003, but on the facts noted the long pendency of the appeals and the pursuit of substantial recovery. It held that deposit of tax was not a condition precedent to hearing the appeals on merits, yet the ends of justice required that recovery remain stayed while the appellate proceedings continued.

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Issues: Whether recovery of the disputed tax demand should remain stayed during the pendency of the appeals, in view of the appellate authority's inability to grant stay under section 33(8) of the Haryana Value Added Tax Act, 2003.

Analysis: The petitions were not decided on the vires challenge to section 33(8). Instead, on the peculiar facts, the Court noted that the appeals had remained pending and that substantial demands were being pursued for recovery despite the dispute being under appellate consideration. The Court held that, even though deposit of tax was not a condition precedent for hearing the appeal on merits, the ends of justice required protection against coercive recovery while the appellate proceedings continued.

Conclusion: Recovery of the disputed tax was ordered to remain stayed during the pendency of the appeals, in favour of the assessee.

Ratio Decidendi: Where disputed tax demands are under appellate challenge and the circumstances show that coercive recovery would defeat the effective remedy of appeal, the Court may grant interim protection to preserve the appeal's efficacy.

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