Interim stay security modified: personal bond accepted in place of bank guarantee on a prima facie exemption claim.

An interim stay condition requiring a bank guarantee for the balance demand was treated as unduly onerous where the assessee showed a prima facie exemption claim for intra-State sales and consequent non-taxability of inter-State turnover under section 8(2A) of the Central Sales Tax Act, along with financial hardship. The court accepted that the assessee had already complied with part of the stay condition and found a personal bond to be adequate substitute security. The bank guarantee requirement was therefore modified to permit furnishing of a personal bond for the balance tax and penalty.

---

---

Issues: Whether the condition imposed while granting interim stay of the assessment order, namely furnishing bank guarantee for the balance demand, required modification to permit furnishing of personal bond in view of the assessee's prima facie case and financial constraint.

Analysis: The dispute arose from the assessee's claim that intraocular lenses were exempt from tax under the State sales tax regime and that, by operation of section 8(2A) of the Central Sales Tax Act, 1956, the inter-State turnover also could not be subjected to tax in the absence of a contrary notification. The appellate authority had granted stay but insisted on payment of a part of the demand and bank guarantee for the balance. The writ court treated the exemption claim as sufficient to show a prima facie case at the interim stage, noted that the assessee had already complied with part of the condition, and took into account the pleaded financial difficulty. On that basis, the court found the requirement of bank guarantee to be unnecessarily stringent and considered personal bond to be an adequate substitute security.

Conclusion: The condition of furnishing bank guarantee was modified and the assessee was permitted to furnish personal bond instead for the balance amount of tax and penalty.

---