Prima facie case against penalty recovery: full disclosure and no finding of intent to evade tax defeated deposit condition for stay.

Where imported goods were fully disclosed in the assessee's books and those books were accepted in assessment, no inference of tax evasion could be drawn merely because the goods were received without form XXXI. As the penalty order also recorded no finding of intention to evade tax, the assessee had a strong prima facie case against recovery during the appeal. The Tribunal's condition requiring deposit of five per cent of the penalty amount as a precondition for stay was therefore unsustainable, and the recovery condition was set aside with stay granted pending the first appeal.

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Issues: Whether the condition imposed by the Tribunal directing deposit of five per cent of the penalty amount as a precondition for stay of recovery was sustainable where the assessee had disclosed the imported goods in its books of account, the books were accepted in assessment, and no intention to evade tax was recorded.

Analysis: The assessee had shown the imported goods in its books of account and before the assessing authority at the time of assessment, and those books were accepted. In such circumstances, no inference of an attempt to evade tax could be drawn merely because the goods were received without form XXXI. The assessment order imposing penalty also did not record any finding of intention to evade tax. On these facts, the assessee had made out a strong prima facie case for protection against recovery during pendency of the appeal, and the insistence on deposit of five per cent of the penalty amount was unsustainable.

Conclusion: The condition requiring deposit of five per cent of the penalty amount was set aside, and recovery of the penalty was stayed pending disposal of the first appeal. The attached bank account was directed to be released.

Ratio Decidendi: Where the alleged infraction is fully disclosed in the books and accepted at assessment, and no finding of intent to evade tax is recorded, penalty recovery cannot be insisted upon by imposing a deposit condition for stay on a prima facie basis.

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