Stay of recovery cannot be made conditional on part payment where the dispute is debatable and no fraud is shown.

The Bombay High Court held that requiring part payment as a condition for continuation of stay of recovery was unnecessary where the petitioner, a Government of India undertaking, showed no prima facie intent to defraud revenue and there was no allegation of collusion with the fishermen societies. The dispute over denial of exemption was itself treated as debatable, and the Court also noted the substantial tax already paid and the prolonged pendency of the matter. The condition of part payment was therefore set aside, and stay of recovery was directed to continue without any part-payment condition pending disposal of the revision application.

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Issues: Whether the condition requiring payment of Rs. 8 lacs for continuation of stay of the recovery order pending revision was justified.

Analysis: The petitioner, a Government of India undertaking, was found not to have any prima facie intent to defraud the revenue. The denial of exemption arose from alleged defects in the fishermen societies' A forms and absence of licence on their part, with no allegation of collusion between the petitioner and those societies. The Tribunal itself had described the controversy as debatable. In the circumstances, and having regard to the large tax already paid for the assessment year and the prolonged pendency of the dispute, the demand of part payment as a condition for stay was held to be unnecessary. The Court also indicated that the statutory remedy, if any, would lie against the fishermen societies under section 7A(2) of the Act.

Conclusion: The condition of payment of Rs. 8 lacs for stay was set aside and the stay of recovery was directed to continue without any part-payment condition pending disposal of the revision application.

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