Prima facie case and undue hardship justified stay of disputed tax recovery pending appeal.

The High Court considered whether recovery of the remaining disputed tax demand should be stayed pending appeal where the assessee raised a strong prima facie case and undue hardship. It noted that the agreement on record and the absence of material showing consideration for transfer supported the contention that there was no transfer of property in the Child Parts and that their value should not form part of taxable turnover. As the Tribunal's partial stay order did not clearly negate prima facie merits, hardship, or balance of convenience, further recovery was restrained for a limited period. The balance demand was stayed for two months or until disposal of the appeal, whichever was earlier, subject to security other than cash or bank guarantee.

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Issues: Whether the balance 30% of the disputed tax demand should be stayed pending disposal of the appeal on the basis of a prima facie case and undue hardship.

Analysis: The challenge concerned inclusion of the value of "Child Parts" in taxable turnover. The agreement on record and the absence of material showing any consideration for transfer supported the view that there was no transfer of property in the Child Parts and that their value should not form part of taxable turnover. The Tribunal's order granting only partial stay did not record any clear finding negating prima facie merits, hardship, or balance of convenience. In the circumstances, and having regard to the need to prevent undue hardship during pendency of the appeal, further recovery was considered unwarranted for a limited period.

Conclusion: The balance 30% of the disputed tax was stayed for two months or until disposal of the appeal, whichever was earlier, subject to the furnishing of security other than cash or bank guarantee; the assessee was otherwise left to pursue the appeal expeditiously.

Ratio Decidendi: Where the assessee shows a strong prima facie case and likely undue hardship, recovery of the disputed demand may be restrained pending appeal to preserve the effectiveness of the appellate remedy.

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