Interim stay of tax recovery depends on a strong prima facie case and adequate revenue protection; recovery orders were withdrawn.

Interim stay of tax recovery pending appeal may be granted where the assessee shows a strong prima facie case and provides adequate protection for the revenue. The Delhi HC found that additional material bearing on the merits had been placed before the appellate forum, while an affidavit-based undertaking and security were sufficient to safeguard the revenue during adjudication. It therefore set aside the Tribunal's refusal to stay recovery and directed fresh reconsideration of the stay application. Pending that reconsideration or disposal of the appeal, garnishee-style recovery steps under section 226(3) were ordered to be withdrawn forthwith.

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Issues: (i) Whether the Tribunal's refusal to grant stay of recovery pending appeal required interference and fresh consideration of the stay application; (ii) whether the recovery steps under section 226(3) were liable to be withdrawn pending disposal of the stay application and appeal.

Issue (i): Whether the Tribunal's refusal to grant stay of recovery pending appeal required interference and fresh consideration of the stay application.

Analysis: The governing consideration for stay of recovery is the existence of a strong prima facie case, coupled with protection of the revenue's interest. The petitioner placed additional documents showing that material relevant to the merits was available before the appellate authority, though not before the Tribunal. The petitioner also offered security through an affidavit undertaking, which was accepted as sufficient protection for the revenue pending adjudication.

Conclusion: The Tribunal's order refusing stay was set aside and the stay application was directed to be reconsidered afresh.

Issue (ii): Whether the recovery steps under section 226(3) were liable to be withdrawn pending disposal of the stay application and appeal.

Analysis: Since recovery was to remain stayed until the Tribunal passed orders on the stay application or disposed of the appeal, the existing garnishee-type recovery directions could not continue consistently with that interim protection.

Conclusion: The orders under section 226(3) were directed to be withdrawn forthwith.

Final Conclusion: The petitioner obtained interim protection against recovery, the adverse stay order was set aside, the stay application was remitted for fresh consideration, and the revenue's interests were safeguarded by the accepted undertaking and security restraint.

Ratio Decidendi: Interim stay of tax recovery may be granted or continued where a strong prima facie case is shown and the revenue's interest is protected by an adequate security undertaking.

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