Prima facie merits and financial hardship govern stay conditions in tax appeals, with partial deposit requirements subject to modification.

In a stay application arising from a statutory appeal under the U.P. Value Added Tax Act, the appellate authority must assess both the prima facie merits of the challenge and the assessee's financial hardship before fixing the deposit condition. Insistence on deposit without adequate consideration of hardship may make the appeal illusory. Applying those principles, the court found the Tribunal had not sufficiently addressed the relevant hardship factors and modified the stay arrangement. During the first appeal, 90% of the disputed tax was kept stayed, 10% was directed to be deposited within one month, and security for the balance was ordered to be furnished to the satisfaction of the assessing authority.

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Issues: Whether, in an interim stay application arising from a statutory appeal under the U.P. Value Added Tax Act, the appellate authority was required to consider the prima facie merits of the case and the assessee's financial hardship while fixing the percentage of disputed tax to be deposited.

Analysis: The revisional jurisdiction was invoked against a Tribunal order that had reduced the stay protection from 70% to 80% of the disputed tax remaining stayed during the appeal, leaving 20% to be deposited. The Court noted that while considering stay or waiver-cum-stay during pendency of a statutory appeal, the appellate authority must examine both the prima facie merits and the financial condition of the applicant, and that insistence on deposit without due regard to hardship may render the right of appeal illusory. On the facts placed before it, the Court found that the Tribunal had not adequately accounted for the relevant hardship factors and that a further modification of the stay arrangement was warranted.

Conclusion: The stay order was modified in favour of the assessee by directing that 90% of the disputed tax remain stayed during the pendency of the first appeal, with 10% to be deposited within one month and security for the balance amount to be furnished to the satisfaction of the assessing authority.

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