Pre-deposit in stay matters must consider debatable liability, penalty inclusion, and financial hardship before fixing the deposit amount.

A stay application for assessment demand must consider both the nature of the disputed liability and the taxpayer's financial hardship. Where the underlying issue is debatable, penalty should ordinarily not be included in the deposit condition unless strong prima facie reasons justify it. The Tribunal also had to assess hardship before fixing the quantum of pre-deposit. Because the order directing deposit of 30 per cent of the dues, including penalty, was made without adequate consideration of these factors, it was set aside and the matter remanded for fresh consideration.

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Issues: Whether the Tribunal was justified in directing deposit of 30 per cent of the disputed dues, including penalty, while considering the stay application, and whether it failed to consider the plea of financial hardship.

Analysis: The dispute arose at the stage of stay of assessment demand under the relevant tax statute. The deposit direction included the penalty amount, although the underlying issue was stated to be debatable. In such a case, penalty should ordinarily not be included while fixing the deposit condition unless strong prima facie reasons justify insisting on it. The Tribunal also did not consider the plea of financial hardship before imposing the deposit condition, even though that factor is relevant in deciding the quantum of deposit for stay.

Conclusion: The order directing deposit of 30 per cent of the dues could not be sustained in its existing form and had to be set aside and reconsidered afresh by the Tribunal.

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