Interim stay of tax recovery may be granted when the demand rests on an overruled precedent and a strong prima facie case exists.

Interim recovery of a tax demand pending statutory appeal may be stayed where the assessment rests exclusively on a precedent later overruled by a Constitution Bench and the assessee shows a strong prima facie case. The dispute concerned a composite works contract involving supply and installation of lifts, and the demand had been sustained only on the basis of the overruled view treating the transaction as a sale contract. In these circumstances, the court found that insisting on deposit would cause undue hardship and granted complete stay of recovery of the disputed demand until the appeal is decided.

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Issues: Whether the revisionist was entitled to complete stay of the tax demand pending disposal of the statutory appeal, where the assessment had proceeded on a precedent later overruled by the Constitution Bench and the contract was claimed to be a composite works contract.

Analysis: The challenge was confined to interim protection against recovery. The assessment had been made by treating the transaction as a sale contract on the basis of an earlier Supreme Court decision that had subsequently been overruled. In such a situation, the appeal authority was required to consider whether the assessee had a strong prima facie case and whether insistence on deposit would cause undue hardship. The material placed showed a composite contract involving supply and installation of lifts, and the demand had been sustained by relying exclusively on the overruled view.

Conclusion: The revisionist was entitled to complete stay of recovery of the disputed demand pending disposal of the appeal.

Final Conclusion: The revision was allowed, the Tribunal's interim order was modified, and recovery of the remaining demand was stayed until the appeal is decided expeditiously in accordance with law.

Ratio Decidendi: Where the assessed demand rests solely on a precedent that has been overruled, and the assessee shows a strong prima facie case, interim recovery should be stayed to prevent undue hardship pending appeal.

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