Interim tax recovery stay modified where reopening of concluded reassessment under the Karnataka VAT Act remained a live jurisdictional issue.

The writ appeals concerned whether an interim recovery order should be modified where the assessee contended that a concluded reassessment could not be reopened under section 39 of the Karnataka Value Added Tax Act. The Court noted that the jurisdictional question whether a concluded assessment could be reopened remained pending before the single judge, and that the interim arrangement should have reflected that substantial issue. Although stay against tax recovery is not ordinarily granted, the peculiar facts justified modification of the protection. The interim order was modified, with stay of recovery subject to a bank guarantee for 30% of the demand and an undertaking for the balance.

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Issues: Whether the interim order requiring deposit of 30% of the demand and bank guarantee for the balance deserved modification in view of the contention that a concluded reassessment could not be reopened under section 39 of the Karnataka Value Added Tax Act.

Analysis: The appeals arose from an interim order in the writ petitions. The challenge was that the reassessment had already concluded, and the reopening was said to rest on a later decision of the Supreme Court and on section 39 of the Karnataka Value Added Tax Act, including the contention that section 39(2) was not in force when the reassessment concluded. The Court noted that the question whether jurisdiction existed to reopen the concluded assessment was a substantial issue pending before the single judge, and that the interim arrangement ought to have taken that aspect into account. While normal practice would not favour stay against tax recovery, the peculiar facts justified modification of the interim protection.

Conclusion: The interim order was modified and stay against recovery of the demanded amount was granted on condition of furnishing bank guarantee for 30% of the demand and an undertaking for the balance 70%.

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