Interim stay in tax disputes may be conditioned by deposit and bank guarantee to protect disputed revenue.

In tax matters involving substantial disputed dues, interim stay may be continued only on terms that secure the revenue pending final adjudication. Here, the HC noted the outstanding demand, the limited controversy over the pre-2013 period, and the need to protect the State's interest while the writ petitions remained pending. It therefore declined to continue the stay unconditionally and instead modified the interim arrangement by directing immediate deposit of 10% of the total demand and a bank guarantee for the balance. The matter was then directed to be listed for final hearing.

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Issues: Whether the interim stay granted in the writ petitions should continue unconditionally, and what conditional deposit and security should be directed in respect of the disputed tax dues.

Analysis: The dispute related to substantial tax dues arising from sales made by a unit in the Special Economic Zone, while the petitioner had already started paying tax under the State laws from March 2013. The Court noted the large outstanding demand, the limited controversy regarding the pre-2013 period, and the need to protect the revenue pending final adjudication. Applying the principles governing interim orders in tax matters, the Court found it appropriate to secure a part of the demand by immediate deposit and the balance by bank guarantee rather than to vacate the stay entirely.

Conclusion: The interim applications were allowed in part, and the petitioner was directed to deposit 10% of the total amount and furnish bank guarantee for the remaining dues, while the matter was directed to be listed for final hearing.

Final Conclusion: The Court modified the interim arrangement by imposing conditions to safeguard the disputed tax revenue, instead of fully continuing or fully vacating the stay.

Ratio Decidendi: In tax matters involving substantial disputed dues, interim protection may be continued only on conditions that adequately secure the revenue pending final disposal.

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