Interim tax recovery relief in a jurisdictional challenge was balanced by security conditions to protect revenue pending writ adjudication.

Pending writ proceedings challenging reopening of a concluded assessment on jurisdictional grounds, the interim tax recovery arrangement was modified to preserve the subject matter while protecting revenue. The court considered the disputed applicability of Section 39 of the Karnataka Value Added Tax Act and the effect of a later Supreme Court decision relied on by the taxpayer. Recovery of the demand remained stayed, subject to security by bank guarantee for 30% of the demand and an undertaking for the balance, leaving the substantive issues open for decision in the writ petitions.

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Issues: Whether the interim order directing deposit of 30% of the demand and furnishing of bank guarantee for the balance required modification pending adjudication of the writ petitions.

Analysis: The appeals arose from an interim arrangement in tax recovery proceedings where the assessment had earlier been concluded and the reopening was challenged on jurisdictional grounds, including the applicability of Section 39 of the Karnataka Value Added Tax Act. The Court considered that, in the peculiar facts, the interim protection granted by the single judge did not adequately reflect the disputed jurisdictional issue and the effect of the later Supreme Court decision relied upon by the appellant. At the same time, the Court noted that the writ petitions were still pending and that the parties' substantive rights should remain open before the single judge.

Conclusion: The interim order was modified so that recovery of the demanded amount remained stayed, subject to the appellant furnishing a bank guarantee for 30% of the demand and giving an undertaking for the remaining 70%.

Final Conclusion: The appeals succeeded to the extent of modifying the interim arrangement and granting conditional protection against tax recovery, while leaving the merits of the writ petitions open for independent decision by the single judge.

Ratio Decidendi: Where tax recovery is sought during pending proceedings involving a contested reopening of concluded assessment and a serious jurisdictional issue, the interim order may be tailored to preserve the subject matter while safeguarding the revenue by imposing reasonable security conditions.

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