Interim tax recovery restraint limited to earlier assessment period; 50% deposit condition upheld in intra-court appeal.

A Supreme Court interim order confined to an earlier assessment period could not be treated as a blanket bar on recovery for later periods, especially where the subsequent assessment was not before the Supreme Court and an earlier Division Bench ruling upholding levy under the Karnataka Value Added Tax Act remained operative. The contention that all future recovery was stayed was rejected. In an intra-court appeal against interim relief, the Single Judge's discretion was not shown to be perverse or manifestly erroneous, and a condition requiring deposit of 50% of the tax demand was held to be a balanced arrangement. The appeals therefore failed and the interim order was left undisturbed.

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Issues: (i) Whether the order of the Supreme Court restrained recovery of tax for all future assessment periods so as to warrant complete stay against recovery in the present appeals; (ii) whether the learned Single Judge erred in granting interim protection only on condition of deposit of 50% of the tax demand.

Issue (i): Whether the order of the Supreme Court restrained recovery of tax for all future assessment periods so as to warrant complete stay against recovery in the present appeals.

Analysis: The relief before the Court turned on the scope of the interim orders of the Supreme Court, which were passed in relation to an earlier period of assessment. The Court held that those orders could not be read as a blanket restraint on recovery for an indefinite future period, especially when the later assessment period had not been the subject of consideration. The Court also noted that the earlier Division Bench decision upholding levy under the Karnataka Value Added Tax Act remained operative, and the assessment and recovery for the subsequent period could not be treated as wholly barred on the basis of the earlier interim orders.

Conclusion: The contention that the Supreme Court order protected the appellant against recovery for all subsequent periods was rejected.

Issue (ii): Whether the learned Single Judge erred in granting interim protection only on condition of deposit of 50% of the tax demand.

Analysis: In an intra-court appeal against an interim order, interference is warranted only when the discretion exercised by the Single Judge is shown to be perverse or ex facie erroneous. The Court found that the condition of deposit was a balanced interim arrangement, particularly because the demand for the later period was substantial and the earlier levy had already been upheld. The Court further held that the suggested reduction of the deposit amount on the basis of service tax already paid could not be accepted as it would run contrary to the binding effect of the earlier Division Bench ruling.

Conclusion: The interim condition requiring deposit of 50% of the tax demand was upheld.

Final Conclusion: The appeals failed and the interim order of the Single Judge was left undisturbed, with liberty reserved to seek clarification or modification before the Supreme Court in the pending proceedings.

Ratio Decidendi: A prior Supreme Court interim order limited to an earlier assessment period cannot be construed as an indefinite bar on recovery for later periods, and an interim order in an intra-court appeal will not be interfered with unless the discretion exercised is perverse or manifestly erroneous.

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