Stay of recovery under VAT law cannot be conditioned on extra security once statutory tax payment requirement is met.

On payment of 20% of the disputed tax under the proviso to section 55(4) of the Kerala Value Added Tax Act, the authorities could not insist on any further security as a condition for stay of recovery. The provision was treated as clear and self-contained, requiring only that statutory remittance to suspend further recovery proceedings until the appeal was disposed of. Once that condition was met, there was no basis to demand an additional solvency certificate or bond. The recovery demand was therefore not sustainable to that extent, and the impugned demand was modified in favour of the petitioner.

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Issues: Whether, on payment of 20% of the disputed tax under the proviso to section 55(4) of the Kerala Value Added Tax Act, the authorities could insist in addition on furnishing security by way of solvency certificate or bond as a condition for stay of recovery.

Analysis: The proviso to section 55(4) was treated as clear and self-contained. It required only remittance of 20% of the disputed tax to secure stay of further recovery proceedings till disposal of the appeal. The Court held that, once that statutory condition was satisfied, there was no basis for the authorities to impose any additional requirement of security, whether by solvency certificate or by bond. The recovery demand could therefore not be sustained to that extent.

Conclusion: The insistence on additional security was rejected and the impugned demand was modified in favour of the petitioner.

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