Interim stay of penalty recovery cannot be made subject to compulsory pre-deposit when the rules do not permit it.

Under the Bihar Value Added Tax Act and Rules, interim stay of penalty recovery pending appeal could not be made conditional on a compulsory pre-deposit. Rule 46(1) allows an assessee to seek interim relief against assessment, interest or penalty, and Rule 46(4)(iii) permits conditions only in relation to stay of tax and interest recovery. The court held that this discretion does not extend to penalty stay applications, so the authority may grant or refuse stay, but cannot add a pre-deposit condition once stay is allowed. The pre-deposit requirement was therefore unsustainable, and the appeal was to proceed without coercive insistence on such deposit.

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Issues: Whether the appellate authority could insist upon pre-deposit as a condition for granting interim stay of penalty recovery pending appeal under the Bihar Value Added Tax Act, 2005 and the Bihar Value Added Tax Rules, 2005.

Analysis: The appeal against penalty was pending before the appellate authority and the record showed substantial excess deposit towards tax. Under Rule 46(1) of the Bihar Value Added Tax Rules, 2005, an assessee may seek interim relief against assessment, interest or penalty. Rule 46(4)(iii) permits the authority to impose terms and conditions while considering stay of recovery of tax and interest, but the rule does not extend the same discretion to a stay application against penalty recovery. The power is therefore confined to accepting or rejecting the request for interim stay of penalty, and once stay is granted, additional conditions such as compulsory pre-deposit cannot be imposed.

Conclusion: The condition requiring pre-deposit for interim stay of the penalty recovery was unsustainable, and the appellate authority was directed to decide the appeal without coercing such pre-deposit.

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