Conditional stay in tax appeal set aside where insolvency resolution plan raised a substantial legal objection to the deposit condition.

A conditional stay order requiring a pre-deposit in a tax appeal was examined in light of a pending challenge to the assessment and the asserted effect of an approved resolution plan under the Insolvency and Bankruptcy Code, 2016. The Court treated the insolvency-related objection as a substantial question of law and noted that the appellate authorities had not applied their mind to that issue before imposing the deposit condition. On that basis, the conditional stay was found unsustainable and the matter was remitted to the first appellate authority for expeditious disposal of the appeal, subject to security being furnished as directed.

---

---

Issues: Whether the conditional stay order directing pre-deposit of 20% of the disputed tax deserved interference in view of the pending challenge to the assessment and the effect of the resolution plan under the Insolvency and Bankruptcy Code, 2016.

Analysis: The revision arose from an assessment under the U.P. Value Added Tax Act, 2008 and the interim orders passed in the appeal process. The challenge before the Court was confined to the legality of the conditional stay imposed by the appellate forums. The Court noted that the applicant had raised a substantial legal objection based on the insolvency resolution process and the binding nature of the approved resolution plan, and that the appellate authorities had not applied their mind to the issue while fixing the deposit condition. Since the controversy raised a pure question of law and a prima facie case was made out, the conditional stay order was found unsustainable.

Conclusion: The conditional stay order was liable to be set aside and the matter was to go back to the first appellate authority for expeditious disposal of the pending appeal, with security for 20% of the disputed amount to be furnished as directed.

---