Pre-deposit must track disputed tax demand, not turnover, when deciding appeal admission under VAT law.

While fixing a pre-deposit as a condition for entertaining a second appeal under the VAT Act, the authority must apply statutory discretion with a rational nexus to the disputed tax demand, not the assessee's turnover. The Tribunal's approach of linking the deposit to turnover was unsustainable because it used an incorrect principle for determining the amount. The pre-deposit condition was therefore recalibrated and substituted with a direction to deposit 5% of the tax demand as a condition precedent for the appeal.

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Issues: Whether the Tribunal was justified in fixing pre-deposit at Rs. 1 crore on the basis of the assessee's turnover, and whether the pre-deposit should instead be correlated to the tax demand while entertaining the second appeal under Section 73(4) of the VAT Act.

Analysis: The Tribunal's approach tying the pre-deposit to turnover was found unsustainable. The amount required as a condition for entertaining the appeal must bear a rational nexus with the tax demand in dispute and not with the assessee's turnover. The Tribunal had therefore proceeded on an incorrect principle in fixing the pre-deposit amount. In the circumstances, the pre-deposit condition was required to be recalibrated by applying the statutory discretion under Section 73(4) of the VAT Act on the basis of the demand raised.

Conclusion: The condition of pre-deposit was modified and substituted by a direction to deposit 5% of the tax demand as a condition precedent for entertaining the appeal, in favour of the assessee.

Ratio Decidendi: While exercising power to impose pre-deposit as a condition for appeal, the authority must correlate the amount to the disputed tax demand and not to the assessee's turnover.

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