Automatic vacation of stay cannot be applied mechanically where the assessee cooperated and delay in appeal disposal was not attributable to it.

Section 51(4) of the Tamil Nadu Value Added Tax Act permits conditional stay, and the automatic vacation proviso is aimed at preventing assessees from prolonging interim protection while delaying appeal disposal. Where the assessee has complied with the stay conditions, cooperated in the hearing, and the delay is not attributable to it, the proviso cannot be applied mechanically and extension of stay may be granted on good cause. The appellate authority's refusal to extend stay was therefore unsustainable, and continuation of stay was directed subject to extension of the bank guarantee and time-bound disposal of the appeals.

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Issues: Whether the appellate authority could refuse extension of stay where the appeal had remained pending beyond the statutory period but the delay was not attributable to the assessee and the assessee had cooperated in the disposal of the appeal.

Analysis: Section 51(4) of the Tamil Nadu Value Added Tax Act, 2006 empowers the appellate authority to grant conditional stay, and the second proviso provides for automatic vacation of the stay if no order is passed within 180 days. That proviso is intended to curb dilatory tactics by assessees who prolong interim protection while delaying disposal of the appeal. Where the assessee has complied with the stay conditions, participated in the hearing and there is no attempt to protract the proceedings, the rigour of the automatic vacation provision is not attracted. Support was drawn from the analogous principle applied under Section 35C of the Central Excise Act, 1944.

Conclusion: The refusal to extend stay was unsustainable, and the stay was directed to continue for a further period subject to extension of the bank guarantee and disposal of the appeals within a fixed time.

Ratio Decidendi: A statutory proviso providing for vacation of interim stay to prevent abuse cannot be applied mechanically where the assessee has cooperated and the delay in disposal is not attributable to the assessee; in such a case, extension of stay may be granted on good cause.

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