Limitation bar relief: conditional leave to appeal against interest and penalty allowed subject to a protective deposit and merits hearing.

Whether liberty should be granted to challenge a rectification order after the limitation period turned on the narrow legal question of interest and penalty where the tax component was paid. The court applied the principle that where the revenue is protected by a deposit and the dispute is limited in scope, an appeal may be entertained despite limitation; accordingly liberty to appeal was permitted only in respect of interest and penalty, subject to a protective deposit within a stipulated time, and the Appellate Authority must decide the appeal on merits without relying on limitation.

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Issues: Whether liberty should be granted to the petitioner to file an appeal against the impugned rectification order insofar as interest and penalty are concerned despite the expiry of the period of limitation, and on what conditions such liberty should be granted.

Analysis: The petitioner challenged a rectification order confirming tax, interest and penalty and did not file an appeal within the limitation period. The petitioner asserts inadvertence, payment of the tax component, availability of input tax credit, and willingness to secure revenue interest by depositing a part of the disputed amount. The respondent sought orders consistent with precedents in similar circumstances. The dispute remaining for adjudication before the Appellate Authority relates only to interest and penalty; the tax amount confirmed by the impugned order has been discharged by the petitioner. The court weighed the petitioner's admission of payment of tax, the narrow scope of the remaining dispute (interest and penalty), and the petitioner's offer to deposit a portion of the liability to protect revenue interest, and directed conditional relief permitting adjudication on merits without being foreclosed by limitation.

Conclusion: Liberty is granted to the petitioner to challenge the impugned order only insofar as interest and penalty are concerned before the Appellate Authority, subject to depositing Rs. 1,50,000 within 30 days from receipt of the order; the Appellate Authority shall decide the appeal on merits without reference to limitation.

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