IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER WEDNESDAY, THE 9TH JULY 2008 / 18TH ASHADHA 1930 WA.No. 1432 of 2008 -------------------------------- AGAINST THE JUDGEMENT IN WPC.17705/2008 Dated 26/06/2008 .................... APPELLANT / PETITIONER IN W.P.(C): ----------------------------------------------------- SRI.PADMABALAJI ALLOYS (P) LTD., 3081, NIDA, MENON PARA ROAD PUDUSSERY CENTRAL VILLAGE, KANJIKODE 678 621, PALAKKAD (DT) REPRESENTED BY ITS AUTHORISED SIGNATORY SRI. M.S. SREEVALSAN. BY ADV. SRI.RAJU JOSEPH RESPONDENT/RESPONDENT IN W.P.(C): ----------------------------------------------------------- THE INTELLIGENCE OFFICER SQUAD NO.1, SPECIAL TEAM, COMMERCIAL TAXES, ERNAKULAM, KOCHI-24. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 09/07/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: H.L. DATTU, C.J. & A.K. BASHEER, J. ------------------------------------- W.A. No. 1432 of 2008 ------------------------------------ Dated this, the 9th day of July, 2008 JUDGMENT H.L. DATTU, C.J. This Writ Appeal is directed against the orders passed by the learned single Judge in Writ Petition No. 17705 of 2008. By the impugned order, the learned single Judge has modified the orders passed by the First Appellate Authority and has directed the petitioner to deposit a sum of Rs. 7 lakhs and also to provide security for the balance amount as a condition for stay. (2) The respondent authority has passed an order in exercise of his power under Section 67 of the Kerala Value Added Tax Act (in short 'the Act') and has imposed a penalty. Aggrieved by the said order, petitioner was before this Court on the earlier occasion. This Court had disposed of the Writ Petition, directing the petitioner to prefer appropriate appeal, if for any reason petitioner is aggrieved by the orders passed by the respondent authority in exercise of his powers under Section 67 of the Act. (3) After disposal of the Writ Petition, the petitioner has filed an appeal before the First Appellate Authority. Along with the appeal, he has also made an application for grant of an interim order. The First Appellate Authority, by its order dated 21.5.2008, has granted a conditional interim order of stay. The order passed by the First Appellate Authority reads as under: “The appellant M/s Sri. Padmabalaji Alloys (P) Ltd., W.A.No.1432 OF 2008 :: 2 :: Menonppara Road, Palakkad has filed an appeal before this office for the year 2006-2007 under KVAT Act 2003. The appellant is an assessee on the rolls of Assistant Commissioner (KVAT), Special Circle, Palakkad. The Intelligence Officer, Sq. No. 1, Spl. Team, Commercial Taxes, Ernakulam has imposed penalty under Section 67(1) of the KVAT Act for the year 2006-2007 against the appellant and aggrieved by the above order of penalty, the appellant filed appeal along with Stay Petition. Sri. N.R. Neelakantan, Chartered Accountant, appeared and heard for the appellant. He contended that, all the defects pointed out in the notice issued were clearly explained to the Intelligence Officer through the reply to the notice. From the orders it is seen that the inspecting authority has accepted almost all the points raised by the dealer. Even the inspecting authority estimated the production on the basis of the project report filed before the KSIDC. The KSIDC personnel themselves admitted that they have not set out any parameters for the production of ingots. They are only financing agencies based on the project reports filed. They only examined the viability on the project based on the project report and examine the eligibility of financing. It is also argued that penalty on the basis of estimated suppression is against the provisions of the Act and Rules and the directions of the W.A.No.1432 OF 2008 :: 3 :: Court in several cases. Therefore, requested a complete stay of collection of penalty imposed. Perused the connected records on the basis of the hearing of the learned Chartered Accountant. After considering the issue under dispute, I feel that there is prima facie a case for granting conditional stay. In the circumstances, the following orders are passed. ORDER NO. STA 912/2008 DATED 21.5.2008 Collection of penalty imposed for the year 2006-2007 under KVAT Act is stayed subject to the conditions that the appellant shall pay 40% (forty percent) of the penalty imposed for the year 2006-2007 under Section 67(1) of the KVAT Act 2003 and furnish security before the assessing authority for the balance 60% within 30 days (thirty days) from the date of this order. If the conditions are not fulfilled the stay order passed will stand vacate automatically.” (4) Aggrieved by the conditional interim order passed by the First Appellate Authority, petitioner has approached this court in Writ Petition No. 17705 of 2008. The learned single Judge, after detailed consideration of the matter, has tentatively come to the conclusion, that, the interim orders passed by the First Appellate Authority does not require modification. But further considering the plea W.A.No.1432 OF 2008 :: 4 :: of the petitioner, has directed the petitioner only to pay a sum of Rs. 7 lakhs and also provide security for the balance amount as a condition for stay. Aggrieved by the aforesaid order passed by the learned single Judge, petitioner in Writ Petition has presented this Writ Appeal. (5) Sri. Raju Joseph, learned counsel for the appellant, would vehemently contend, that, the First Appellate Authority and the learned single Judge were not justified in granting conditional interim order of stay. According to the learned counsel, in a case of this nature, the First Appellate Authority and the learned single Judge ought to have granted an unconditional interim order of stay, staying the orders passed by the respondent authority in exercise of his powers under Section 67 of the Act. The submission of the learned counsel, in our opinion, has no merit whatsoever. (6) The right to appeal is a statutory right and it can be circumscribed by the conditions of grant. Secondly, filing of an appeal against assessment/imposition of penalty by itself is not a ground for granting stay of collection of taxes, penalty, interest etc. Discretion is given to the appellate authority to give such directions as he thinks fit in regard to the payment of tax/penalty/interest before the disposal of the appeal. The scheme of the Act shows that the appellate authority has discretion to pass appropriate orders regarding payment of tax/penalty pending the appeal on such terms as he thinks fit. Such discretionary power should be exercised judiciously and not in an arbitrary manner. It is incumbent upon him to apply his mind in a manner known to law and pass speaking orders. Once the appellate authority has exercised his discretion in a manner known to law and has passed a speaking order showing W.A.No.1432 OF 2008 :: 5 :: application of his mind to the points involved, normally courts would not interfere with such discretionary orders. (7) In the instant case, the appellate authority, while passing the impugned order, has kept in view the aforesaid aspects. At this stage it would be useful to refer to the observations made by Apex Court in the case of Empire Industries Limited and Others v. Union of India and Others (1987 STC Vol. 64 p. 42). The Apex Court has observed: “If we may venture to suggest, in fiscal matters specially in cases involving indirect taxes where normally taxes have been realised from the consumers but have not been paid over to the exchequer or where taxes are to be realised from consumers by the dealers or others who are parties before the court, interim orders staying the payment of such taxes until final disposal of the matters should not be passed. It is a matter of balance of public convenience. Large amount of taxes are involved in these types of litigations. Final disposal of matters unfortunately in the present state of affairs in our courts takes enormously long time and non-realisation of taxes for long time creates an upsetting effect on industry and economic life causing great inconvenience to ordinary people. Governments are run on public funds and if large amounts all over the country are held up during the pendency of litigations, it becomes difficult for the Governments to run and becomes W.A.No.1432 OF 2008 :: 6 :: oppressive to the people. Governments' expenditures cannot be made on bank guarantees or securities. In that view of the matter, as we said before, if we may venture to suggest for consideration by our learned brethren that this Court should refrain from passing any interim orders staying the realisations of indirect taxes or passing such orders which have the effect of non-realisation of indirect taxes. This will be healthy for the country and for the courts.” (8) In view of the above discussion, we are of the opinion that the interference with the orders passed by the First Appellate Authority and modified by the learned single Judge is not called for. Accordingly, appeal requires to be rejected and it is rejected. Ordered accordingly. H.L.DATTU CHIEF JUSTICE A.K. BASHEER JUDGE jes