Can the appellate authority ignore existence of prima facie case when considering the stay applications? Allahabad High Court says, no.

18.12.2014 : Allahabad High Court : Food Corporation Of India  Vs CCT Lucknow UP 

Facts :

For the assessment year 2010-11 an assessment order dated 31.3.2014, was passed against FCI imposing a heavy tax liability. On 1st appeal, the first appellate authority, granted conditional stay on 65% of the tax liability.  On a 2nd appeal before the Tribunal, FCI was granted stay to the extent of 90% of the liability. FCI filed the revision application in High Court seeking waiver of pre-desposit against the entire tax demand.


Arguments :

The Tribunal had recorded a favourable finding for FCI but did not grant absolute stay. The applicants argued that the Tribunal was incorrect in holding the view that merits of the case will be examined only when hearing the main appeal. This view is manifestly incorrect, and militates against the view of Division Bench judgment of this Court in the case of I.T.C. Ltd. Vs. Commissioner (Appeals) Custom and Central Excise, Meerut-1 2005 (184) E.T.C. 347 (Alld.).  It was incumbent upon the Tribunal to consider  existence of strong prima facie case while deciding stay applications.

Further the applicant being a Government corporation absolute stay should be granted.

The Revenue did not dispute either of the contentions of the applicants. That FCI is a Central Government corporation and the impugned order did not take into account the existence of strong prima facie case in its favour. 

Judgement of the The Hon'ble High Court  :

"Time and again it has been held by the Apex Court and this Court that while considering stay application/waiver application, it is incumbent upon the authority to take into consideration the existence of prima facie case. It has been held that if the tax imposed does not have any legal backing and no leg to stand, then it could be a case of complete stay." (emphasis supplied)

In short, any appellate authority cannot side step or ignore the existense of a prima facice case even when one exists. If prima facie case exists, then complete stay should be granted. In view of the above, the Hon'ble High Court granted absolute stay.