ORDER
R. Gururajan, J.
1. The petitioner-dealer, Balsara Hygiene Products Ltd., is before this Court challenging annexure “C”, an order dated September 29, 2001 passed by the first respondent, Joint Commissioner of Commercial Taxes (Appeals), Bangalore Division, Bangalore, with a further prayer of a mandamus directing the first respondent-Joint Commissioner of Commercial Taxes (Appeals) to pass a speaking order, after taking into account, the payment of Rs. 13,91,512, on the application for stay filed by the petitioner, annexure “B”.
2. The petitioner is a dealer. The assessments for the year 1997-98 for Besta Cosmetics Ltd., and the petitioner were concluded by the second respondent-assessing authority levying tax on the turnover of “Promise” tooth-paste and tooth-powder sold by Besta Cosmetics Ltd. (for short “BCL”) to the petitioner as the first sale liable for tax under the Karnataka Sales Tax Act, 1957 (for short, “the Act”) and the very same turnover was assessed to tax in the hands of the petitioner also, as first sale on the ground that the said turnover relates to sale of branded goods. The petitioner being the brand owner is liable for tax under the third proviso to Section 5(3)(a) of the Karnataka Sales Tax Act. BCL was subjected to the tax and an amount of Rs. 20,02,603 has to be collected as tax from BCL and out of which Rs. 13,91,512 relates to tax collected by BCL from the petitioner towards sale of “Promise” tooth-paste and powder. On the very same turnover of “Promise” tooth-paste and powder, sold by the petitioner, the assessing authority has levied tax once again and has demanded the said tax from the petitioner. The total tax levied on the petitioner on this account is Rs. 26,88,698. The assessment orders for the year 1997-98 are filed at annexures “A” and “A1”. Aggrieved by the orders, the petitioner has preferred an appeal before the Joint Commissioner of Commercial Taxes (Appeals), Bangalore Division, Bangalore. An application for stay seeking stay of recovery of the said disputed tax was filed along with the memorandum of appeal. The appellate authority has now passed an order on September 28, 2001. In the said order, the appellate authority has directed the petitioner to pay 50 per cent by cash the remaining 50 per cent, by way of bank guarantee. Aggrieved by this order, the petitioner is before this Court.
3. Heard Sri B.V. Acharya, learned Senior Counsel appearing for the petitioner.
4. At my instance, Sri Vedamurthy, learned Government Advocate accepts notice.
5. Learned Senior Counsel contends that the impugned order is a case of non-application of mind. The counsel states that the authority has failed to take into consideration, the material facts in the case on hand. The counsel says that BCL and the petitioner could not be held to be the first sellers in terms of Section 5 of the Act.
6. Per contra, Sri Vedamurthy, learned Government Counsel states that the order imposing 50 per cent cash and 50 per cent bank guarantee is strict, in accordance with law. He refers to the proviso under Section 20(3)(b) in this regard. He says that a discretionary order need not be interfered in the case on hand.
7. After hearing the counsel, I have carefully perused the material placed before this Court. The petitioner, aggrieved by the order of the assessing authority, has preferred an appeal before the Joint Commissioner of Commercial Taxes in terms of annexure “B”. Along with the appeal memo, he has filed an IA seeking for an order of stay in the matter. It is contended in the stay application that the assessing authority has levied on the same turnover of the sale effected by the BCL and the petitioner. It amounts to the double jeopardy, according to the petitioner. The appellate authority, in the impugned order has not given any reasons to say the least in the matter. He has only stated that the interim stay is granted subject to the petitioner making a payment of 50 per cent in cash and the balance by way of a bank guarantee. This order, in my view, is a clear case of non-application of mind. The petitioner has placed an argument with regard to double jeopardy in the matter. The same has not been referred to or properly considered by the authorities. Therefore, in my view, the mechanical order of 50 per cent cash and 50 per cent bank guarantee requires my interference and I do so in the case on hand.
8. Section 20 of the Act provides for statutory appeal under certain circumstances. Section 20(3)(b) of the proviso reads as under :
“Notwithstanding that an appeal has been preferred under Subsection (1), the tax or other amount shall be paid in accordance with the order against which the appeal has been preferred :
Provided that the appellate authority may, in its discretion, give such directions as it thinks fit in regard to the payment of tax or other amount payable under Clause (b), if the appellant furnishes sufficient security to its satisfaction in such form and in such manner as may be prescribed.”
9. Sri Vedamurthy, Government Advocate, strongly relies on the proviso to sustain the order. I have carefully perused the said provision. It provides for a discretion with regard to the payment of tax and with regard to the furnishing security to the satisfaction. Discretion does not mean mechanical order of 50 per cent cash and 50 per cent bank guarantee by the authorities. The authority has to apply its mind to the material facts and apply the relevant laws and thereafter, apply its discretionary powers with regard to the case placed before the appellate authority. No such attempt is made in the case on hand. To say the least, the discretion is exercised mechanically in the case on hand. Therefore, the argument of Sri Vedamurthy, Government Advocate, is not acceptable to me.
10. Courts are consistently ruling that a matter of grant of stay with a condition is a matter that requires serious attention. A Division Bench of this Court in the case of B.M. Moidin Kunhi v. State of Mysore [1971] 27 STC 154 has ruled as under :
“The order made under the proviso to Sub-section (3) being an appealable order, the appellate authority ought to give reasons for the rejection of the offer of security made by the assessee. The order of the Deputy Commissioner does not make any reference to the offer of security of immovable properties made by the assessee. When the rule states that the appellate authority at its discretion may direct security in any one of the forms prescribed in the rule, it means that the discretion so vested has to be exercised in a judicial manner and not capriciously and arbitrarily.”
11. In the case of V.N. Purushothaman v. Agrl. Income-tax Officer , the Kerala High Court has ruled as under :
“He should exercise the discretion vested in him in accordance with law. The order passed by him should show that he has applied his mind and taken into consideration the basic requirements germane to the issue. The difficulties involved in the issues raised in the case and the prospects of the appeal being successful is one such aspect. The position and economic circumstances of the assessee is another. If the officer feels that the stay would put the realisation of the amount in jeopardy, that would be a cogent factor to be taken into consideration. The amount involved is also a relevant factor.”
12. This Court in the case of Sudarshan Pine Products (P) Ltd. v. Additional Deputy Commissioner of Commercial Taxes (Assessments)-I, Bangalore Division, Bangalore [1998] 111 STC 740 has ruled as under :
“………….It is evident that the Joint Commissioner while hearing and disposing of the stay application has to exercise his discretion in a judicious manner. He has to record the reasons if the application is not accepted or partly accepted. This is beside the fact that proper opportunity of hearing has also to be given. It is true that stay is not automatic and the various factors like possibility of success in appeal, financial position of the assessee beside the factors which are relevant for grant of injunction, viz., existence of prima facie case, balance of convenience and the factor of irreparable loss have to be kept in view. The appellate authority has to draw a balance between the assessee and the Revenue.”
13. In the light of the various decisions referred to above, it is very clear that in these matters, the authorities have to apply their mind, while exercising their judicial discretion with regard to grant of stay. If the authorities are satisfied as per the judicial discretion, then they must record reasons with regard to the condition. In the case on hand, unfortunately, no such attempt is made by the appellate authority. In these circumstances, I have no hesitation in holding that the impugned order is unsustainable in law.
14. This petition is allowed. The impugned order is set aside. Matter is remitted back to the appellate authority for reconsideration and for passing a speaking considered order, in accordance with law. No costs.