TML Business Services Limited Vs Deputy Commissioner of State Tax (Bombay High Court)
Facts- Petitioner statedly is a limited company engaged in procuring vehicles from Tata Motors Limited (“TML”) and selling them to dealers within and outside the State of Maharashtra.
Pursuant to an assessment u/s. 23 of the Maharashtra Value Added Tax Act, 2002 for F.Y. 2010-2011, AO passed an Assessment Order raising a demand of Rs. 17,76,93,422 including tax and interest. Aggrieved by the same, the Petitioner filed an appeal which resulted in a reduced demand of Rs. 14,00,74,890.
For F.Y. 2011-2012 an assessment order dated 21 August 2017 was passed raising a demand of Rs. 9,67,02,366/- including tax and interest. A first appeal was filed by the Petitioner against this order which resulted in an order for refund of Rs.10,69,89,606/- on 28 February 2019. It is the Petitioner’s case that the said order was received on 5 April 2019.
Being desirous of availing benefit of the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Ordinance, 2019 (the “Amnesty Scheme”) for settlement of its dues with respect to the year 2010-2011, the Petitioner withdrew the intimation made in Form-314 on 12 April 2019, informing Respondent No.1 of the same and also requested Respondent No. 1 to keep the refund of Rs. 10,69,89,606/- for the year 2011-2012 on hold.
On 13 May 2019, Petitioner made an application under the Amnesty Scheme for F.Y. 2010-2011 for settlement of dues by making a payment of Rs. 8,46,84,821/-.It is the case of the Respondents that since past dues of the Petitioner amounting to Rs. 14,00,74,890/- were already available for recovery since 12 April 2019, as per the proviso of Section 50 (1) of MVAT Act, the Commissioner was mandated to first apply the excess towards the recovery of any amount due from the dealer and then proceed to refund the balance amount, if any, u/s. 50 (1) of the MVAT Act
It was argued that as the petitioner had already submitted an application to settle the dues for the year 2010-2011 in accordance with the Amnesty Scheme’s provisions, the petitioner argued that the respondents were not permitted to adjust the refund of Rs. 10,69,89,606 against the liability of Rs. 14,00,74,890 for the year.
Thereafter, a Defect Notice was issued which showed a zero amount in the short paid column. Further, a refund adjustment order was issued by the erstwhile petitioner informing that the refund of Rs. 10,69,89,606/- which was due to them would be adjusted towards the amount of tax due for the year 2010-2011.
The petitioner replied to the Defect Notice and recorded that the action of the Respondents in adjusting the refund was unfair and unjust.
Conclusion- It is only pursuant to the Defect Notice, Petitioner figured out that the excess amount would not be refunded to the Petitioner and it is only on 23 May 2019 pursuant to the Refund Adjustment Order that the Petitioner came to know that the refund of Rs. 10,69,89,606/- granted for the year 2011-2012 would be adjusted towards the amount of tax due for the period 2010-2011. There was no notice whatsoever of this adjustment to the erstwhile Petitioner.
These actions of the Respondent Authorities in our view cannot be countenanced. Apart from the general law that no action adverse to a party can be taken without giving the party an adequate notice and an opportunity of defending, the provisions of the MVAT Act also mandate the Respondents to put the Assessee on notice before making any adjustment of refund. Section 32 as quoted above, also appears to suggest this.
In our view, the Defect Notice and the Refund Adjustment Order are apart only by a day and this could not have provided sufficient opportunity to the Petitioner even to seek redressal of his grievance from the Authorities. Even while the Authorities had not responded to the communication dated 12 April 2019 of the Petitioner, whereby the Petitioner had requested the Authorities to keep the refund amount on hold as they were in the process of filing an application under the Amnesty Scheme, the Respondent Authorities, in our view, could not have, while the application for the Amnesty Scheme was under consideration in the absence of any response to the erstwhile Petitioner’s communication dated 12 April 2019 gone ahead without any notice to the Petitioner and adjusted the refund amount for the year 2011-2012 against the dues for the year 2010-2011 and that too when the Petitioner had already filed the application under the Amnesty Scheme which was accepted by the Respondent Authorities alongwith the payment of Rs. 8,46,84,821/-under the said scheme.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
By this petition, the Petitioner is seeking quashing of the Refund Adjustment Order dated 22 May 2019 issued by Respondent No.1 -Deputy Commissioner of State Tax, Pune, VAT-E, 622 (LTU), Pune by which the statutory refund pertaining to the year 2011-2012 available to the Petitioner was adjusted towards the statutory dues payable by the Petitioner for the year 2010-2011 purportedly without notice.
2. Petitioner statedly is a limited company engaged in procuring vehicles from Tata Motors Limited (“TML”) and selling them to dealers within and outside the State of Maharashtra. The Petitioner was formerly known as the “TML Distribution Limited”. Pursuant to order dated 11 March 2022 passed by NCLT, Mumbai Bench V in CA (CAA/255/MB-V/2021) all assets and liabilities of TML Distribution Company Limited have been transferred from transferor company (TML Distribution Company Limited) to the transferee company (TML Business Services Limited). Petitioner is registered under the Maharashtra Value Added Tax Act, 2002 (“MVAT Act”) and Central Sales Tax Act, 1956 (“CST Act”).
3. Pursuant to an assessment under Section 23 of the MVAT Act for the financial year 2010-2011, the Assessing Officer passed an Assessment Order dated 30 March 2015, raising a demand of Rs. 17,76,93,422/- including tax and interest. Aggrieved by the same, the Petitioner filed an appeal which resulted in a reduced demand of Rs. 14,00,74,890/-.
4. For the financial year 2011-2012 an assessment order dated 21 August 2017 was passed raising a demand of Rs. 9,67,02,366/- including tax and interest. A first appeal was filed by the Petitioner against this order which resulted in an order for refund of Rs.10,69,89,606/- on 28 February 2019. It is the Petitioner’s case that the said order was received on 5 April 2019.
5. With respect to financial year 2010-2011, on 11 March 2019, Petitioner intimated the office of the Respondent No.1 in Form-314 that they were in the process of filing second appeal against the order dated 31 January 2019.
6. Earlier on 6 March 2019, the Government of Maharashtra issued an ordinance called the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Ordinance, 2019 (the “Amnesty Scheme”) providing for settlement of arrears of tax, interest, penalty and late fee as on 1 April 2019 upon payment of a part thereof.
7. Being desirous of availing benefit of this Amnesty Scheme for settlement of its dues with respect to the year 2010-2011, the Petitioner withdrew the intimation made in Form-314 on 12 April 2019, informing Respondent No.1 of the same and also requested Respondent No. 1 to keep the refund of Rs. 10,69,89,606/- for the year 2011-2012 on hold.
8. After processing the refund, a refund approval proposal was moved to the Respondents office on 7 May 2019 and the proposal was approved by the Respondents on 10 May 2019 directing to proceed to grant the refund. It is the case of the Respondent Authorities that this is the date on which the refund became statutorily available for any adjustment / grant as per the statutory appeal order dated 28 February 2019.
9. On 13 May 2019, Petitioner made an application under the Amnesty Scheme for financial year 2010-2011 for settlement of dues by making a payment of Rs. 8,46,84,821/-, which was acknowledged by the Respondent Authorities.
10. It is the case of the Respondents that since past dues of the Petitioner amounting to Rs. 14,00,74,890/- were already available for recovery since 12 April 2019, as per the proviso of Section 50 (1) of MVAT Act, the Commissioner was mandated to first apply the excess towards the recovery of any amount due from the dealer and then proceed to refund the balance amount, if any, under Section 50 (1) of the MVAT Act, which reads as under:-
“50. Refund of excess payment
(1) Subject to the other provisions of this Act and the rules made thereunder, the Commissioner shall, by order refund to a person to the amount or tax, penalty, interest, security deposit deposited under Section 16 and fee except when the fee is paid by way of court fee stamp, if any, paid by such person in excess of the amount due from him. The refund may be either by deduction of such excess from the amount of tax, penalty, amount forfeited and interest due, if any, in respect of any other period or in any other case, by cash payment:
Provided that, the Commissioner shall first apply such excess towards the recovery of any amount due in respect of which a notice under sub-section (4) of section 32 has been issued, or, as the case may be, any amount which is due as per any return or revised return but not paid and shall then refund the balance, if any.
(2) If a registered dealer has filed any returns, fresh returns or revised returns in respect of any period contained in any year and any amount is refundable to the said dealer according to the return, fresh return or revised return then subject to rules, the dealer may adjust such refund against the amount due as per any return, fresh return or revised return for any period contained in the said year, filed under this Act or the Central Sales Tax Act, 1956 (74 of 1956) or the Maharashtra Tax on the Entry of Goods into Local Areas Act, 2002.
Provided that, for the period commencing on or after the 1st April 2012, a dealer whose refund claim in a year is rupees five lakh or less, may ,carry forward such refund to the return or revised return for immediate succeeding year to which such refund relates.”
11. On 22 May 2019, the erstwhile Petitioner received an email from the MVAT Department enclosing a Defect Notice for compliance in Form-III as under:
“FORM-III
(See section 11 (1) of the Maharashtra Settlement of Arrears of tax)
Interest, Penalty or, Late fee Ordinance, 2019)
FORM OF DEFECT NOTICE
Notice of Defect in respect of application for settlement of arrears
To,
TML DISTRIBUTION CO LTD.
Subject: Defect notice under section 11 (2) Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late fee Ordinance, 2019.
Ref: Your application No. 54148529 Dated :14-05 -2019 Gentlemen/Sir/Madam,
1. This is with reference to your application for settlement of arrears for the period from 01/04/2010 to 31/03/2011 submitted as per section 7 of the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late fee Ordinance, 2019. This application is received on14/05/2019 which is in FIRST PHASE. On preliminary scrutiny, of your captioned application certain defect (s) are observed which are as under:
Defect related to documents to be attached:
2. On scrutiny of the application for settlement of arrears it is noticed as under:
Defect related to payments:
(1) Difference in outstanding amount of arrears as on 1st April 2019.
