Ajay Kumar Kaushal Vs State of Maharashtra (Bombay High Court)
Introduction: In a recent case before the Bombay High Court, Ajay Kumar Kaushal, a retired Director of M/s Ananta Impex Pvt. Ltd., challenged a notice issued by the Sales Tax Officer, Nodal Division Mumbai-2, under Section 38 of the Maharashtra Value Added Tax Act, 2002 (MVAT Act). The notice, dated 11th April 2022, sought the recovery of dues amounting to Rs.1,68,22,661, arising from assessment orders under the MVAT Act for the financial years 2016-17 and 2017-18.
Factual Background: The petitioner and two other founder directors had resigned from their positions with effect from 20th March 2017. They sold their shares to new incoming directors, who subsequently filed accurate Profit & Loss A/c, Balance Sheets, and returns, including an Audit Report, under MVAT and Income Tax Act. These submissions correctly reflected a NIL turnover of sales and purchases. However, after a few months, the new directors revised the MVAT Act returns, indicating a significant turnover.
The assessment orders were based on these revised returns, confirming the output tax and disallowing Input Tax Credit (ITC). While the petitioner did not challenge the assessment orders, he filed a Writ Petition seeking the quashing of the notice dated 11th April 2022 and the freezing of his Demat accounts.
Bombay High Court’s Observations:
The Bombay High Court, in its interim order, noted the following key points:
1. Former Director and Non-Registered Dealer: The court observed that the impugned notice under Section 38 could not be validly issued to the petitioner, who was a former Director and not a registered dealer to whom such a notice could have been addressed.
2. Prima Facie Opinion: The court held that, prima facie, it did not find a legal basis for the notice and that the authorities had not verified the facts before issuing it.
3. Stay on Notice and Lapsed Attachment: The court, as an interim measure, stayed the impugned notice dated 11th April 2022. Additionally, it declared that the provisional attachment of the Demat Accounts of the petitioner and his family members had lapsed by virtue of the provisions of Subsection (2) of Section 35 of the MVAT Act.
4. Department’s Future Actions: While granting relief to the petitioner, the court clarified that the department was not precluded from taking any lawful action for the recovery of MVAT dues against Ananta Impex Pvt. Ltd. or Mapro Ventures Ltd., as well as their present directors.
Conclusion:
The interim order by the Bombay High Court provides temporary relief to Ajay Kumar Kaushal by staying the impugned notice and declaring the lapsed attachment of Demat accounts. The court’s decision underscores the importance of proper verification of facts before issuing recovery notices under tax laws. The matter is scheduled for further proceedings, and the court has directed the respondents to file a reply affidavit within a week.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
We have heard Mr. Bapat, learned counsel for the Petitioner and Mr. Takke, learned AGP for the Respondent (State).
2. The challenge in this petition is to a notice dated 11th April 2022, issued to the Petitioner by the Sales Tax Officer, (C-813), Nodal Division Mumbai-2, being an intimation under Section 38 of the Maharashtra Value Added Tax Act, 2002 (for short “MVAT Act”).
3. The impugned notice proceeds on the assumption that the Petitioner is a Director of one – Ananta Impex Pvt. Ltd. and/or of Mapro Ventures Ltd., being the registered dealer under the Act and against whom for the period 1st April 2016 to 31st March 2017 and 1st April 2017 to 31st March 2018, there is a MVAT liability of Rs.53,24,740/- and Rs. 1,14,97,921/- respectively totaling to Rs. 1,68,17,661/-. By the impugned notice Petitioner is informed that he has become liable to pay the said amount and that for such recovery, a charge is being created on the assets of the Petitioner as set out in the following terms:-
“This is to bring to your notice that, the provision of Section 38 of the MVAT Act 2002 which state that during the pendency of any proceedings under this Act, the total amount of which exceed Rs. 16817661/- creates a charge on, or parts with the possession by way of sale, mortgage, gift, exchange or any other mode or transfer whatsoever of any of the assets of his business valued at Rs. 16817661/- or more in favors of any other person with intention of defrauding the revenue, such charges or transfer shall be void as against any claim in respect of any tax or any other sum payable by the dealer as a result of the completion of such proceedings.
Please note that in this section “assets” means land, building, machinery, plant, shares, securities and fixed deposits in bank, to the extent to which any of the assets aforesaid does not from part of the stock-in-trade of the business of the assessee.”
4. The second challenge as raised by the Petitioner is to the effect that in pursuance of a notice dated 9th June 2021 of the Sales Tax Officer, the Demat Accounts of the Petitioner and his family members with the ICICI Bank are freezed. The ICICI Bank has informed the Petitioner and his family members that in pursuance of communication issued by the Sales Tax Officer addressed to the officer incharge of National Security Depository Limited (for short “NSDL”), the demat accounts of the Petitioner as also of his relatives, Tripta Ajay Kaushal, Saurabh Kaushal and Ruchi Chand Seth being the following demat account numbers stands freezed : –
