Six-Monthly MVAT Payment Cannot Attract Interest When Rules Permit It: Bombay HC

Microsoft Corporation (India) Pvt. Ltd. Vs State of Maharashtra (Bombay High Court)

Summary: The Bombay High Court allowed the writ petition of Microsoft Corporation (India) Pvt. Ltd. and set aside the levy of interest under Section 30(2) of the Maharashtra Value Added Tax Act, 2002 arising from the petitioner’s six-monthly payment of tax for FY 2013-14. The petitioner had voluntarily registered under the MVAT Act and Central Sales Tax Act from 3 September 2012. Its CST liability for FY 2012-13 was Rs.19,200 and there was no MVAT liability. Since the preceding year’s tax liability was below Rs.1 lakh, Rule 17(4) of the MVAT Rules, 2005 entitled it to file six-monthly returns for FY 2013-14. The petitioner consequently paid approximately Rs.41.35 crore of tax on taxable turnover of approximately Rs.981 crore within the due dates applicable to those six-monthly returns.

During appellate proceedings, however, the authority levied interest under Section 30(2), reasoning that despite technical compliance with Rule 17, a large taxpayer paying more than Rs.40 crore during the year ought effectively to have paid tax monthly. The Revenue further alleged that voluntary registration followed by minimal activity in FY 2012-13 and substantial turnover in FY 2013-14 constituted a colourable device designed to secure six-monthly periodicity and defer remittance of Government revenue. Reliance was placed, among other decisions, on M/s. McDowell and Company Limited Vs Commercial Tax Officer.