Mahalaxmi Cotton Ginning Pressing and Oil Industries Vs State of Maharashtra & Ors. (Bombay High Court)
The petitioner, a partnership firm engaged in the business of reselling cotton bales and registered under the Maharashtra Value Added Tax Act, 2002 (MVAT Act), challenged the constitutional validity of Section 48(5) of the Act. Alternatively, it sought a reading down of the expression “actually paid” to mean “ought to have been paid.” The petitioner also challenged an assessment order that reduced its input tax credit (ITC) claim and refund on the ground that certain suppliers had not deposited tax into the Government Treasury.
The petitioner argued that it had purchased goods from registered dealers, possessed valid tax invoices, and had fulfilled all statutory requirements for claiming set-off. It contended that a purchasing dealer cannot be held responsible for a seller’s failure to deposit tax and that denying ITC in such circumstances imposed an impossible burden. The petitioner also claimed that Section 48(5) violated Article 14 of the Constitution because it treated purchasers unfairly, provided no mechanism to verify whether sellers had deposited tax, and could force purchasers to bear tax liability twice.
The State opposed the challenge, contending that a set-off is a concession created by statute and not an independent right. According to the State, Section 48(5) clearly restricts the grant of set-off to the extent of tax “actually paid” into the Government Treasury. The State argued that the provision was enacted to safeguard revenue, prevent tax evasion, and ensure compliance in the VAT regime. It also submitted that the legislature was entitled to prescribe conditions for granting such concessions.
