Defaulted claim under Maharashtra settlement cannot be adjusted against refund payable under Maharashtra VAT Act: High Court

The Bombay High Court held that the authorities under the VAT Act, in exercise of powers under the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Charges Act, 2022, cannot invoke the provisions of section 50 of the VAT Act and under the time of review of the proceedings in accordance with the Law on Settlement.

Division bench Justice M. S. Sonak and Justice Jitendra Jain observed that there is no provision in the Settlement Act which provides for the calculation of outstanding arrears for a particular year after the adjustment of compensation for another year, especially in the case where there is no such adjustment of the order for compensation on the date of application or on the date of settlement order u/s 13 Act of calculations.

The facts of the case

The assessee/petitioner engaged in the business of manufacturing and selling machinery was served with an appeal order under the VAT Act demanding payment of tax of Rs.1,01,51,134/-. Later, the Revenue/Respondent issued an assessment order under the VAT Act and a demand of Rs.30,40,559/- was made against the assessee. In the meantime, the Settlement Act was enacted to clear arrears of taxes, interest, penalty or late fees levied, payable or imposed under various acts administered by the state. Thereafter, an appeal order was issued under the VAT Act whereby an amount of Rs.27208381 was determined to be refundable to the assessee.

Further, in the reference application filed under the Settlement Act, the Dy CST passed the settlement order u/s 13(1) and arrived at the same figure of settled amount as calculated by the settler in his statement. Thereafter, an order was passed under the VAT Act whereby an amount of Rs.1,41,86,978/- was determined to be payable by the assessee who immediately filed a settlement statement which was accepted and payment under the Settlement Act has been evaluated. Again, the Joint CST issued a show cause notice u/s 15 to revise the orders passed u/s 13(1) of the Settlement Act, proposing to adjust the refund as per demand within three years and recalculate the settlement amount. The provisions of section 50 of the VAT Act were then applied and the amount owed after adjusting the refund was determined. Thus, the assessee challenged the revision orders passed u/s 15 of the Settlement Act whereby the Dy CST proposed to adjust the refund as per the demand.

Remarks of the High Court

The court noted that powers under one statute may be invoked to address matters covered or governed by another statute.

Then any action The authorities under the Maharashtra Settlement Act, encroaching on the powers conferred under the VAT Act, will not have jurisdiction, the court clarified.

Thus, the court observed that the actions of the Revenue in recalculating the outstanding arrears after passing the settlement order by invoking section 15 of the Settlement Act without an order u/s 50 of the VAT Act is not subject to jurisdiction.

Further, if the assessee does not wish to adjust the refund for one year against the claim of another year, the Commissioner u/s 50 of the VAT Act cannot adjust the same on his own, the Court added.

The Court explained that the Settlement Act is a separate law enacted to settle unpaid dues under various State Acts, each of which has separate and distinct powers under its respective Acts to administer them.

Although the State Revenue Commissioner is the Commissioner under the MVAT Act, he wears a different hat as an ‘authorised authority’ under the Settlement Act, the Court added.

In this case, there is no order u/s 50 of the VAT Act to adjust the refund for the financial year 2016-17 against the charges for the years 2013-14, 2015-16 and 2017-18, the court observed.

Thus, the court explained that the authorities under the Conciliation Act can also be the authorities under the VAT Act, but while exercising the powers under the Conciliation Act, they cannot invoke the provisions of section 50 of the Conciliation Act, and in review proceedings under the Settlement Agreement Act.

The Dispute Settlement Act nowhere contemplates or empowers the authorities under the said Act to import the provisions of the VAT Act and in particular the provisions of Section 50 of the VAT Act to determine the required amount to be paid under the Settlement Act, the court added.

On a conjoint reading of section 50 and rule 60, the Court held that if the assessee does not wish to adjust the refund in one year as against the claim of another year, the Commissioner cannot, u/s 50, adjust the same on his own accord and even if he proposes to do so, he must do so by giving an opportunity to be heard.

In this case, admittedly, there is no such desire expressed by the assessee nor shown any order u/s 50 passed to adjust the refund as per the demand, the court added.

The court also noted that the calculation of the arrears and the amount payable under the Settlement Act must be carried out strictly in accordance with the scheme of the said Act, and if there was no procedure for adjusting the refund on the day of filing the application and making the settlement order, then how can it be an error in the settlement order.

Therefore, the high court granted the petition of the convicted person.

Counsel for Plaintiff/Individual: Anai Y. Banhati, Asmita Gupta and Siddhant Chhabra

Advocate for respondent/Revenue: SD Vyas and Vrishali Raje

Case Title: Andreas Stihl Private Limited v The Joint Commissioner of State Tax & Ors

Case number: WRIT PETITION NO. 15511 of 2023

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