Outstanding Demand Under Maharashtra Settlement Can't Be Adjusted Against Refund Payable Under Maharashtra VAT Act: High Court

The Division Bench of Justice M. S. Sonak and Justice Jitendra Jain observed that there is no provision under Settlement Act which provides for calculation of outstanding arrears of a particular year to be arrived at after adjustment of refund for another year more so in a case where there is no such adjustment of refund order on date of application or on date of settlement order u/s 13 of Settlement Act.

Facts of the case

The assessee/ petitioner, engaged in the business of manufacturing & sale of machineries, was served an appeal order under the MVAT Act demanding tax payable of Rs.1,01,51,134/-. Later, an assessment order was passed by the Revenue/ Respondent under the MVAT Act and a demand of Rs.30,40,559/- was raised against the assessee. Meanwhile, the Settlement Act was passed for settlement of arrears of tax, interest, penalty or late fee which were levied, payable or imposed under various Acts administered by the State. Thereafter, an appeal order under the MVAT Act came to be passed, pursuant to which sum of Rs.2,72,08,381/- was determined as refundable to the assessee.

Further, in reference application filed under the Settlement Act, the Dy CST passed an order of settlement u/s 13(1) and arrived at the same figure of the settlement amount which were calculated by the assessee in its application. Thereafter, an order under MVAT Act came to be passed whereby sum of Rs.1,41,86,978/- was determined as payable by assessee, who immediately, filed settlement application, which was accepted and payment as per the Settlement Act was made by the assessee. Again, the Joint CST issued a show cause notice u/s 15, for review of the orders passed u/s 13(1) of the Settlement Act, proposing to adjust refund against demand for three years and recompute the settlement amount. Thereafter, provisions of Section 50 of the MVAT Act were invoked and the amount outstanding, after adjustment of refund, was arrived at. Hence, the assessee challenged review orders passed u/s 15 of the Settlement Act, whereby the Dy CST proposed to adjust the refund against the demand.

Observations of the High Court

The Bench observed that powers under one statute can be exercised for dealing with the matters covered or falling under another statute.

Further, any action of authorities under Maharashtra Settlement Act by encroaching upon the powers conferred under MVAT Act would be without jurisdiction, clarified the Bench.

Thus, the Bench observed that action of Revenue to recalculate outstanding arrears after passing settlement order by invoking Sec 15 of Settlement Act without there being an order u/s 50 of MVAT Act, is without jurisdiction.

Also, unless assessee desires for adjustment of refund of one year against demand of another year, Commissioner u/s 50 of MVAT Act, cannot adjust the same on its own, added the Bench.

The Bench explained that the Settlement Act is a separate Act which is enacted for settlement of outstanding dues under various State Acts, each of which have separate and distinct authorities under their respective Acts for their administration.

Although the Commissioner of State Tax is a Commissioner under the MVAT Act, he wears a different hat as a "designated authority" under the Settlement Act, added the Bench.

In the present case, there is no order u/s 50 of the MVAT Act for adjustment of refund of the F.Y 2016-17 against dues of F.Ys 2013-14, 2015-16 & 2017-18, found the Bench.

The Bench therefore explained that the authorities under the Settlement Act may also be the authorities under the MVAT Act but while exercising powers under the Settlement Act, they cannot invoke provisions of Section 50 of the MVAT and that too in review proceedings under the Settlement Act.

The Settlement Act nowhere provides or empowers the authorities under the said Act to import the provisions of the MVAT Act and more particularly provisions of Section 50 of the MVAT Act for determination of the requisite amount to be paid under the Settlement Act, added the Bench.

On conjoint reading of Section 50 and Rule 60, the Bench opined that unless an assessee desires for adjustment of refund of one year against demand of another year, the Commissioner cannot, u/s 50 adjust the same on its own volition and even if he proposes to do so he has to do so by giving an opportunity of hearing.

In the instant case, admittedly there is neither such desire expressed by the assessee nor shown any order u/s 50 which is passed for adjusting the refund against demand, added the Bench.

The Bench further stated that the calculation of arrears and amount payable under the Settlement Act has to be strictly in accordance with the scheme of the said Act and if on the day when the application was made and the order of settlement was passed, there was no order adjusting the refund, then how can there be an error in the settlement order.

Hence, the High Court allowed the Assessee's petition.

Counsel for Petitioner/ Assessee: Anay Y. Banhatii, Asmita Gupta and Siddhant Chhabra

Counsel for Respondent/ Revenue: S. D. Vyas and Vrishali Raje

Case Title: Andreas Stihl Private Limited versus The Joint Commissioner of State Tax & ors

Case Number: WRIT PETITION NO. 15511 OF 2023

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