Adjusting a refund to the amount of tax owed without giving prior notification is not appropriate
Fact and issue of the case
By this petition, the Petitioner is seeking quashing of the Refund Adjustment Order dated 22 May 2019 issued by Respondent No.1 -Deputy Commissioner of State Tax, Pune, VAT-E, 622 (LTU), Pune by which the statutory refund pertaining to the year 2011-2012 available to the Petitioner was adjusted towards the statutory dues payable by the Petitioner for the year 2010-2011 purportedly without notice.
Petitioner statedly is a limited company engaged in procuring vehicles from Tata Motors Limited (“TML”) and selling them to dealers within and outside the State of Maharashtra. The Petitioner was formerly known as the “TML Distribution Limited”. Pursuant to order dated 11 March 2022 passed by NCLT, Mumbai Bench V in CA (CAA/255/MB-V/2021) all assets and liabilities of TML Distribution Company Limited have been transferred from transferor company (TML Distribution Company Limited) to the transferee company (TML Business Services Limited). Petitioner is registered under the Maharashtra Value Added Tax Act, 2002 (“MVAT Act”) and Central Sales Tax Act, 1956 (“CST Act”).
Pursuant to an assessment under Section 23 of the MVAT Act for the financial year 2010-2011, the Assessing Officer passed an Assessment Order dated 30 March 2015, raising a demand of Rs. 17,76,93,422/- including tax and interest. Aggrieved by the same, the Petitioner filed an appeal which resulted in a reduced demand of Rs. 14,00,74,890/-.
Observation of the court
Further, in our view, serious prejudice has also been caused to the Petitioner by the Respondent Authorities in not putting the Petitioner to notice of the adjustment that was effected pursuant to the Refund Adjustment Order.
The Statement of Objects and Reasons for introducing the Amnesty Scheme clearly record that as large number of cases and litigation are pending in respect of the repealed laws pursuant to the introduction of the GST Act locking substantial amount of tax, therefore, the Government considered it expedient to provide a scheme for settlement of arrears of tax, interest, penalty or late fee under those Acts for the period ending on or before 30 June 2017, so that the settlement of such disputes would safeguard the revenue and also settle the arrears of tax.
In the face of such objectives of the Amnesty Scheme, the State cannot submit in its affidavit or the AGP cannot be heard to be arguing that just because of the communication dated 12 April 2019 pursuant to which the Petitioner withdrew the intimation to file an appeal in respect of the year 2010-2011 where the dues were Rs. 14,00,74,890/-, that the said amount became available for recovery from 12 April 2019. In our view, such an approach by the State clearly militates against the objectives of the Amnesty Scheme. Having said this, we do not think it is necessary for us to dwell into the rival contentions of the parties on the merits of the matter, in as much as the very action of the Respondent authorities in making the adjustment of refund due to Petitioner for the year 2011-2012 while considering the application under the Amnesty Scheme for the year 2010-2011 without notice to the Petitioner and even without responding to Petitioner’s communication dated 12 April 2019, in our view is in utter disregard of the well established principles of natural justice and has caused grave prejudice to the Petitioner, which action cannot be sustained in any manner. The Petitioner cannot in the circumstances be relegated to the statutory remedy of Appeal.
Therefore, in view of the breach of the principles of natural justice as noted above, we are inclined to set aside the Defect Notice dated 22 May 2019 and the Refund Adjustment Order dated 23 May 2019 and remand the matter back to the Respondent Authorities, which we hereby do, and direct the Respondent Authorities to consider the refund application dated 13 May 2019 after giving an opportunity of hearing and after considering the submissions of the Petitioner pass a reasoned order in accordance with law, within a period of six weeks from the date of this order.
Petition stands allowed in the above terms. Parties to bear their own costs.
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
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