2024 (8) TMI 1326 - HC - VAT and Sales Tax

Interpretation of provisions of the Maharashtra Municipal Corporation Act, 1949 (the Act) and the Maharashtra Municipal Corporation (Local Body Tax) Rules (the Rules) - Scope of the phrase disputed tax as appearing in Section 406 (8) of the Act - whether Petitioner is liable to pay Local Body Tax (LBT)? - HELD THAT - The scheme of levy of LBT makes a distinction between levy of tax and interest and penalty. Rule 5 of the said rules provides for liability to pay LBT in certain cases and various sub-rules therein prescribes liability to pay LBT including any interest and penalty. Rule 27 of the said Rules provides for lump sum payment of LBT in case of registered dealer having small turnover and the LBT based on the turnover ranges from Rs. 2,000/- to Rs. 5,000/-. The provisions in the Act, the said Rules and Forms point to the fact that even the law makers wanted to indicate that tax, interest and penalty are distinct. If the legislature intended to make tax, interest and penalty as a pre-condition they would have simply stated disputed demand and not disputed tax . In Chennai Network Infrastructure Limited 2017 (4) TMI 1152 - BOMBAY HIGH COURT the issue that arose before Co-ordinate Bench of this Court was for filing an appeal under Section 406 of the Act for challenging the penalty imposed under Section 267-A of the said Act, whether the appellant is required to pay the said penalty as a condition precedent for entertaining appeal. It was the contention of the appellant therein that penalty is not a tax and Section 406 requires, as a condition precedent for entertaining appeal, payment of disputed tax and since the penalty imposed was not a tax, no amount is required to be paid. This Court rejected the contention of the appellant after analysing the provisions of Sections 128-A, 129 and 267-A which dealt with property taxes - the Court came to a conclusion that an appellant has to pay penalty amount for entertaining the appeal. In the present case the issue does not relate to property tax under Sections 128-A, 129 and 267-A of the Act nor it is the case made out by respondent in the impugned order that Section 406 (2) of the Act is applicable to petitioner. The issue raised in the appeal by petitioner is with respect to levy of LBT on entry of goods within the Municipal limits of respondents and the interest is charged on the premise that the demand made for the period 2015 to 2017 has not been paid and further penalty of Rs. 15,000/- is imposed under Rule 48 of the said Rules. The levy of LBT is governed by Section 127 of the Act read with the said Rules. Therefore, the provisions of Sections 128-A, 129 and 267-A are not applicable and are also not the subject matter of the appeal filed by petitioner. The impugned order dated 22nd February 2024 is hereby quashed and set aside and the matter is remanded for denovo consideration. The appellate authority shall dispose the appeal in accordance with law by giving a personal hearing, notice whereof shall be communicated atleast 5 working days in advance - Petition disposed off.

Summary

Issues: Interpretation of the phrase "disputed tax" in Section 406 (8) of the Maharashtra Municipal Corporations Act, 1949.

Analysis:
1. The petitioner challenged an order requiring the deposit of disputed tax, interest, and penalty under Section 406 of the Act. The key issue was the interpretation of the phrase "disputed tax" in Section 406 (8) of the Act.

2. The court examined the distinction between tax, interest, and penalty under the Maharashtra Municipal Corporation (Local Body Tax) Rules. The petitioner argued that only the disputed tax needed to be deposited for an appeal, while the respondents contended that interest and penalty were also required.

3. The court analyzed the scheme of levy of Local Body Tax (LBT) under the Act and Rules. It noted that various provisions, including Rule 33, differentiated between tax, interest, and penalty. Forms and rules emphasized the separation of these components in tax assessments.

4. Referring to previous judgments, the court distinguished the present case from precedents related to property tax. It highlighted that the issue in the appeal concerned LBT, not property tax, and thus the interpretation of "disputed tax" was specific to the LBT levy.

5. The court cited the decision in C.G. International P. Ltd. case, where it was held that the Act recognized the difference between tax, interest, and penalty. Based on this interpretation, the court ruled that only the disputed tax needed to be deposited for entertaining the appeal.

6. Consequently, the court quashed the impugned order and remanded the matter for fresh consideration. It directed the appellate authority to provide a personal hearing, advance notice of reliance on judgments, and a reasoned order addressing all submissions.

Conclusion:
The court's decision clarified that under Section 406 (8) of the Act, the phrase "disputed tax" does not encompass interest and penalty, affirming that only the disputed tax amount needs to be deposited for appeal purposes.