2021 (12) TMI 477 - SC - VAT and Sales Tax

Maintainability of appeal - whether the amount deposited under protest prior to an order of assessment can be adjusted against the mandatory pre-deposit required for filing an appeal? - Section 26(6A) of the Maharashtra Value Added Tax Act 2002 - HELD THAT - Under the provisions of Section 26(6A), the aggregate of the amounts stipulated in the sub-clauses of the provision has to be deposited and proof of payment is required to be produced together with the filing of the appeal. Both clauses (b) and (c) employ the expression an amount equal to ten per cent of the amount of tax disputed by the appellant . The entirety of the undisputed amount has to be deposited and 10 per cent of the disputed amount of tax is required to be deposited by the appellant. In the present case, the appellant disputes the entirety of the tax demand. Consequently, on the plain language of the statute, 10 per cent of the entire disputed tax liability would have to be deposited in pursuance of Section 26(6A). The amount which has been deposited by the appellant anterior to the order of assessment cannot be excluded from consideration, in the absence of statutory language to that effect. A taxing statute must be construed strictly and literally. There is no room for intendment. If the legislature intended that the protest payment should not be set off as the deposit amount, then a provision would have to be made to the effect that 10 per cent of the amount of tax in arrears is required to be deposited which is not the case. The High Court, while rejecting the petition, placed reliance on the fact that there has to be a proof of payment of the aggregate of the amounts, as set out in clauses (a) to (d) of Section 26(6A). The second reason which weighed with the High Court, is that any payment, which has been made albeit under protest, will be adjusted against the total liability and demand to follow. Neither of these considerations can affect the interpretation of the plain language of the words which have been used by the legislature in Section 26(6A) - There is no reason why the amount which was paid under protest, should not be taken into consideration. It is common ground that if that amount is taken into account, the provisions of the statute were duly complied with. The rejection of the appeal was not in order and the appeal would have to be restored to the file of the appellate authority, subject to due verification that 10 per cent of the amount of tax disputed, as interpreted by the terms of this judgment, has been duly deposited by the appellant. The appeal shall stand restored to the file of the appellate authority.

Summary

Issues:
Whether amounts deposited under protest prior to an assessment order can be adjusted against mandatory pre-deposit for filing an appeal under Section 26(6A) of the Maharashtra Value Added Tax Act 2002 (MVAT Act).

Analysis:
The appellant, a public limited company, engaged in the manufacture and sale of products, faced an investigation by the Sales Tax Department resulting in a tax demand. The appellant made protest payments before an assessment order was issued, leading to a dispute over whether these amounts could be adjusted against the mandatory pre-deposit required for filing an appeal under Section 26(6A) of the MVAT Act.

The introduction of Sections 26(6A), 26(6B), and 26(6C) into the MVAT Act mandated a pre-deposit for filing appeals. The appellant's appeal against the assessment order was rejected by the appellate authority, leading to a legal challenge regarding the adjustment of the amounts paid under protest against the total tax liability.

The interpretation of Section 26(6A) was crucial in determining whether the appellant was required to deposit 10% of the total tax demand after adjusting the amount paid under protest. The appellant argued that 10% of the disputed tax amount needed to be deposited along with the appeal, while the State of Maharashtra contended that 10% of the tax demanded post-assessment had to be paid.

The Supreme Court analyzed the statutory provisions strictly and concluded that 10% of the entire disputed tax liability had to be deposited as per Section 26(6A). The Court emphasized that the amount paid under protest could not be excluded unless explicitly provided for in the statute. Quoting Justice Bhagwati, the Court highlighted the need for strict interpretation of taxing statutes without room for intendment.

The Court overturned the High Court's decision, emphasizing that the appellant complied with the statutory requirements by considering the amount paid under protest. The appeal was allowed, setting aside the High Court's judgment and restoring the case to the appellate authority for verification that the required deposit had been made in accordance with the Court's interpretation of Section 26(6A).