2023 (5) TMI 235 - HC - VAT and Sales Tax

Adjustment of Refund with the dues - 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 - HELD THAT - By communication dated 12 April 2019, Petitioner had informed the Respondent Authorities that it was desirous of availing the benefit of the Amnesty Scheme and therefore, it had withdrawn the intimation made in Form-314 of its intention to file an appeal against the order for the year 2010-2011 and had also requested that refund of Rs. 10,69,89,606/- for the year 2011-2012 be kept on hold till filing of its application under the Amnesty Scheme. It is not in dispute that against the said communication there was no response from the Respondent Authorities. The Petitioner filed an application under the Amnesty Scheme on 13 May 2019 by making a payment of Rs. 8,46,84,821/-. No objection to the communication dated 12 April 2019 or any response to the fact of the request made by the Petitioner to keep the refund on hold was communicated to the Petitioner by the Respondent Authorities. The Defect Notice and the Refund Adjustment Order are apart only by a day and this could not have provided sufficient opportunity to the Petitioner even to seek redressal of his grievance from the Authorities. Even while the Authorities had not responded to the communication dated 12 April 2019 of the Petitioner, whereby the Petitioner had requested the Authorities to keep the refund amount on hold as they were in the process of filing an application under the Amnesty Scheme, the Respondent Authorities, in our view, could not have, while the application for the Amnesty Scheme was under consideration in the absence of any response to the erstwhile Petitioner's communication dated 12 April 2019 gone ahead without any notice to the Petitioner and adjusted the refund amount for the year 2011-2012 against the dues for the year 2010-2011 and that too when the Petitioner had already filed the application under the Amnesty Scheme which was accepted by the Respondent Authorities alongwith the payment of Rs. 8,46,84,821/-under the said scheme. Non communication of any stand with respect to the Petitioner's communication dated 12 April 2019 to keep the refund for the year 2011-2012 on hold led the Petitioner to believe that the request to keep the refund on hold was accepted. And based on this belief Petitioner went ahead and took an irretrievable decision including filing of the application dated 13 May 2019 under the Amnesty Scheme - 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. 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 - in view of the breach of the principles of natural justice, the Defect Notice dated 22 May 2019 and the Refund Adjustment Order dated 23 May 2019 are set aside and the matter remanded back to 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 - petition allowed by way of remand.

Summary

Issues Involved:
1. Quashing of Refund Adjustment Order dated 22 May 2019.
2. Adjustment of statutory refund without notice.
3. Application and implications of the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Ordinance, 2019 (Amnesty Scheme).

Issue 1: Quashing of Refund Adjustment Order dated 22 May 2019
The Petitioner sought to quash the Refund Adjustment Order dated 22 May 2019 issued by the Deputy Commissioner of State Tax, Pune, which adjusted the statutory refund for the year 2011-2012 towards dues for the year 2010-2011 without notice. The court found that the actions of the Respondent Authorities in adjusting the refund without notice to the Petitioner were in violation of the principles of natural justice and caused grave prejudice to the Petitioner. Consequently, the court set aside the Defect Notice dated 22 May 2019 and the Refund Adjustment Order dated 23 May 2019.

Issue 2: Adjustment of statutory refund without notice
The Petitioner argued that the Respondents should have refunded the full amount due for the year 2011-2012 and then set off the amount paid by the Petitioner under the Amnesty Scheme for the year 2010-2011. The court noted that the Respondent Authorities failed to provide notice to the Petitioner before making the adjustment of the refund, which contravened Section 32(4) of the MVAT Act. The court emphasized that no action adverse to a party can be taken without giving adequate notice and an opportunity to defend.

Issue 3: Application and implications of the Amnesty Scheme
The Petitioner had applied under the Amnesty Scheme to settle dues for the year 2010-2011 and paid Rs. 8,46,84,821/-. The Respondents adjusted the refund of Rs. 10,69,89,606/- for the year 2011-2012 against the dues for 2010-2011. The court found that the Respondents' actions were contrary to the objectives of the Amnesty Scheme, which aimed to settle disputes and safeguard revenue. The court held that the Respondents' failure to respond to the Petitioner's communication and the subsequent adjustment without notice was unjust and illegal.

Conclusion:
The court allowed the petition, set aside the Defect Notice and Refund Adjustment Order, and remanded the matter back to the Respondent Authorities for reconsideration of the refund application after giving the Petitioner an opportunity of hearing and passing a reasoned order in accordance with law within six weeks. The court emphasized the importance of adhering to principles of natural justice and the objectives of the Amnesty Scheme.