Dr Dhananjaya Y Chandrachud, J
1 Leave granted.
2 This appeal arises from a judgment and order of the High Court of Judicature at
Bombay dated 8 November 2019.1
3 The issue, which arises in the appeal, is whether amounts which have been
deposited under protest prior to an order of assessment can be adjusted against
the mandatory pre-deposit required for filing an appeal under Section 26(6A) of
the Maharashtra Value Added Tax Act 20022.
Signature4 Not Verified The appellant is a public limited company which engages in the manufacture Sanjay Kumar
1 WP No. 8834 of 2018 2 “MVAT Act”
2016 and 22 November 2016, an investigation was carried out by the officers of
the Sales Tax Department at the premises of the appellant. A notice to show
cause was issued on 22 November 2016, to which the appellant filed a reply
contesting the proposed tax liabilities. On 8 December 2016 and 11 January
2017, the appellant made a protest payment of Rs 3,64,24,388, comprising an
amount of Rs 2,32,37,249 towards tax and Rs 1,31,87,139 towards interest for
Assessment Year3 2013-14. On 30 October 2017, a notice to show cause was
issued to the appellant in relation to the imposition of penalty, to which the
appellant submitted its reply.
5 On 15 April 2017, Sections 26(6A), 26(6B) and 26(6C) were introduced into the
MVAT Act by Maharashtra Act XXXI of 2017 mandating a pre-deposit for the filing
of appeals. For AY 2013-14, an order of assessment was passed on 26
December 2017 under the Maharashtra Tax on the Entry of Goods into Local
Areas Act 2002, imposing a tax demand of Rs 10,44,54,708, together with the
penalty in an equivalent amount, besides a demand for interest of Rs
7,09,06,928. The total dues under the assessment order were, thus, in the
amount of Rs 27,98,36,344. After adjustment of the amounts paid, under
protest, by the appellant, the amount held to be payable was Rs 24,34,11,956.
6 An appeal was filed against the order of assessment, which was rejected by the
appellate authority. The appellant was informed by the Joint Commissioner of
Sales Tax (HQ) 1 by a letter dated 4 June 2018 that the payments which were
made under protest could not be considered towards pre-deposit for the purpose
of Section 26(6A). A petition under Article 226 of the Constitution was instituted
to challenge the letter dated 4 June 2018.
3 “AY”
7 Arguments were heard and the petition was reserved for judgment on 14
February 2019. By a judgment delivered nearly seven months thereafter, on 8
November 2019, the Division Bench of the High Court has dismissed the petition.
The High Court has held that once an order of assessment has been passed, any
amounts which have been paid albeit under protest, would have to be adjusted
against the total tax liability and the demand to follow. Hence, the view of the
High Court was that the appellant was duty bound to deposit 10 per cent of the
total tax demand after adjusting the amount which had already been paid under
protest, prior to the order of assessment.
8 The correctness of the view of the High Court turns upon the interpretation of
Section 26(6A) of the MVAT Act, which reads as follows:
“6A) No appeal against an order, passed on or after the
commencement of the Maharashtra Tax Laws (Levy,
Amendment and Validation) Act, 2017 (Mah XXXI of
2017), shall be filed before the appellate authority in first
appeal, unless it is accompanied by the proof of payment
of an aggregate of the following amounts, as applicable,-
(a) in case of an appeal against an order, in which claim
against declaration or certificate, has been disallowed on
the ground of non-production of such declaration or, as
the case may be, certificate then, amount of tax, as
provided in the proviso to sub-section (6),
(b) in case of an appeal against an order, which involves
disallowance of claims as stated in clause (a) above and
also tax liability on other grounds, then, an amount equal
to 10 per cent of the amount of tax, disputed by the
appellant so far as such tax liability pertains to tax, on
grounds, other than those mentioned in clause (a),
(c) in case of an appeal against an order, other than an
order, described in clauses (a) and (b) above, an amount
equal to 10 per cent. of the amount of tax disputed by
the appellant,
(d) in case of an appeal against a separate order imposing
only penalty, deposit of an amount, as directed by the
appellate authority, which shall not in any case, exceed
10 per cent of the amount of penalty, disputed by
appellant.”
9 Mr V Sridharan, Senior Counsel appearing on behalf of the appellant, submits
that:
(i) clauses (b) and (c) of Section 26(6A) stipulate that the appeal has to be filed,
together with proof of payment of an amount equal to 10 per cent “of the
amount of tax disputed by the appellant”;
(ii) The statutory provision does not stipulate that 10 per cent of the tax in
arrears has to be deposited, but requires that 10 per cent of the tax disputed by
the appellant has to accompany the filing of the appeal, together with the full
amount of the undisputed tax; and
(iii) Since the entirety of the tax, as assessed and demanded, has been
disputed, 10 per cent of that amount was required to be deposited, together
with the appeal and the amount which was paid under protest, cannot be
excluded from consideration.
10 On the other hand, Mr Rahul Chitnis, Chief Standing Counsel for the State of
Maharashtra, submitted that the dispute arises after the order of assessment,
which was made under the provisions of Section 23 of the MVAT Act.
Consequently, 10 per cent of the amount of tax, as demanded in pursuance of
the order of assessment, has to be paid as a condition precedent for filing the
appeal.
11 While analyzing the rival submissions, it is necessary to note, at the outset, 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. Justice Bhagwati in A.V Fernandez v. State of Kerala4 , writing for a
Constitution Bench, elucidated the principle of strict interpretation in construing
a taxing statue as follows:
“29. In construing fiscal statutes and in determining
the liability of a subject to tax one must have regard
to the strict letter of the law. If the revenue satisfies
the court that the case falls strictly within the
provisions of the law, the subject can be taxed. If, on
the other hand, the case of not covered within the
four corners of the provisions of the taxing statue,
no tax can be imposed by inference or by analogy or
by trying to probe into the intentions of the
Legislature and by considering what was the
substance of the matter.”
12 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
4 AIR 1957 SC 657
which have been used by the legislature in Section 26(6A). The provisions of a
taxing statute have to be construed as they stand, adopting the plain and
grammatical meaning of the words used. Consequently, the appellant was liable
to pay, in terms of Section 26(6A), 10 per cent of the tax disputed together with
the filing of the appeal. 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. Hence, 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.
13 Subject to the aforesaid verification, we allow the appeal and set aside the
impugned judgment and order of the High Court of Judicature at Bombay dated 8
November 2019 in Writ Petition No 8834 of 2018. The appeal shall stand
restored to the file of the appellate authority.
14 Pending application, if any, stands disposed of.
[Dr Dhananjaya Y Chandrachud]
[A S Bopanna]
New Delhi; December 03, 2021 -S-
ITEM NO.22 Court 4 (Video Conferencing) SECTION IX
Petition(s) for Special Leave to Appeal (C) No(s).28607/2019
(Arising out of impugned final judgment and order dated 08-11-2019 in WP No. 8834/2018 passed by the High Court of Judicature at Bombay)
VVF (INDIA) LIMITED Petitioner(s)
VERSUS
THE STATE OF MAHARASHTRA & ORS. Respondent(s)
Date : 03-12-2021 This petition was called on for hearing today.
For Petitioner(s) Mr. V Sridharan, Sr. Adv.
Mr. Sriram Sridharan, Adv.
Mr. Aditya Bhattacharya, Adv.
Ms. Apeksha Mehta, Adv.
Mr. Sahil Parghi, Adv.
Ms. Mounica Kasturi, Adv.
Mr. Akash Pratap Singh, Adv.
Ms. Charanya Lakshmikumaran, AOR
For Respondent(s) Mr. Rahul Chitnis, Adv.
Mr. Sachin Patil, AOR
Mr. Aaditya A. Pande, Adv.
Mr. Geo Joseph, Adv.
UPON hearing the counsel the Court made the following
O R D E R
1 Leave granted.
2 The appeal is allowed in terms of the signed reportable judgment.
3 Pending application, if any, stands disposed of.
(Signed reportable judgment is placed on the file)