Adjusting Refund Under Amnesty Scheme Without Notice Is In Utter Disregard Of Principles Of Natural Justice: Bombay HC

The Bombay High Court has observed that adjusting refund under the Amnesty Scheme without notice and without responding to any communication is in utter disregard of the well-established principles of natural justice.

A Division Bench comprising Justice Nitin Jamdar and Justice Abhay Ahuja held, “… 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.”

The Bench also held that in the face of the objectives of the Amnesty Scheme, the State cannot submit its affidavit or the AGP cannot be heard to be arguing that just because of the communication dated April 12, 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 April 12, 2019.

Senior Advocate R.A. Dada appeared on behalf of the petitioner while AGP Shruti D. Vyas appeared on behalf of the State.

Brief Facts -

The petitioner company was seeking quashing of the Refund Adjustment Order issued by the Deputy Commissioner of State Tax 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. Pursuant to an assessment under Section 23 of the MVAT Act for the financial year 2010-2011, the Assessing Officer passed an Assessment Order, raising a demand of Rs. 17,76,93,422/- including tax and interest and aggrieved by the same, the petitioner filed an appeal which resulted in a reduced demand of Rs. 14,00,74,890/-.

In 2019, the petitioner made an application under the Amnesty Scheme for the financial year 2010-2011 for settlement of dues by making a payment of Rs. 8,46,84,821/-, which was acknowledged by the respondent authorities. It was the case of the respondents that since past dues of the petitioner amounting to Rs. 14,00,74,890/- were already available for recovery since April 12, 2019, as per the proviso of Section 50 (1) of MVAT Act, the Commissioner was mandated to first apply the excess towards the recovery of any amount due from the dealer and then proceed to refund the balance amount, if any, under Section 50 (1) of the MVAT Act.

The High Court in view of the facts and circumstances of the case noted, “Though, requirement of the communication of the stand of the authorities to a communication/representation of the Petitioner will depend on the facts and circumstances of each case and we are not laying down any absolute proposition of law in this regard, however, in this case, the requirement of communication of the stand of the Respondent-Authority will have to be interpreted as a necessity in the light of our observations, which in our view, has resulted in grave prejudice to the Petitioner.”

The Court further noted that the Statement of Objects and Reasons for introducing the Amnesty Scheme clearly record that a large number of cases and litigation are pending in respect of the repealed laws pursuant to the introduction of the GST Act locking substantial amounts 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 June 30, 2017, so that the settlement of such disputes would safeguard the revenue and also settle the arrears of tax.

Accordingly, the Court allowed the plea, set aside the defect notice and refund adjustment order, and remanded the matter back to the respondent authorities.

Cause Title- TML Business Services Limited v. The Deputy Commissioner of State Tax & Ors. (Neutral Citation: 2023:BHC-AS:13614-DB)

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