VVF (INDIA) LIMITED versus THE STATE OF MAHARASHTRA & ORS on 3 December 2021

108

SUPREME COURT REPORTS

[2021] 12 S.C.R.

VVF (INDIA) LIMITED

A

v.

THE STATE OF MAHARASHTRA & ORS

(Civil Appeal No 7387 of 2021)

BDECEMBER 03, 2021

[DR. DHANANJAYA Y CHANDRACHUD ANDA. S. BOPANNA, JJ]

Maharashtra Value Added Tax Act, 2002: s.26(6A) – Pursuantto investigation carried out by the Sales Tax Department at theCpremises of appellant, demand notice issued to appellant – Appellantmade a protest payment of Rs.3.64 crores comprising an amount ofRs.2.32 crores towards tax and Rs.1.31 crores towards interest forassessment year 2013-14 – Another show cause notice issued toappellant in relation to imposition of penalty – On 15 April 2017,Dss.26(6A), 26(6B) and 26(6C) were introduced into the MVAT Actby Maharashtra Act XXXI of 2017 mandating a pre-deposit for thefiling of appeals – For AY 2013-14, an order of assessment passedunder the Maharashtra Tax on the Entry of Goods into Local AreasAct 2002, imposing a tax demand of Rs 10.44 crores, together withthe penalty in an equivalent amount, besides a demand for interestEof Rs 7.09 crores – The total dues under the assessment order were,thus, in the amount of Rs 27.98 crores – After adjustment of theamounts paid, under protest, by the appellant, the amount held tobe payable was Rs 24.34 crores – Appellant was informed by SalesTax Department that the payments which were made under protestFcould not be considered towards pre-deposit for the purpose ofs.26(6A) – Appellant filed writ petition under Art.226 of theConstitution – High Court dismissed the petition holding that oncean order of assessment has been passed, any amounts which havebeen paid albeit under protest, would have to be adjusted againstthe total tax liability and the demand to follow – Whether amountsGwhich have been deposited under protest prior to an order ofassessment can be adjusted against the mandatory pre-depositrequired for filing an appeal under s.26(6A) of the Act of 2002 –Held: Under the provisions of s.26(6A), the aggregate of the amountsstipulated in the sub-clauses of the provision has to be depositedHand 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 bythe appellant” – The entirety of the undisputed amount has to bedeposited and 10 per cent of the disputed amount of tax is requiredto be deposited by the appellant – In the instant case, the appellantdisputes the entirety of the tax demand – Consequently, on the plainlanguage of the statute, 10 per cent of the entire disputed tax liabilitywould have to be deposited in pursuance of s.26(6A) – The amountwhich has been deposited by the appellant anterior to the order ofassessment cannot be excluded from consideration, in the absenceof statutory language to that effect – The provisions of a taxingstatute have to be construed as they stand, adopting the plain andgrammatical meaning of the words used. Consequently, the appellantwas liable to pay, in terms of s.26(6A), 10 per cent of the tax disputedtogether with the filing of the appeal – There is no reason why theamount which was paid under protest, should not be taken intoconsideration – Rejection of the appeal was not in order and theappeal would have to be restored to the file of the appellateauthority, subject to due verification that 10 per cent of the amountof tax disputed has been duly deposited by the appellant –Interpretation of statutes.

Interpretation of statutes: A taxing statute must be construedstrictly and literally – There is no room for intendment – MaharashtraValue Added Tax Act, 2002 – s.26(6A).

Allowing the appeal, the Court

Conclusion

HELD: 1. On the plain language of the statute, 10 per centof the entire disputed tax liability would have to be deposited inpursuance of Section 26(6A). The amount which has beendeposited by the appellant anterior to the order of assessmentcannot be excluded from consideration, in the absence of statutorylanguage to that effect. A taxing statute must be construed strictlyand literally. There is no room for intendment. If the legislatureintended that the protest payment should not be set off as thedeposit amount, then a provision would have to be made to theeffect that 10 per cent of the amount of tax in arrears is requiredto be deposited which is not the case. [Para 11][113-G-H;114-A-B]

ABC

D

E

FG

H

110SUPREME COURT REPORTS

[2021] 12 S.C.R.

AA.V Fernandez v. State of Kerala AIR 1957 SC 657 :1957 SCR 837 – relied on.

2. The High Court, while rejecting the petition, placedreliance on the fact that there has to be a proof of payment of theaggregate of the amounts, as set out in clauses (a) to (d) of SectionB26(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 ofthe plain language of the words which have been used by thelegislature in Section 26(6A). The provisions of a taxing statuteChave to be construed as they stand, adopting the plain andgrammatical meaning of the words used. Consequently, theappellant was liable to pay, in terms of Section 26(6A), 10 percent of the tax disputed together with the filing of the appeal.There is no reason why the amount which was paid under protest,Dshould not be taken into consideration. [Para 12][114-D-G]

Case Law Reference

1957 SCR 837relied onPara 11

CIVIL APPELLATE JURISDICTION: Civil Appeal No.7387 of

2021.E

From the Judgment and Order dated 08.11.2019 of the High Courtof Judicature at Bombay in Writ Petition No.8834 of 2018.

V. Sridharan, Sr. Adv., Sriram Sridharan, Aditya Bhattacharya,Ms. Apeksha Mehta, Sahil Parghi, Ms. Mounica Kasturi, Akash PratapSingh, Ms. Charanya Lakshmikumaran, Advs. for the Appellant.F

Rahul Chitnis, Sachin Patil, Aaditya A. Pande, Geo Joseph, Advs.for the Respondents.

The Judgment of the Court was delivered by DR. DHANANJAYA Y CHANDRACHUD, J.

G1. Leave granted.

2. This appeal arises from a judgment and order of the High Courtof Judicature at Bombay dated 8 November 2019.[1]

3. The issue, which arises in the appeal, is whether amounts whichhave been deposited under protest prior to an order of assessment canbe adjusted against the mandatory pre-deposit required for filing an appealunder Section 26(6A) of the Maharashtra Value Added Tax Act 2002[2].

4. The appellant is a public limited company which engages in themanufacture and sale of oleo-chemicals and personal care products.Between 15 November 2016 and 22 November 2016, an investigationwas carried out by the officers of the Sales Tax Department at thepremises of the appellant. A notice to show cause was issued on 22November 2016, to which the appellant filed a reply contesting theproposed tax liabilities. On 8 December 2016 and 11 January 2017, theappellant made a protest payment of Rs 3,64,24,388, comprising anamount of Rs 2,32,37,249 towards tax and Rs 1,31,87,139 towards interestfor Assessment Year[3] 2013-14. On 30 October 2017, a notice to showcause 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) wereintroduced into the MVAT Act by Maharashtra Act XXXI of 2017mandating a pre-deposit for the filing of appeals. For AY 2013-14, anorder of assessment was passed on 26 December 2017 under theMaharashtra 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 inan 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 ofRs 27,98,36,344. After adjustment of the amounts paid, under protest, bythe appellant, the amount held to be payable was Rs 24,34,11,956.

6. An appeal was filed against the order of assessment, whichwas rejected by the appellate authority. The appellant was informed bythe Joint Commissioner of Sales Tax (HQ) 1 by a letter dated 4 June2018 that the payments which were made under protest could not beconsidered towards pre-deposit for the purpose of Section 26(6A). Apetition under Article 226 of the Constitution was instituted to challengethe letter dated 4 June 2018.

7. Arguments were heard and the petition was reserved forjudgment on 14 February 2019. By a judgment delivered nearly seven 2 “MVAT Act”

3 “AY”

A

B

C

D

E

F

G

H

Amonths thereafter, on 8 November 2019, the Division Bench of the HighCourt has dismissed the petition. The High Court has held that once anorder of assessment has been passed, any amounts which have beenpaid albeit under protest, would have to be adjusted against the total taxliability and the demand to follow. Hence, the view of the High Courtwas that the appellant was duty bound to deposit 10 per cent of the totalBtax demand after adjusting the amount which had already been paidunder protest, prior to the order of assessment.

8. The correctness of the view of the High Court turns upon theinterpretation of Section 26(6A) of the MVAT Act, which reads asfollows:C

“6A) No appeal against an order, passed on or after thecommencement 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 anDaggregate of the following amounts, as applicable,- (a)in case of an appeal against an order, in which claim againstdeclaration or certificate, has been disallowed on the groundof non-production of such declaration or, as the case maybe, certificate then, amount of tax, as provided in the provisoEto sub-section (6), (b)in case of an appeal against an order, which involvesdisallowance of claims as stated in clause (a) above andalso tax liability on other grounds, then, an amount equal toF10 per cent of the amount of tax, disputed by the appellantso far as such tax liability pertains to tax, on grounds, otherthan 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 toG10 per cent. of the amount of tax disputed by the appellant, (d)in case of an appeal against a separate order imposing onlypenalty, deposit of an amount, as directed by the appellateauthority, which shall not in any case, exceed 10 per centof the amount of penalty, disputed by appellant.”

H

9. Mr V Sridharan, Senior Counsel appearing on behalf of theappellant, submits that:

A

(i) clauses (b) and (c) of Section 26(6A) stipulate that theappeal has to be filed, together with proof of payment of anamount equal to 10 per cent “of the amount of tax disputedby the appellant”; B

(ii) The statutory provision does not stipulate that 10 per centof the tax in arrears has to be deposited, but requires that10 per cent of the tax disputed by the appellant has toaccompany the filing of the appeal, together with the fullamount of the undisputed tax; andC

(iii) Since the entirety of the tax, as assessed and demanded,has been disputed, 10 per cent of that amount was requiredto be deposited, together with the appeal and the amountwhich was paid under protest, cannot be excluded fromconsideration.

D

10. On the other hand, Mr Rahul Chitnis, Chief Standing Counselfor the State of Maharashtra, submitted that the dispute arises after theorder of assessment, which was made under the provisions of Section23 of the MVAT Act. Consequently, 10 per cent of the amount of tax, asdemanded in pursuance of the order of assessment, has to be paid as acondition precedent for filing the appeal.

E

11. While analyzing the rival submissions, it is necessary to note,at the outset, that, under the provisions of Section 26(6A), the aggregateof the amounts stipulated in the sub-clauses of the provision has to bedeposited and proof of payment is required to be produced together withthe 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 theappellant”. The entirety of the undisputed amount has to be depositedand 10 per cent of the disputed amount of tax is required to be depositedby the appellant. In the present case, the appellant disputes the entiretyof the tax demand. Consequently, on the plain language of the statute, 10per cent of the entire disputed tax liability would have to be deposited inpursuance of Section 26(6A). The amount which has been deposited bythe appellant anterior to the order of assessment cannot be excludedfrom consideration, in the absence of statutory language to that effect.

F

G

H

114SUPREME COURT REPORTS

AA taxing statute must be construed strictly and literally. There is no roomfor intendment. If the legislature intended that the protest payment shouldnot be set off as the deposit amount, then a provision would have to bemade to the effect that 10 per cent of the amount of tax in arrears isrequired to be deposited which is not the case. Justice Bhagwati in A.VFernandez v. State of Kerala[4] , writing for a Constitution Bench,Belucidated the principle of strict interpretation in construing a taxing statueas follows:

“29. In construing fiscal statutes and in determining the liability ofa subject to tax one must have regard to the strict letter of thelaw. If the revenue satisfies the court that the case falls strictlyCwithin the provisions of the law, the subject can be taxed. If, onthe other hand, the case of not covered within the four corners ofthe provisions of the taxing statue, no tax can be imposed byinference or by analogy or by trying to probe into the intentions ofthe Legislature and by considering what was the substance of theDmatter.”

12. The High Court, while rejecting the petition, placed relianceon the fact that there has to be a proof of payment of the aggregate ofthe amounts, as set out in clauses (a) to (d) of Section 26(6A). Thesecond reason which weighed with the High Court, is that any payment,Ewhich has been made albeit under protest, will be adjusted against thetotal liability and demand to follow. Neither of these considerations canaffect the interpretation of the plain language of the words which havebeen used by the legislature in Section 26(6A). The provisions of a taxingstatute have to be construed as they stand, adopting the plain andgrammatical meaning of the words used. Consequently, the appellantFwas liable to pay, in terms of Section 26(6A), 10 per cent of the taxdisputed together with the filing of the appeal. There is no reason whythe amount which was paid under protest, should not be taken intoconsideration. It is common ground that if that amount is taken intoaccount, the provisions of the statute were duly complied with. Hence,Gthe rejection of the appeal was not in order and the appeal would have tobe restored to the file of the appellate authority, subject to due verificationthat 10 per cent of the amount of tax disputed, as interpreted by theterms of this judgment, has been duly deposited by the appellant.