Bombay High Court
Soremartee S.A Luxembourg vs State Of Maharshtra Thr The Secretary ... on 17 October, 2024
Author: M.S.Sonak
Bench: M.S.Sonak
wp.11914-2023(F).docx
2024:BHC-AS:41238-DB
Pradnya
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 11914 OF 2023
1. M/s Soremartec S. A., Luxembourg,
a Company incorporated under
the laws of Luxembourg
having its registered office at
16, Route De Treves, L-2633
Senningerberg, Luxembourg
through its authorised representative in India,
namely, Mr Vikas Gattani
2. M/s Magic Production Group SA, Luxembourg,
a Company incorporated under
the laws of Luxembourg
having its registered office at
16, Route De Treves, L-2633
Senningerberg, Luxembourg
through its authorised representative in India,
namely, Mr Vikas Gattani
3. M/s Ferrero India Pvt. Ltd.
a Company incorporated under
the laws of India
having its registered office at
No.F-13, M.I.D.C., Baramati,
Dist. Pune 413133, Maharashtra, India
through its authorised representative
in India, namely, Mr Vikas Gattani ...Petitioners
VERSUS
1. The State of Maharashtra,
through the Secretary,
Ministry of Finance,
Mantralaya, Mumbai-400 021.
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wp.11914-2023(F).docx
2. The Commissioner of State Tax,
GST Bhavan, 8th Floor,
Mazgaon, Mumbai-400 010.
3. The Deputy Commissioner of Sales Tax,
PUN-VAT-E-622,
GST Bhavan, Airport Road, Yerwada,
Pune-411006, Maharashtra ...Respondents
__________________________________________________________
A PPEARANCES -
Mr Rohan Shah, Senior Advocate, a/w Mr Sandeep Sachdeva
a/w Ms Surabhi Prabhudesai a/w Ms Renita Alex, i/b. India
Law Alliance, for the Petitioners.
Ms S. D. Vyas, Addl.G.P., a/w Ms P. N. Diwan, AGP, for the
Respondent-State.
__________________________________________________________
CORAM : M.S.Sonak &
Jitendra Jain, JJ.
RESERVED ON : 15 October 2024
PRONOUNCED ON : 17 October 2024
JUDGMENT (Per MS Sonak J):-
1. Heard learned counsel for the parties.
2. Rule. The Rule is made returnable immediately at the request of and with the consent of the learned counsel for the parties.
3. The challenge in this Petition is to the impugned assessment order dated 24 May 2023 for FY 2015-2016.
4. The Petitioners 1 and 2 are established in accordance with Luxembourgian Laws. Petitioner No.3 is a company incorporated under the Companies Act of 1956.
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5. The Petitioners Nos. 1 and 2 had inter alia granted the 3rd Petitioner the right to use their IPR in India. In that sense, therefore, the Petitioners Nos.1, 2 and 3 are group companies. By the product license agreement effective 1 April 2013, the right to use such IPR in India was also extended to M/s. Imsofer Manufacturing India Pvt Ltd. A product license agreement effective from 1 January 2013 was also entered into between the second Petitioner and M/s. MPG Multi Production Group India Pvt Ltd concerning IPRs.
6. On 5 May 2023, the Petitioner No.3 in Pune, India, received a notice dated 3 May 2023 in Form 301 for assessment for FY 2015-2016, addressed to the 1st and 2 nd Petitioners seeking to levy VAT on the value of 'royalty' payments made by the 3rd Petitioner against the license to use IPRs and technical know-how granted by 1st and 2 nd Petitioner by treating the same as a 'sell of goods'.
7. The Petitioners have pleaded that Form 301, dated 3 May 2023, was the first time that any of the Petitioners had received an intimation as to the assessment of the 1st and 2nd Petitioners under the Maharashtra Value Added Tax Act, 2002 ("MVAT Act") for any period.
8. Under the notice dated 3 May 2023 (served upon the 3rd Petitioner) on 5 May 2023, Petitioners Nos. 1 and 2 were required to remain present before the 3rd Respondent on 23 May 2023 concerning the assessment of FY 2015-2016 royalty payments. Since the Petitioners Nos.1 and 2 were incorporated in Luxembourg and considering the short notice, Page 3 of 10 wp.11914-2023(F).docx Mr Vikas Gattani, Assistant General Manager of the 3rd Petitioner, appeared before the 3rd Respondent on 23 May 2023 and applied for an extension of time to obtain appropriate authorisation from 1st and 2nd Petitioners and to file a detailed response to the notice dated 3 May 2023. The Petitioners have pleaded that the 3rd Respondent granted the oral extension as prayed for by Mr Gattani. Mr Gattani was informed that the Petitioners would be notified of the following date for appearance.
9. The Petitioners have pleaded that on 1 July 2023, the third Petitioner was shocked to receive an assessment order dated 24 May 2023 from the third Respondent confirming the demand for VAT on royalty payments for FY 2015-2016.
10. The record shows that a notice as contemplated by Section 23(4) of the MVAT Act was issued to the Petitioners and received by at least the third Petitioner on 5 May 2023. On 23 May 2023, Mr Vikas Gattani, Assistant General Manager-Tax of the third Petitioner, attended the hearing and sought an extension of time. However, on the next date, 24 May 2023, the impugned assessment order came to be issued.
11. The impugned assessment order proceeds on the basis that Mr Vikas Gattani filed written submissions and pleaded in defence of the Petitioners during the alleged hearing on 23 May 2023. However, Mr Vikas Gattani requested an extension of time on 23 May 2023 and did not file any written submissions.
12. Section 23(4) of the MVAT Act contemplates the issue of notice in Form 301 and a reasonable opportunity of being Page 4 of 10 wp.11914-2023(F).docx heard before any assessment order could be made. Even though a notice in Form 301 may have been served upon the Petitioners, they did not have a reasonable hearing opportunity of being heard. Thus, there was a failure of principles of natural justice and a breach of Section 23(4) of the MVAT Act.
13. Besides, we find that the impugned assessment order dated 24 May 2023 refers to written submissions when, in fact, no such written submissions were ever filed. This order also refers to some agreements that have no connection with either the Petitioners or the issues involved in the Petitioners' case. All this is prima facie indicative of non-application of mind.
14. Thus, on the grounds of failure of the principles of natural justice, breach of Section 23(4) of the MVAT Act, and non-application of mind, a case is made out for quashing the impugned assessment order dated 24 May 2023.
15. Mr Dhananjay Akhade, Additional Commissioner of State Tax, Pune, has filed a common affidavit in Writ Petition Nos.11929, 11914 and 11915 of 2023. Paragraphs 4 to 8 of this affidavit read as follows:-
"4. I have gone through the Assessment orders impugned in the captioned writ petitions. It is seen that there are several mistakes in the impugned Assessment Orders. It is submitted that, in the instant matter if on enquiry, the assessment orders passed by the assessing officer are found vexatious or under assessed and thus the assessing officer is found guilty, actions against the assessing officer can be initiated as per the provisions of Section 12 of the MVAT Act.
5. I have been informed that, on 05/12/2023 Joint Commissioner, Large Taxpayer Unit, Pune has issued a Page 5 of 10 wp.11914-2023(F).docx communication to the assessing officer Mr. Babasaheb K Shedge seeking his explanation regarding assessment orders passed by him for the periods 2013-14, 2014-15 & 2015-16 in the petitioner's case.
6. I have been informed that explanation submitted by the assessing officer Mr. Babasaheb K Shedge in response to letter issued dated 05/12/2023 is not accepted by Joint Commissioner, Large Taxpayer Unit, Pune.
7. Joint Commissioner, Large Taxpayer Unit, Pune has sent proposal to my office i.e. the office of Addl. Commissioner, Pune to initiate proceeding against the assessing officer Mr. Babasaheb K Shedge for breach of duty due to negligence.
8. In view of the above, it is humbly submitted that, as the mistakes that have occurred in the impugned assessment orders cannot be rectified or reviewed under the provisions of the MVAT Act, and considering the fact that the amount of tax quantum involved is huge, the Respondents most humbly pray that the petitioner's case may be remanded back for fresh assessment to protect the interest of Revenue."
16. Thus, the respondents virtually conceded that the impugned assessment order dated 24 May 2023 could be set aside. However, a prayer for remand of the matter to enable the Respondents to make a fresh assessment is made.
17. In our judgment and order disposing of Writ Petition No.11929 of 2023 for FY 2013-2014, we have given reasons why we cannot accede to the prayer for a remand. By following this judgment and order, we have also disposed of Writ Petition No.11915 of 2023 by quashing the impugned assessment order dated 20 March 2023 for FY 2014-2015 but have not made any order for remand. The reasons for not ordering a remand are discussed and set out in our judgment and order disposing of Writ Petition No.11929 of 2023.
Page 6 of 10wp.11914-2023(F).docx
18. However, in so far as the present Petition, dealing with FY 2015-2016, is concerned, the facts relevant to considering whether or not to order a remand are different from those obtained in Writ Petition Nos.11929 of 2023 and 11915 of 2023. Therefore, the request for remand would have to be examined against the backdrop of the facts in this case.
19. One of the main reasons that prompted us not to make a remand order in Writ Petition Nos.11929 of 2023 and 11915 of 2023 was the reference to Mr Vikas Gattani allegedly attending the hearing on 23 May 2023 in the assessment orders dated 14 March 2022 and 20 March 2023. There was no explanation as to how there could be any reference to the alleged hearing on 23 May 2023 in orders made much before the said date, i.e. 14 March 2022 and 20 March 2023. According to us, this strongly suggested backdating the said two orders to make it appear that they were made and issued within the statutorily prescribed period of limitation of eight years when, in fact, they may have been issued beyond this period.
20. Besides, we found that the assessment orders dated 14 March 2022 for FY 2013-2014 and the order dated 20 March 2023 for FY 2014-2015, which were the subject matter of Writ Petition No.11929 of 2023 and Writ Petition No.11915 of 2023 were communicated to the third Petitioner only on 1 July 2023, i.e. after 15 months and 4 months, respectively. Again, there was no explanation for the delayed communication of the said orders.
21. Therefore, upon cumulative consideration of the above factors, we declined the request for remand and, Page 7 of 10 wp.11914-2023(F).docx consequently, extension of the statutorily prescribed limitation period by a further 36 months in the peculiar facts and circumstances of those two Petitions.
22. However, in the present Petition, Mr Vikas Gattani did appear before the assessing authority on 23 May 2023. There is no dispute about his appearance as a representative of the Petitioners. The only dispute is whether he made any submissions or only sought an extension of time. Assuming that he only sought an extension of time, we cannot say there is any manipulation or backdating of the impugned assessment order dated 24 May 2023. At the highest, we can say that the impugned assessment order was made in a tearing hurry and is therefore in breach of the principles of natural justice.
23. The impugned assessment order dated 24 May 2023 was communicated to the third Petitioner on 1 July 2023, i.e., within about 35 days from the date of its making. This delay is not comparable to the delay involved in communicating the impugned orders that were the subject matter of Writ Petition No.11929 of 2023 and Writ Petition No.11915 of 2023.
24. Though the impugned assessment order dated 24 May 2023 may be vitiated by non-application of mind, failure of natural justice, and even breach of Section 23(4) of the MVAT Act, which statutorily incorporates the requirement of personal hearing, we cannot infer any manipulation, backdating, or subterfuge. Besides, there was no unreasonable delay in communicating the impugned assessment order dated 24 May 2023. The issue of this order being made beyond the Page 8 of 10 wp.11914-2023(F).docx statutorily prescribed limitation period also does not arise in this matter.
25. Accordingly, we are satisfied that the facts and circumstances that persuaded us not to accede to the prayer for remand in Writ Petition Nos.11929 of 2023 and 11915 of 2023 are not the facts involved in the present Petition. Therefore, by balancing the interest of the Revenue and the Petitioners' entitlement to fair treatment, we are satisfied that a remand would be in order after quashing the impugned assessment order.
26. Accordingly, the Rule in this Petition is disposed of by making the following order:-
ORDER
(a) The impugned assessment order dated 24 May 2023 is quashed and set aside;
(b) The matter is remanded to the assessing officer to make a fresh assessment order for FY 2015-2016 after giving the Petitioners reasonable opportunity of being heard;
(c) All contentions of the parties on merits are left open to be decided by the assessing officer in the first instance;
(d) The Petitioners are directed to furnish their e-mail IDs where they could be served the notices for personal hearing.
27. There shall be no order for costs.
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28. All concerned to act on an authenticated copy of this order.
(Jitendra Jain, J) (M. S. Sonak, J)
Signed by: Pradnya Bhogale
Designation: PA To Honourable Judge Page 10 of 10
Date: 17/10/2024 15:26:30