Bombay HC Denies SASF’s Prospective Tax Relief, Upholds Retrospective VAT Liability on Past Sales [Read Order]

In a recent ruling, the Bombay High Court denied the Stressed Assets Stabilization Fund ( SASF ) the benefit of prospective tax relief, holding it retrospectively liable for VAT on past sales.

The case arose from a dispute over whether the appellant, a trust set up by the Central Government to recover stressed assets from IDBI, was liable to pay VAT on its sale of movable assets under the Maharashtra Value Added Tax ( MVAT ) Act, 2002.

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The Maharashtra Sales Tax Department determined that the appellant was a deemed dealer under Section 2(8) of the MVAT Act and was required to pay VAT on its auction sales of movable property.

The Determination Order (DDQ) issued by the Commissioner of Sales Tax on 28.03.2014 confirmed that the appellant was a dealer under MVAT, making it liable for VAT on transactions prior to the order.

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The appellant challenged this ruling before the Maharashtra Sales Tax Tribunal (MSTT), arguing that it was unaware of its tax liability before the DDQ order and that retrospective tax imposition would cause severe financial hardship. The appellant’s counsel requested that the DDQ Order be given prospective effect under Section 56(2) of the MVAT Act.

The key question before the court was whether the appellant should be granted prospective effect under Section 56(2) of the MVAT Act, which allows the Commissioner of Sales Tax to limit tax liability to future transactions if an entity was genuinely unaware of its obligations.

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The bench comprising Justice Firdosh P. Pooniwalla and Justice B. P. Colabawalla observed that the appellant should have been aware of its tax obligations, particularly after the Sales Tax Department’s investigation in December 2013.

The court observed that the prospective effect under Section 56(2) is discretionary and applies only in cases of genuine uncertainty. The appellant was regularly engaging in the sale of movable assets through auctions and there was no ambiguity regarding its tax liability.

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The court also rejected the appellant’s hardship argument, stating that failure to collect VAT from buyers does not exempt an entity from its statutory obligations. It emphasized that granting prospective effect in this case would set a precedent for businesses to ignore tax liabilities and later claim relief.

The court upheld the Maharashtra Sales Tax Tribunal’s (MSTT) decision, which rejected the appellant’s request for prospective effect under Section 56(2) of the Maharashtra Value Added Tax (MVAT) Act, 2002. The Bombay High Court upheld the Sales Tax Tribunal’s decision and ruled that the appellant must pay VAT retrospectively on all past transactions.

To Read the full text of the Order CLICK HERE

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Stressed Assets Stabilization Fund vs The State of Maharashtra , 2025 TAXSCAN (HC) 317 , APPEAL NO.23 OF 2014 , 03 MARCH 2025 , Nikita Badheka , Jyoti Chavan