Bombay HC Rules SASF is a "Deemed Dealer" Under MVAT Act, Liable for VAT on Movable Asset Sales [Read Order]

In a recent ruling, the Bombay High Court held that the Stressed Assets Stabilization Fund (SASF) qualifies as a “deemed dealer” under the Maharashtra Value Added Tax (MVAT) Act, 2002, making it liable to pay VAT on the sale of movable assets.

The case arose after the Maharashtra Sales Tax Department determined that the Stressed Assets Stabilization Fund (SASF) (Appellant) was selling movable property through auctions as part of its recovery of stressed assets from IDBI.

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In a Determination Order (DDQ) dated 28.03.2014, the Commissioner of Sales Tax ruled that the appellant was liable to register as a dealer and pay VAT. The appellant challenged this order, arguing that it was not engaged in trade or commerce but was merely executing its mandate as a trust formed by the Central Government to recover non-performing assets.

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The tribunal rejected SASF’s arguments, explaining that the MVAT Act explicitly deems certain entities as dealers if they engage in the sale of goods, including by auction.

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The bench comprising Justice Firdosh P. Pooniwalla and Justice B. P. Colabawalla observed that the appellant had full control over the stressed assets, transferred ownership to buyers, and engaged in multiple transactions of movable assets, all of which fall within the taxable scope of the MVAT Act.

The appellant’s counsel further invoked Article 285 of the Constitution, arguing that a State cannot tax Union Government properties. The court clarified that VAT is a tax on the transaction of sale, not on the property itself, thereby making Article 285 inapplicable.

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The court ruled that SASF falls within the Explanation to Section 2(8) of the MVAT Act, which includes entities owned or constituted by the Central Government as deemed dealers, irrespective of whether they engage in business in the conventional sense.

Dismissing SASF’s appeal, the Bombay High Court upheld the Sales Tax Tribunal’s decision. The court ruled that SASF is liable for VAT on all sales of movable property conducted in Maharashtra.

To Read the full text of the Order CLICK HERE

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