Bombay HC Quashes MVAT Refund Adjustment, Orders ₹33.29 Lakh Payout with Interest Under Amnesty Scheme [Read Order]

In a recent ruling The Bombay High Court has ruled the Amnesty Scheme, 2023 under the Maharashtra Settlement of Arrears Act overrides Maharashtra Value Added Tax Act (MVAT) recovery provisions, the Court quashed the adjustment and directed the authorities to release the refund with applicable interest and ruled that the State Tax Department wrongly adjusted a refund of ₹33.29 lakh against dues for FY 2008‑09.

President Trade and Exim Corporation, a paper trading concern, was assessed under the MVAT Act for multiple years. While the 2007‑08 assessment entitled the firm to a refund, subsequent years (2008‑09 and 2009‑10) resulted in demands. The company opted into the 2023 Settlement Act (Amnesty Scheme), paid the prescribed amounts under the One‑Time Payment Option, and awaited settlement orders.

Also in April 2024, the Assistant Commissioner adjusted the 2007‑08 refund against 2008‑09 dues, invoking Section 50 of the MVAT Act.

The petitioner, President Trade and Exim Corporation, argued that the refund of ₹33.29 lakh for FY 2007‑08 was illegally adjusted against dues for FY 2008‑09. They maintained that once they had applied under the Maharashtra Settlement of Arrears Act, 2023 (Amnesty Scheme) and paid the prescribed settlement dues, there were no recoverable arrears for 2008‑09.

They stressed that the Settlement Act is a special code overriding the MVAT Act, designed to give finality to disputes, and thus, Section 50 of the MVAT Act could not be invoked.

On the other hand, the state argued that as on the date of refund adjustment, arrears for 2008‑09 were still subsisting, since settlement orders had not yet been passed. For that reason, under Section 50 of the MVAT Act, the refund had to be first applied against pending demands. The department maintained that the petitioner’s applications under the Settlement Act did not extinguish arrears until formal orders were issued.

After considering the submissions, the high court observed that the Settlement Act is a special code overriding the MVAT Act, designed to give finality to disputes once the prescribed payments are made. Since the petitioner had already paid dues under the Settlement Act and no defect notice was issued, the adjustment of the refund was unjustified.

The court pointed out that non‑speaking orders and mechanical invocation of Section 50 cannot stand when a special settlement scheme is in force.

The bench of Justice G.S. Kulkarni and Justice Aarti Sathe set aside the impugned order dated 18th April 2024, holding that the refund of ₹33.29 lakh determined for FY 2007‑08 could not be adjusted against those dues. The Court directed the authorities to accept the petitioner’s settlement application for 2008‑09 without refund adjustment and ordered the State Tax Department to release the ₹33.29 lakh refund along with statutory interest under the MVAT Act, crediting it to the petitioner’s account within two weeks.

Accordingly, the writ petition was disposed of, with no order as to costs.,

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates