VAT Liability for IMFL On‑Shop Owners Statutory Since 2015: Gauhati HC Declines Stay on Circular [Read Order]

The Gauhati High Court has declined to grant interim relief to a group of IMFL On‑Shop owners who sought a stay on a circular dated 14 November 2025 issued by the Commissioner and Secretary to the Government of Assam, Finance (Taxation) Department.

The petitioners, Sanchita Saxena and 16 others, had approached the Court challenging the directive that required them to pay Value Added Tax (VAT) as a precondition for renewal of their excise licences.

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They argued that the demand was arbitrary, unreasonable, and imposed without a proper legal foundation.

During the hearing, counsel for the petitioners contended that the circular imposed an onerous financial burden and that the requirement to pay VAT had not been consistently enforced in the past.

They argued that the sudden insistence on VAT compliance, coupled with the threat of non‑renewal of licences, amounted to an arbitrary exercise of administrative power. The petitioners maintained that they had been operating their IMFL On‑Shops under valid licences and that the impugned circular disrupted their business continuity without adequate justification.

Opposing the plea, the Standing Counsel for the Excise Department submitted that the VAT requirement was not a new imposition but a statutory mandate introduced through an amendment to the Assam Value Added Tax Act, 2003, which came into effect on 17 June 2015.

The State argued that despite the clear statutory prescription, the petitioners had failed to register under VAT or make the requisite payments for several years. The Finance Department’s counsel further stressed that the issue involved State revenue and that no interim protection should be granted in a matter where statutory compliance was mandatory.

After considering the rival submissions, the bench of Justice Sanjay Kumar Medhi held that the VAT liability was rooted in statute and that the petitioners had not challenged the validity of the statutory provision itself.

In the absence of such a challenge, the Court found no basis to stay the operation of the circular. Justice Medhi observed that the requirement to register and pay VAT was a legal obligation flowing directly from the 2015 amendment, and therefore, no blanket interim order could be issued to shield the petitioners from compliance.

However, the Court provided limited relief by directing that the question of VAT liability for the period between the commencement of the statutory amendment and the issuance of the 14 November 2025 notice would be kept in abeyance. This aspect, the Court clarified, would be decided after the respective departments examined the returns filed by the petitioners.

Importantly, the Court also directed that once the petitioners register and pay current VAT dues, their licence renewals should not be refused on the ground of past non‑payment.

With these observations, the interlocutory application was disposed of, leaving the petitioners obligated to comply with current statutory requirements while deferring adjudication of past dues.

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