The adjustment of tax refunds against outstanding demands cannot occur if no dues exist at the time of adjustment, protecting taxpayers from unlawful retention of funds.

JUDGMENT :

Jitendra Jain, J.

1. Rule. Rule made returnable forthwith. By consent of the parties taken up for final hearing at the admission stage.

2. By this Petition under Article 226 of the Constitution of India, Petitioner seeks refund of tax for the year 2011-2012 amounting to Rs.10,69,89,606/- with further interest thereon.

3. Petitioner is engaged in trading of vehicles and is registered with the Respondent-Tax Authority.

4. For the year 2010-2011, an assessment order was passed by Respondent No.1 on 30th March 2015 demanding a sum of Rs.17,76,93,422/-. The said order was challenged in appeal and on 28th February 2019, the Appellate Authority passed an order in appeal by which the demand was reduced to Rs.14,00,74,890/-.

5. For the year 2011-2012, an assessment order was passed demanding a sum of Rs.9,67,02,366/-. The said order was subject matter of appeal and on 28th February 2019 the appeal for the year 2011-2012 was allowed resulting in refund of Rs.10,69,89,606/-.

6. On 6th March 2019, Respondent No.3 issued an Ordinance for settlement of arrears of tax, interest, penalty and late fee outstanding as on 1st April 2019 upon payment of amount specified in the said Settlement Scheme. The said scheme was named as Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Act, 2019 (hereinafter referred to as the ‘Settlement Scheme’).

7. Petitioner informed Respondents through letter dated 12th April 2019 that they are considering to avail the benefit of the Settlement Scheme for the year 2010-2011 for which there was a demand of Rs.14,00,74,890/-. In the said letter, Petitioner also informed Respondents not to adjust the refund of Rs.10,69,89,606/- which arose on account of appeal order for the year 2011-12 against the demand for the year 2010-2011.

8. On 13th May 2019, Petitioner informed Respondents that they have made online application under Settlement Scheme for the year 2010-2011 and paid Rs.8,46,84,821/- as per the said scheme against the original outstanding dues of Rs.14,00,74,790/-. Petitioner also enclosed with the said letter the challan evidencing the said payment and the acknowledgement of Respondents having received the said application in Form-1.

9. On 14th May 2019, defect notice was issued by Respondents under Section 11 of the Settlement Scheme, wherein it was informed to Petitioner that the requisite amount payable for the year 2010-2011 under the scheme is only Rs.66,17,057/-. It seems that the requisite amount of Rs.66,17,057/- is arrived at after adjusting the refund for the year 2011-2012 amounting to Rs.10,69,89,606/- and post application made by Petitioner.

10. On 23rd May 2019, i.e., after Petitioner availing the benefit of the Settlement Scheme for 2010–2011, Respondents issued a refund adjustment order under Rule 55 of the MAHARASHTRA VALUE ADDED TAX RULES , 2005 (“MVAT Rules”) informing Petitioner that refund of Rs.10,69,89,606/- for the year 2011-2012 will be adjusted towards the amount of tax due for the year 2010-2011.

11. Petitioner challenged the aforesaid defect notice and refund adjustment before this Court in Writ Petition No.8343 of 2019. The said Writ Petition was disposed on 4th May 2023, by remanding the matter back to Respondents to consider the refund application filed by Petitioner after giving opportunity of hearing. Pursuant to the said order, on 26th June 2023 the refund application came to be rejected on the ground that refund of Rs.10,69,89,606/- is adjusted against the demand for the year 2010-2011. It is on this backdrop that the present petition is filed praying for refund for the year 2011-2012 of Rs.10,69,89,606/-.

Submissions of the Petitioner :-

12. Mr. Dada, learned Senior Counsel appearing for P