VVF (INDIA) LIMITEDversusTHE STATE OF MAHARASHTRA & ORS

108                      [2021]REPORTS
               SUPREME COURT   12 S.C.R. 108             [2021] 12 S.C.R.


A                          VVF (INDIA) LIMITED
                                       v.
                  THE STATE OF MAHARASHTRA & ORS
                        (Civil Appeal No 7387 of 2021)
B                           DECEMBER 03, 2021
              [DR. DHANANJAYA Y CHANDRACHUD AND
                        A. S. BOPANNA, JJ]
             Maharashtra Value Added Tax Act, 2002: s.26(6A) – Pursuant
      to investigation carried out by the Sales Tax Department at the
C
      premises of appellant, demand notice issued to appellant – Appellant
      made a protest payment of Rs.3.64 crores comprising an amount of
      Rs.2.32 crores towards tax and Rs.1.31 crores towards interest for
      assessment year 2013-14 – Another show cause notice issued to
      appellant in relation to imposition of penalty – On 15 April 2017,
D     ss.26(6A), 26(6B) and 26(6C) were introduced into the MVAT Act
      by Maharashtra Act XXXI of 2017 mandating a pre-deposit for the
      filing of appeals – For AY 2013-14, an order of assessment passed
      under the Maharashtra Tax on the Entry of Goods into Local Areas
      Act 2002, imposing a tax demand of Rs 10.44 crores, together with
      the penalty in an equivalent amount, besides a demand for interest
E
      of Rs 7.09 crores – The total dues under the assessment order were,
      thus, in the amount of Rs 27.98 crores – After adjustment of the
      amounts paid, under protest, by the appellant, the amount held to
      be payable was Rs 24.34 crores – Appellant was informed by Sales
      Tax Department that the payments which were made under protest
F     could not be considered towards pre-deposit for the purpose of
      s.26(6A) – Appellant filed writ petition under Art.226 of the
      Constitution – High Court dismissed the petition holding that once
      an order of assessment has been passed, any amounts which have
      been paid albeit under protest, would have to be adjusted against
      the total tax liability and the demand to follow – Whether amounts
G
      which have been deposited under protest prior to an order of
      assessment can be adjusted against the mandatory pre-deposit
      required for filing an appeal under s.26(6A) of the Act of 2002 –
      Held: Under the provisions of s.26(6A), the aggregate of the amounts
      stipulated in the sub-clauses of the provision has to be deposited
H     and proof of payment is required to be produced together with the
                                      108
     VVF (INDIA) LIMITED v. THE STATE OF MAHARASHTRA                        109


filing of the appeal – Both clauses (b) and (c) employ the expression       A
“an amount equal to ten per cent of the amount of tax disputed by
the appellant” – The entirety of the undisputed amount has to be
deposited and 10 per cent of the disputed amount of tax is required
to be deposited by the appellant – In the instant case, the appellant
disputes the entirety of the tax demand – Consequently, on the plain
                                                                            B
language of the statute, 10 per cent of the entire disputed tax liability
would have to be deposited in pursuance of s.26(6A) – The amount
which has been deposited by the appellant anterior to the order of
assessment cannot be excluded from consideration, in the absence
of statutory language to that effect – The provisions of a taxing
statute have to be construed as they stand, adopting the plain and          C
grammatical meaning of the words used. Consequently, the appellant
was liable to pay, in terms of s.26(6A), 10 per cent of the tax disputed
together with the filing of the appeal – There is no reason why the
amount which was paid under protest, should not be taken into
consideration – Rejection of the appeal was not in order and the
                                                                            D
appeal would have to be restored to the file of the appellate
authority, subject to due verification that 10 per cent of the amount
of tax disputed has been duly deposited by the appellant –
Interpretation of statutes.
       Interpretation of statutes: A taxing statute must be construed
strictly and literally – There is no room for intendment – Maharashtra      E
Value Added Tax Act, 2002 – s.26(6A).
      Allowing the appeal, the Court
       HELD: 1. On the plain language of the statute, 10 per cent
of the entire disputed tax liability would have to be deposited in          F
pursuance of Section 26(6A). The amount which has been
deposited by the appellant anterior to the order of assessment
cannot be excluded from consideration, in the absence of statutory
language to that effect. A taxing statute must be construed strictly
and literally. There is no room for intendment. If the legislature
intended that the protest payment should not be set off as the              G
deposit amount, then a provision would have to be made to the
effect that 10 per cent of the amount of tax in arrears is required
to be deposited which is not the case. [Para 11][113-G-H;
114-A-B]
                                                                            H
110               SUPREME COURT REPORTS                     [2021] 12 S.C.R.


A              A.V Fernandez v. State of Kerala AIR 1957 SC 657 :
               1957 SCR 837 – relied on.
             2. The High Court, while rejecting the petition, placed
      reliance on the fact that there has to be a proof of payment of the
      aggregate of the amounts, as set out in clauses (a) to (d) of Section
B     26(6A). The second reason which weighed with the High Court,
      is that any payment, which has been made albeit under protest,
      will be adjusted against the total liability and demand to follow.
      Neither of these considerations can affect the interpretation of
      the plain language of the words which have been used by the
      legislature in Section 26(6A). The provisions of a taxing statute
C     have to be construed as they stand, adopting the plain and
      grammatical meaning of the words used. Consequently, the
      appellant was liable to pay, in terms of Section 26(6A), 10 per
      cent of the tax disputed together with the filing of the appeal.
      There is no reason why the amount which was paid under protest,
D     should not be taken into consideration. [Para 12][114-D-G]
                                Case Law Reference
      1957 SCR 837                     relied on               Para 11
               CIVIL APPELLATE JURISDICTION: Civil Appeal No.7387 of
      2021.
E
            From the Judgment and Order dated 08.11.2019 of the High Court
      of Judicature at Bombay in Writ Petition No.8834 of 2018.
            V. Sridharan, Sr. Adv., Sriram Sridharan, Aditya Bhattacharya,
      Ms. Apeksha Mehta, Sahil Parghi, Ms. Mounica Kasturi, Akash Pratap
      Singh, Ms. Charanya Lakshmikumaran, Advs. for the Appellant.
F
             Rahul Chitnis, Sachin Patil, Aaditya A. Pande, Geo Joseph, Advs.
      for the Respondents.
               The Judgment of the Court was delivered by
               DR. DHANANJAYA Y CHANDRACHUD, J.
G              1. Leave granted.
            2. This appeal arises from a judgment and order of the High Court
      of Judicature at Bombay dated 8 November 2019.1


H     1
          WP No. 8834 of 2018
       VVF (INDIA) LIMITED v. THE STATE OF MAHARASHTRA                        111
              [DR. DHANANJAYA Y CHANDRACHUD, J.]

       3. The issue, which arises in the appeal, is whether amounts which     A
have been deposited under protest prior to an order of assessment can
be adjusted against the mandatory pre-deposit required for filing an appeal
under Section 26(6A) of the Maharashtra Value Added Tax Act 20022.
      4. The appellant is a public limited company which engages in the
manufacture and sale of oleo-chemicals and personal care products.            B
Between 15 November 2016 and 22 November 2016, an investigation
was carried out by the officers of the Sales Tax Department at the
premises of the appellant. A notice to show cause was issued on 22
November 2016, to which the appellant filed a reply contesting the
proposed tax liabilities. On 8 December 2016 and 11 January 2017, the
appellant made a protest payment of Rs 3,64,24,388, comprising an             C
amount of Rs 2,32,37,249 towards tax and Rs 1,31,87,139 towards interest
for Assessment Year3 2013-14. On 30 October 2017, a notice to show
cause was issued to the appellant in relation to the imposition of penalty,
to which the appellant submitted its reply.
      5. On 15 April 2017, Sections 26(6A), 26(6B) and 26(6C) were            D
introduced into the MVAT Act by Maharashtra Act XXXI of 2017
mandating a pre-deposit for the filing of appeals. For AY 2013-14, an
order of assessment was passed on 26 December 2017 under the
Maharashtra Tax on the Entry of Goods into Local Areas Act 2002,
imposing a tax demand of Rs 10,44,54,708, together with the penalty in        E
an equivalent amount, besides a demand for interest of Rs 7,09,06,928.
The total dues under the assessment order were, thus, in the amount of
Rs 27,98,36,344. After adjustment of the amounts paid, under protest, by
the appellant, the amount held to be payable was Rs 24,34,11,956.
       6. An appeal was filed against the order of assessment, which          F
was rejected by the appellate authority. The appellant was informed by
the Joint Commissioner of Sales Tax (HQ) 1 by a letter dated 4 June
2018 that the payments which were made under protest could not be
considered towards pre-deposit for the purpose of Section 26(6A). A
petition under Article 226 of the Constitution was instituted to challenge
the letter dated 4 June 2018.                                                 G
     7. Arguments were heard and the petition was reserved for
judgment on 14 February 2019. By a judgment delivered nearly seven

2
    “MVAT Act”
3
    “AY”                                                                      H
112               SUPREME COURT REPORTS                        [2021] 12 S.C.R.


A     months thereafter, on 8 November 2019, the Division Bench of the High
      Court has dismissed the petition. The High Court has held that once an
      order of assessment has been passed, any amounts which have been
      paid albeit under protest, would have to be adjusted against the total tax
      liability and the demand to follow. Hence, the view of the High Court
      was that the appellant was duty bound to deposit 10 per cent of the total
B
      tax demand after adjusting the amount which had already been paid
      under protest, prior to the order of assessment.
            8. The correctness of the view of the High Court turns upon the
      interpretation of Section 26(6A) of the MVAT Act, which reads as
      follows:
C
            “6A) No appeal against an order, passed on or after the
                 commencement of the Maharashtra Tax Laws (Levy,
                 Amendment and Validation) Act, 2017 (Mah XXXI of 2017),
                 shall be filed before the appellate authority in first appeal,
                 unless it is accompanied by the proof of payment of an
D
                 aggregate of the following amounts, as applicable,-
            (a)     in case of an appeal against an order, in which claim against
                    declaration or certificate, has been disallowed on the ground
                    of non-production of such declaration or, as the case may
                    be, certificate then, amount of tax, as provided in the proviso
E
                    to sub-section (6),
            (b)     in case of an appeal against an order, which involves
                    disallowance of claims as stated in clause (a) above and
                    also tax liability on other grounds, then, an amount equal to
F                   10 per cent of the amount of tax, disputed by the appellant
                    so far as such tax liability pertains to tax, on grounds, other
                    than those mentioned in clause (a),
            (c)     in case of an appeal against an order, other than an order,
                    described in clauses (a) and (b) above, an amount equal to
G                   10 per cent. of the amount of tax disputed by the appellant,
            (d)     in case of an appeal against a separate order imposing only
                    penalty, deposit of an amount, as directed by the appellate
                    authority, which shall not in any case, exceed 10 per cent
                    of the amount of penalty, disputed by appellant.”
H
     VVF (INDIA) LIMITED v. THE STATE OF MAHARASHTRA                          113
            [DR. DHANANJAYA Y CHANDRACHUD, J.]

      9. Mr V Sridharan, Senior Counsel appearing on behalf of the            A
appellant, submits that:
      (i)     clauses (b) and (c) of Section 26(6A) stipulate that the
              appeal has to be filed, together with proof of payment of an
              amount equal to 10 per cent “of the amount of tax disputed
              by the appellant”;                                              B
      (ii)    The statutory provision does not stipulate that 10 per cent
              of the tax in arrears has to be deposited, but requires that
              10 per cent of the tax disputed by the appellant has to
              accompany the filing of the appeal, together with the full
              amount of the undisputed tax; and                               C
      (iii)   Since the entirety of the tax, as assessed and demanded,
              has been disputed, 10 per cent of that amount was required
              to be deposited, together with the appeal and the amount
              which was paid under protest, cannot be excluded from
              consideration.                                                  D
       10. On the other hand, Mr Rahul Chitnis, Chief Standing Counsel
for the State of Maharashtra, submitted that the dispute arises after the
order of assessment, which was made under the provisions of Section
23 of the MVAT Act. Consequently, 10 per cent of the amount of tax, as
demanded in pursuance of the order of assessment, has to be paid as a         E
condition precedent for filing the appeal.
        11. While analyzing the rival submissions, it is necessary to note,
at the outset, that, under the provisions of Section 26(6A), the aggregate
of the amounts stipulated in the sub-clauses of the provision has to be
deposited and proof of payment is required to be produced together with       F
the filing of the appeal. Both clauses (b) and (c) employ the expression
“an amount equal to ten per cent of the amount of tax disputed by the
appellant”. The entirety of the undisputed amount has to be deposited
and 10 per cent of the disputed amount of tax is required to be deposited
by the appellant. In the present case, the appellant disputes the entirety    G
of the tax demand. Consequently, on the plain language of the statute, 10
per cent of the entire disputed tax liability would have to be deposited in
pursuance of Section 26(6A). The amount which has been deposited by
the appellant anterior to the order of assessment cannot be excluded
from consideration, in the absence of statutory language to that effect.
                                                                              H
114               SUPREME COURT REPORTS                          [2021] 12 S.C.R.


A     A taxing statute must be construed strictly and literally. There is no room
      for intendment. If the legislature intended that the protest payment should
      not be set off as the deposit amount, then a provision would have to be
      made to the effect that 10 per cent of the amount of tax in arrears is
      required to be deposited which is not the case. Justice Bhagwati in A.V
      Fernandez v. State of Kerala4 , writing for a Constitution Bench,
B
      elucidated the principle of strict interpretation in construing a taxing statue
      as follows:
               “29. In construing fiscal statutes and in determining the liability of
               a subject to tax one must have regard to the strict letter of the
               law. If the revenue satisfies the court that the case falls strictly
C
               within the provisions of the law, the subject can be taxed. If, on
               the other hand, the case of not covered within the four corners of
               the provisions of the taxing statue, no tax can be imposed by
               inference or by analogy or by trying to probe into the intentions of
               the Legislature and by considering what was the substance of the
D              matter.”
              12. The High Court, while rejecting the petition, placed reliance
      on the fact that there has to be a proof of payment of the aggregate of
      the amounts, as set out in clauses (a) to (d) of Section 26(6A). The
      second reason which weighed with the High Court, is that any payment,
E     which has been made albeit under protest, will be adjusted against the
      total liability and demand to follow. Neither of these considerations can
      affect the interpretation of the plain language of the words which have
      been used by the legislature in Section 26(6A). The provisions of a taxing
      statute have to be construed as they stand, adopting the plain and
      grammatical meaning of the words used. Consequently, the appellant
F
      was liable to pay, in terms of Section 26(6A), 10 per cent of the tax
      disputed together with the filing of the appeal. There is no reason why
      the amount which was paid under protest, should not be taken into
      consideration. It is common ground that if that amount is taken into
      account, the provisions of the statute were duly complied with. Hence,
G     the rejection of the appeal was not in order and the appeal would have to
      be restored to the file of the appellate authority, subject to due verification
      that 10 per cent of the amount of tax disputed, as interpreted by the
      terms of this judgment, has been duly deposited by the appellant.

      4
H         AIR 1957 SC 657
      VVF (INDIA) LIMITED v. THE STATE OF MAHARASHTRA                           115
             [DR. DHANANJAYA Y CHANDRACHUD, J.]

        13. Subject to the aforesaid verification, we allow the appeal and      A
set aside the impugned judgment and order of the High Court of Judicature
at Bombay dated 8 November 2019 in Writ Petition No 8834 of 2018.
The appeal shall stand restored to the file of the appellate authority.
       14. Pending application, if any, stands disposed of.
                                                                                B
Devika Gujral                                                 Appeal allowed.




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