Soremartee S.A Luxembourg vs. State Of Maharshtra Thr The Secretary Ministry Of Finance And Anr

Held

The Court held that the impugned assessment order dated May 24, 2023, was vitiated by a failure of the principles of natural justice and a breach of Section 23(4) of the MVAT Act, which mandates a reasonable opportunity of being heard. The Court noted that while Mr. Vikas Gattani appeared on May 23, 2023, he only requested an extension of time, and the assessment order was issued the very next day, indicating a lack of adequate hearing. Furthermore, the order referred to written submissions that were not filed and irrelevant agreements, suggesting a non-application of mind by the assessing officer. Unlike previous cases (Writ Petition Nos. 11929 of 2023 and 11915 of 2023), there was no evidence of manipulation, backdating, or significant delay in communicating the order. Balancing the interests of the Revenue and the Petitioners' right to fair treatment, the Court found that a remand was appropriate. The assessment order was quashed, and the matter was remanded for fresh assessment, with all contentions left open.

Facts

The Petitioners, including Luxembourg-based companies M/s Soremartec S. A. and M/s Magic Production Group SA, and Indian company M/s Ferrero India Pvt. Ltd., challenged an assessment order dated May 24, 2023, for FY 2015-2016. The order, passed by the Deputy Commissioner of Sales Tax, sought to levy VAT on royalty payments made by Ferrero India to the Luxembourg entities for the use of Intellectual Property Rights (IPR). The Petitioners received a notice in Form 301 on May 5, 2023, for an assessment concerning royalty payments. Mr. Vikas Gattani, representing the Petitioners, appeared on May 23, 2023, and requested an extension of time. However, the assessment order was issued the very next day, May 24, 2023, and received by the Petitioners on July 1, 2023. The Petitioners contended that they were not afforded a reasonable opportunity to be heard and that the order was passed without application of mind.

Key Issues

1. Whether the impugned assessment order dated May 24, 2023, for FY 2015-2016, passed by the Deputy Commissioner of Sales Tax, is liable to be quashed and set aside on the grounds of violation of principles of natural justice and breach of Section 23(4) of the Maharashtra Value Added Tax Act, 2002 (MVAT Act)? Petitioner's Arguments: The Petitioners argued that they were not given a reasonable opportunity of being heard, as their representative merely sought an extension of time on May 23, 2023, and the assessment order was issued the following day without considering any detailed submissions. They also contended that the assessment order was passed without application of mind, referencing written submissions that were never filed and agreements unrelated to the case. This constitutes a failure of natural justice and a breach of Section 23(4) of the MVAT Act. Respondent's Arguments: The Respondent-State, through an affidavit, admitted that there were "several mistakes in the impugned Assessment Orders" and proposed remanding the matter for a fresh assessment to protect the interest of the Revenue. This implicitly conceded that the original assessment order was flawed.