Statutory refund set-off under VAT law must follow completion of earlier-year assessment before later-year demands are addressed.

Delay in completing the earlier-year assessment was held to undermine the statutory refund set-off mechanism under Section 48(6) of the Maharashtra Value Added Tax Act, 2002. The court noted that any refund due to a dealer must first be appropriated against outstanding liability under the earlier law or the Act, and only the balance, if any, can be dealt with thereafter. Because the earlier assessment remained pending while demand for the subsequent year had already been raised, the authorities were directed to complete the earlier assessment within six weeks and then process the refundable amount in accordance with Section 48(6). The effect on tax, interest and penalty for the later year was left open in the pending appeals.

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Issues: Whether the respondents could be directed to complete the pending assessment for the earlier year and, upon crystallisation of the refundable amount, give effect to the statutory set-off under Section 48(6) of the Maharashtra Value Added Tax Act, 2002.

Analysis: The petitioners had a pending assessment for the earlier period, while demand for the subsequent year had already been raised. Section 48(6) obliges the authorities to first appropriate any refund due to a dealer against outstanding liability under the earlier law or the Act, and only thereafter deal with any balance. The delay in finalising the earlier assessment defeated the statutory scheme and the benefit intended for the dealer. The question of the consequential effect on tax, interest and penalty for the later year was left open for decision in the pending appeals.

Conclusion: The respondents were required to complete the assessment for the earlier year within six weeks and then deal with the refundable amount in accordance with Section 48(6); the petitions were allowed.

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