2022 (2) TMI 1223 - HC - VAT / Sales Tax

Writ petition dismissed; petitioner directed to file appeal under Section 27 MVAT with six-week filing and pre-deposit requirement

The HC declined to exercise writ jurisdiction and refused to entertain the petition, noting the petitioner may pursue the statutory appellate remedy under ... Maintainability of petition - Levy of Tax - payments of royalty made by the subsidiary companies to the petitioner - allegation is that such royalty amounts to consideration for transfer of right to use of trademarks and technical know-how - HELD THAT:- We are loath to entertain this writ petition by exercising our discretion because (i) the petitioner can approach this Court in its appellate jurisdiction under section 27 of the MVAT Act at the appropriate time; and (ii) the petitioner is free to rely on the decision in Mahyco Monsanto Biotech (India) Pvt. Ltd. [2016 (8) TMI 717 - BOMBAY HIGH COURT] before the appellate authority to have the impugned order reversed since such decision will prevail, if it is applicable, over any previous contra decision of the Tribunal. However, in the peculiar facts and circumstances, viz. pendency of this writ petition on the file of this Court for quite some time and that a Constitutional issue touching Article 286 of the Constitution is sought to be raised, we are inclined not to relegate the petitioner to the first appellate remedy but to give it opportunity to prefer an appeal before the Tribunal directly, if it so chooses, so that any infirmity in the impugned order can be brought to its notice, including the decision of this Court in the case of Mahyco Monsanto Biotech (India) Pvt. Ltd. for its correction. It is made clear that such appeal may not be entertained unless the requisite pre-deposit is made by the petitioner for preferring an appeal before the Tribunal. There is a statement in the writ petition that the requisite pre-deposit for approaching the first appellate authority has already been made. If indeed that is so, it would constitute half of the pre-deposit for filing an appeal before the Tribunal. The balance pre-deposit together with an acknowledgment of the amount of pre-deposit that has been made, may be filed along with any appeal that the petitioner may wish to prefer before the Tribunal. In the event the petitioner prefers an appeal before the Tribunal within six weeks from today. Petition disposed off. Issues Involved:1. Validity of the assessment order passed by the Deputy Commissioner of Sales Tax.2. Applicability of the Maharashtra Value Added Tax Act (MVAT Act) on royalty payments.3. Exhaustion of alternative remedy before invoking writ jurisdiction under Article 226 of the Constitution of India.4. Jurisdiction of the State of Maharashtra to levy tax in light of Article 286 of the Constitution.5. Relevance of prior judicial decisions on the present case.Detailed Analysis:Issue 1: Validity of the Assessment OrderThe petitioner, a Swiss company, challenged the assessment order dated 24th March 2020, passed by the Deputy Commissioner of Sales Tax, Aurangabad. The order levied tax under the MVAT Act on royalty payments made by the petitioner’s subsidiaries in India, considering it a sale transaction. The order relied on a prior judgment by the Maharashtra Sales Tax Tribunal in the case of M/s. Merk KGaA, Germany Vs. The State of Maharashtra. The impugned order determined the gross turnover of sales and net sales at Rs. 38,168,775, with MVAT levied at 5%, totaling dues of Rs. 3,816,878.Issue 2: Applicability of the MVAT Act on Royalty PaymentsThe petitioner argued that the royalty payments do not constitute a sale transaction under the MVAT Act. The petitioner referenced a decision by a coordinate Bench of the Bombay High Court in Mahyco Monsanto Biotech (India) Pvt. Ltd., asserting that the situs of the intangibles owned by the petitioner is outside India, and thus, the income is not liable to tax in India. The Deputy Commissioner’s order ignored this precedent, raising questions about its validity.Issue 3: Exhaustion of Alternative RemedyThe court noted that the MVAT Act provides a complete code for appeals, including a first appeal to the Joint Commissioner and a second appeal to the Tribunal. The petitioner bypassed these remedies, arguing that the Tribunal’s prior decision in a similar matter would render the appellate process futile. The court emphasized the principle that the writ jurisdiction under Article 226 should not be invoked when an alternative remedy is available, as established in Thansingh Nathmal Vs. A. Mazid and Titaghur Paper Mills Co. Ltd. Vs. State of Orissa.Issue 4: Jurisdiction of the State of Maharashtra to Levy TaxThe petitioner raised a constitutional issue regarding the jurisdiction of Maharashtra to levy tax on transactions involving intangibles with a situs outside India, referencing Article 286 of the Constitution. The court acknowledged this as a significant constitutional point but noted that the petitioner, not being a citizen of India, could not claim infringement of Article 19 rights.Issue 5: Relevance of Prior Judicial DecisionsThe petitioner cited several Supreme Court decisions where writ petitions were entertained despite the availability of alternative remedies, arguing that the present case warranted similar treatment. The court distinguished these cases, emphasizing that the rule of exhaustion of alternative remedy is discretionary and context-specific. The court also highlighted that the decision in Mahyco Monsanto Biotech (India) Pvt. Ltd. is binding on all authorities under the MVAT Act, including the Tribunal.Conclusion:The court concluded that the petitioner should not bypass the statutory appellate remedies provided under the MVAT Act. However, considering the peculiar facts and the constitutional issue raised, the court allowed the petitioner to directly approach the Tribunal, bypassing the first appellate authority, provided the requisite pre-deposit is made. The writ petition was disposed of with these directions, leaving all contentions open for the Tribunal to adjudicate.