2025 (8) TMI 1135 - HC - VAT / Sales Tax

Section 44 empowers authority to recover payments from persons holding money for a dealer, including approved subsidy disbursements

The HC held that Section 44 (non-obstante) of the Assam VAT Act empowers the Prescribed Authority to require payment from any person from whom money is ... Jurisdiction - power of State Tax authority to make recovery from the subsidy amount claimed by an Industry, set up in terms of the promises held out in the various industrial policies formulated for development of industries - HELD THAT:- A perusal of the provisions of Section 44 of Assam Value Added Tax Act, 2003 would go to reveal that it starts with a non-obstante clause. It mandates that notwithstanding anything contained in any law or contract to the contrary, the Prescribed Authority may, at any time or from time to time, by notice in writing, a copy of which shall be forwarded to the dealer at this last known address, require to any person from whom any amount of money is due or may become due, to a dealer or person liable, on whom notice has been served under sub-section (3) of Section 29; or, any person who holds or may subsequently hold money for or on account of such dealer or person, liable to pay to the Prescribed Authority, either forthwith upon the money becoming due or being held within the time specified in the first mentioned notice (but not before the money becomes due or is held as aforesaid), so much of the money as is sufficient to pay the amount due from the dealer or person liable in respect of the arrears of tax, interest, penalty etc. The subsidy amounts claimed by the petitioners is required to be processed in the manner laid down in the Industrial policies concerned and the notifications issued in this direction from time to time by the Central Government. Thereafter, on the amounts involved being approved, after the same is processed by the competent authorities of the State Government, by the DIPP and amounts released, the NEDFi authorities would be required to disburse the same to the concerned authority. Accordingly, on the amounts being approved by the Committees concerned and its subsequent approval by the DIPP and release of money, the amounts of subsidy due to an industry would be held as having become due to it. This Court proceeds to hold that given the language in which Section 44 is so couched, the term “any person from whom any amount of money is due or may become due to a dealer or person and/or any person who holds or may subsequently hold for or, on account of such dealer or person liable, would also bring within its fold, the subsidy amount due to an industry under the Industrial policies formulated by the Central Government, disbursement of which is through the NEDFi authorities, however, the said position would come to be in effect, only after the claim made by the Industry concerned is cleared by the Committees of the State Government and is finally approved for payment by the DIPP authorities. The present writ petitions stands disposed of. ISSUES PRESENTED AND CONSIDERED 1. Whether a State Tax authority is empowered to require a nodal disbursing agency not to disburse subsidy amounts to industrial units without prior clearance/concurrence for recovery of alleged tax dues. 2. Whether subsidy amounts due under Central Government industrial policies and routed through the designated nodal agency (NEDFi) constitute 'any amount of money due' or 'money held' within the meaning of Section 44 of the Assam Value Added Tax Act, 2003, and thus are subject to recovery under that provision. 3. Whether the communication by the Superintendent of Taxes (Recovery) directing the nodal agency to withhold disbursement is ultra vires or suffers from infirmity where the tax liability figures communicated were not reconciled with payments claimed by the industries. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Power to require nodal disbursing agency to withhold subsidies Legal framework: Section 44 of the Assam Value Added Tax Act, 2003 prescribes a special mode of recovery by which the Prescribed Authority may require any person from whom any amount of money is due or any person who holds money for or on account of a dealer to pay sufficient money to satisfy arrears of tax, notwithstanding anything contained in any law or contract to the contrary. Precedent Treatment: No separate precedents were relied upon in the judgment; the Court analyses statutory text and scheme. Interpretation and reasoning: The Court interprets Section 44 broadly, noting the non-obstante clause and the language 'any person from whom any amount of money is due or may become due' and 'any person who holds or may subsequently hold money for or on account of such dealer.' The nodal agency's role as disbursing agent for Central Government subsidies was examined: when subsidy claims are processed, approved by State Committees and DIPP and funds released, the subsidy becomes an amount due for payment to the industry through the nodal agency. Ratio vs. Obiter: Ratio - The statutory power under Section 44 extends to require withholding of subsidy amounts disbursed through a nodal agency once the subsidy has become due and is ready for release. Conclusions: The Superintendent of Taxes (Recovery) possessed jurisdiction to request the nodal disbursing agency not to disburse subsidy amounts without its prior clearance/concurrence in respect of subsidies routed through that nodal agency under Central Government policies, as such amounts fall within the scope of Section 44 once they become due for payment. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Whether subsidy constitutes 'amount of money due' or 'money held' under Section 44 Legal framework: Section 44's operative concepts are 'amount of money due or may become due' to a dealer and 'money held for or on account of such dealer.' Industrial policy and scheme rules require nodal agency to ensure recovery of outstanding Government and financial dues before disbursal. Precedent Treatment: No overturning or distinguishing of prior judicial decisions; analysis is statutory and scheme-based. Interpretation and reasoning: The Court links the scheme-procedure (processing by State Committees, approval by DIPP, release of funds to nodal agency) to the statutory language. When those steps are completed and funds are in the nodal agency for disbursement, the subsidy is no longer a mere contingent promise but an amount that is due or being held for the industry. The scheme requirement that nodal agency ensure recovery of outstanding dues before disbursement reinforces that such subsidy monies can be treated as available for recovery under Section 44. Ratio vs. Obiter: Ratio - Subsidy amounts under Central Government industrial policies, routed through the nodal disbursing agency and having become due (i.e., processed, approved, and released), fall within the ambit of 'any amount of money is due or may become due' or 'money held' in Section 44 and are therefore amenable to recovery procedures under that provision. Conclusions: The Court concludes that subsidy amounts routed through the nodal agency, after requisite approvals and release, are susceptible to requisition under Section 44 for recovery of tax dues; the nodal agency may be directed not to disburse without tax authority concurrence. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Validity of the specific communication where tax liability figures were not reconciled Legal framework: Administrative action to invoke Section 44 must be anchored in correct computation of dues and give effect to principles of fair procedure; statutory recovery must be for 'the amount due.' The communication functioned as a withholding request to the nodal agency pending clearance. Precedent Treatment: No prior authorities cited; Court relies on record and pleadings. Interpretation and reasoning: The Court examined the material - the petitioners' claims of tax payments and requests for reconciliation and the absence of any affidavit or documentary rebuttal by the Taxation Authorities disputing the petitioners' reconciliatory contentions. The Court held that while the statutory power to withhold exists (see Issues 1-2), the particular quantified liabilities set out in the communication were computed without reconciling prior payments acknowledged by the petitioners and were therefore erroneous as against those petitioners. Administrative exercise of recovery power cannot rest upon fictitious or unreconciled figures. Ratio vs. Obiter: Ratio - A communication invoking Section 44 that identifies specific amounts for recovery must be based on reconciled and accurate computation; if the State does not dispute a petitioner's reconciliation evidence, the communication insofar as it reflects erroneous liabilities must be set aside. Conclusions: The Court set aside the communication insofar as it concerned the petitioners named, on the ground that the alleged liabilities were shown to be erroneous and not controverted by tax authorities. The Court directed the tax authorities to issue notices to the petitioners, determine actual tax dues after considering petitioners' responses, and, if admitted dues exist, proceed with recovery, including by invoking Section 44 consistent with the Court's statutory interpretation. ADDITIONAL OBSERVATIONS AND APPLICATIONS 1. Differentiation as to source of subsidy: The Court emphasized that NEDFi is nodal only for Central Government schemes; the withholding power in relation to subsidies administered under State Government schemes (where NEDFi is not the disbursing agency) does not apply via the impugned communication insofar as those state-administered subsidies are concerned. 2. Procedural safeguard: The Court underscored that the power to withhold is exercisable after the subsidy claim is cleared and funds are released for disbursement; prior to that point the nodal agency may have no occasion to act on a withholding request. 3. Directions: The Taxation Authorities must (a) issue notices to concerned petitioners specifying dues; (b) consider petitioners' responses and reconcile payments; (c) compute actual dues; and (d) if dues remain admitted or established, initiate recovery including by applying Section 44 as construed by the Court.