Year-wise tax settlement cannot use an earlier refund to reduce later dues, and fair hearing remains mandatory.

The Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Act, 2023 operates as a self-contained, year-wise amnesty scheme and does not permit importing the refund-adjustment mechanism from the MVAT Act into settlement computation. A refund relating to one period cannot be appropriated against settlement dues of another period unless there is a lawful refund-adjustment order under the MVAT Act. The scheme also requires compliance with fair hearing requirements before adverse settlement action is taken; where no defect notice or opportunity of hearing is given, the settlement order is vulnerable.

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Issues: Whether the authorities could adjust the refund determined for an earlier tax period against the settlement dues of a subsequent tax period under the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Act, 2023, and whether the impugned settlement order could be sustained despite the absence of a defect notice and opportunity of hearing.

Analysis: The Settlement Act was enacted as a self-contained amnesty scheme to settle specified arrears period-wise and to give quietus to old disputes. The scheme requires assessment of arrears and payment obligations with reference to each financial year and operates on its own footing. The provisions governing settlement did not authorise importing the refund-adjustment mechanism under Section 50 of the Maharashtra Value Added Tax Act, 2002 into the settlement computation. A refund for one year was not treated as an amount that could be appropriated to reduce settlement dues of another year in the absence of a lawful refund adjustment order under the MVAT Act. The impugned order was also made without giving the assessee an opportunity of hearing, although adverse action under the Settlement Act required such opportunity where the application was not in accordance with law.

Conclusion: The adjustment of the refund against the settlement dues was impermissible and the impugned settlement order could not be sustained. The challenge succeeded in favour of the assessee.

Final Conclusion: The settlement application for the relevant year had to be accepted without setting off the earlier-year refund, and the refund amount was directed to be released with statutory interest.

Ratio Decidendi: Under the Settlement Act, authorities cannot invoke the MVAT refund-adjustment machinery to appropriate a refund of one tax period against the settlement dues of another tax period, and any adverse settlement action must comply with the Act and the requirements of fair hearing.

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