TaxTMI 
TaxTMI 
2025 (3) TMI 116
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....r alia holding that the Appellant is a "deemed dealer" as per the Explanation to Section 2 (8) of the said Act. Maharashtra Value Added Tax Appeal No. 16 of 2016 was admitted vide order dated 30th August 2016 on the following three questions of law:- (a) Whether on the facts, evidences, circumstances and details available on record, the Tribunal was justified in holding that the Appellant Trust is a deemed dealer under section 2 (8) of MVAT Act 2002 liable for registration and payment of tax under MVAT Act. (b) Whether on the facts, evidences, circumstances and details available on record, the Tribunal was justified in upholding the view of the Ld. Commissioner that "it is not necessary for levy of Sales Tax, that the Appellant must carry on 'business' in the capacity of the dealer". (c) Whether on the facts, evidences, circumstances and details available on record the Tribunal was justified in holding that the transaction of sale of movable property is affected by SASF, especially when the Commissioner had clearly observed that whether there is sale of movable or immovable property, is to be ascertained by the field officers at the appropriate stage. ....
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....are conspicuously absent. (c) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in confirming, that the Appellant was effecting recovery of the stressed assets by sale of movable properties, when the Commissioner himself had kept this question open to be decided by field officers after due verification? (d) Whether on the facts, evidence, circumstances and the details available on record, the Tribunal was justified in not appreciating that the Appellant Trust having disbursed the amount recovered amongst other secured creditors, it will not be able to recover any tax from the other secured creditors and therefore a case of grave hardship was made out especially when the Appellant trust has no income of its own and its administrative expenses are born by successor of IDBI (now IDBI Bank Ltd.) as per Trust Deed?" 3. Both the above Appeals have now come up for hearing and final disposal before us. Before we proceed to decide the questions of law raised in both the aforesaid Appeals, it would be necessary to set out some facts. Since the facts in both the Appeals are identical, we will refer to the facts as we go along....
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....necessary details before the Investigating Officers, and they did not find any discriminatory material for suspicion. However, according to the Investigating Officers, the Appellant was a dealer (as contemplated under the provisions of the MVAT Act) and ought to have registered itself under the said Act and should have paid tax on the sale of movable properties which it undertook whilst it was seeking to recover the loans and advances of the defaulting borrowers, and which were assigned to the Appellant. 7. According to the Appellant, it was not a dealer in terms of the provisions of the MVAT Act as it was not carrying on any business of buying or selling goods. According to the Appellant, it was constituted by the Government of India, for the Government of India, and the Government of India was the beneficiary of the Trust set up by it. It was the further case of the Appellant that the money realized by it had to be transferred to the Central Government under the Trust Deed which set up/constituted the Appellant. Since the Government of India was the beneficiary, and also the fact that if the Trust was unable to sell the stressed assets within the period mentioned in the Trust ....
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.... the State of Maharashtra. According to the Commissioner, the Appellant was aware that it is effecting recovery of stressed assets by sale of movable and immovable property and therefore it was not a fit case for granting prospective effect to the DDQ Order. In other words, the request for giving prospective effect to the DDQ Order was turned down by the Commissioner. 10. Being aggrieved by the DDQ Order passed by the Commissioner, the Appellant approached the MSTT by filing an Appeal under Section 26(1)(c) of the MVAT Act. The MSTT also, after giving a hearing to the Appellant, by a detailed judgment and order dated 4th June 2015 [the 1st impugned order], confirmed the DDQ Order passed by the Commissioner, in so far as it held that the Appellant was a "deemed dealer". This forms the subject matter of Maharashtra Value Added Tax Appeal No. 16 of 2016. However, the two members of the MSTT differed on whether the benefit of prospective effect ought to be given to the Appellant. One member was of the view that the Appellant had made out a case for getting the benefit of prospective effect to the DDQ Order, while the other member did not. It is because of this difference of opinion ....
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....ng reliance on these provisions of the Trust Deed, Ms. Badheka submitted that by no stretch of the imagination can it be said that the Appellant Trust is doing a "business" of sale and purchase of movable property. Since the Trust is formed by the Central Government for a specific purpose, with a limited duration, the Trust cannot be deemed to be a dealer within a meaning of the MVAT Act. Ms. Badheka submitted that the definition of word "business" in Section 2 (4) of the MVAT Act inter alia includes any adventure or concern in the nature of service, trade, commerce, or manufacture. She submitted that looking at the objects of the Trust and what it is supposed to do in terms of the Trust Deed [under which it is set up], the Appellant can never be said to be indulging in any activity of carrying on "business" as contemplated in terms of Section 2 (4) of the MVAT Act. She further submitted that the definition of the word "sale" under Section 2 (24) of the MVAT Act means a sale of goods made within the State of Maharashtra for cash or deferred payment or other valuable consideration. She submitted that the Appellant has not sold any goods within the State of Maharashtra but has discha....
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.... incidental transaction of sale of securities (movable) is required to be carried out by the Appellant Trust and this activity carried out by the Appellant cannot be termed as "carrying on business". Since there is no sale or purchase of goods as understood in the normal parlance, coupled with the fact that there is no profit motive involved, the Appellant can never be said to be a "dealer" as contemplated under the MVAT Act. This is more so because the amount recovered by sale of securities by the Appellant is required to be credited to the Central Government which again clearly goes to establish that the Appellant is doing no business and has no profit motive. 13. Apart from the aforesaid argument, Ms. Badheka also submitted that the loans advanced by IDBI to its borrowers, and which were thereafter assigned to the Appellant Trust, was on the basis of securities and mortgage of immovable properties. She submitted that the entire properties that were auctioned by the Trust were immovable properties having plant and machinery embedded in the earth. Since the sale was carried out on an "as is where is basis" there was absolutely no sale of movable property and therefore would not....
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.... effect [to the DDQ Order] to the Appellant. In this regard, Ms. Badheka pointed out the provisions of Section 56 of the MVAT Act. She submitted that Section 56 as it stood [prior to its deletion with effect from 1st May 2016], inter alia provided that if any question arises, otherwise than in a proceeding before the Court or a Tribunal under Section 55, or before the Commissioner has commenced assessment of a dealer under Section 23, whether, for the purposes of this Act, any person is a dealer, or any particular person or dealer is required to be registered, or any particular thing done to any goods amounts to or results in the manufacture of goods within the meaning of that term, or any transaction is a sale or purchase, or where it is sale or purchase, the sale or purchase price thereof etc, the Commissioner shall, subject to rules, make an order determining such question. She submitted that under Section 56 (2), the Commissioner has the power to rule that the determination made by him under sub-section (1) shall not affect the liability of the Applicant under the MVAT Act, or if the circumstances so warrant, of any other person similarly situated, with respect to any sale or p....
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....f IDBI, and admittedly was not carrying on any business [as understood in the common parlance] and neither was it making any profit, this was a fit case where the discretion ought to have been exercised in favour of the Appellant and the benefit of prospective effect ought to have been granted. 18. To carry this argument further, Ms. Badheka pointed out once again, that this is a unique case where the Central Government has set up the Appellant Trust in public interest. The object is to manage, administer and realize huge stressed assets of the erstwhile IDBI. Once the assets are realized and recovery was made, the same had to be passed on to the Central Government. All this is explicitly clear from the terms of the Trust Deed. It is in these facts and circumstances that the Appellant was of the bona fide belief that it would not be liable to pay any sales tax on sale of securities (movable) as it was not carrying on any business of buying or selling goods. In fact, the Comptroller and Auditor General, who are the regular auditors of the Appellant, have also not pointed out any time that the sale of securities (movable) by the Appellant would be exigible to sales tax. It is for ....
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....ying on any business as contemplated under the provisions of the MVAT Act and hence would not be liable to tax under the provisions thereunder. Before we examine the provisions of the MVAT Act, it would be necessary to examine the relevant clauses of the Trust Deed dated 24th September 2004 and the Transfer Deed dated 30th September 2004. From the Trust Deed it is clear that for four decades, IDBI had accumulated non-performing assets of approximately Rs. 9,000/- Crores as on 31st March 2004. The Government of India, therefore, as a settlor, decided to set up a Special Purpose Vehicle in the form of a Trust for acquiring (by transfer) the stressed assets of IDBI with a view to recover the amounts due thereunder. It is for this purpose that the Appellant was constituted as "the Stressed Assets Stabilization Fund". The salient features of this Trust Deed indicates that the Trustees of the Appellant were to realize the stressed assets by re-structuring, arriving at settlement with borrowers, taking legal measures, or adopting such measures as it may deem fit, including but not limited to recovery as arrears of land revenue. The amounts realized or recovered from the stressed assets we....
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....t in such service, trade, commerce, manufacture, adventure or concern is with a motive to make gain or profit and whether or not any gain or profit accrues from such service, trade, commerce, manufacture, adventure or concern. Explanation.- For the purpose of this clause,- [***] (ii) any transaction of sale or purchase of capital assets pertaining to such service, trade, commerce, manufacture, adventure or concern shall be deemed to be a transaction comprised in business; (iii) sale or purchase of any goods, the price of which would be credited or, as the case may be, debited to the profit and loss account of the business under the double entry system of accounting shall be deemed to be transactions comprised in business; (iv) any transaction in connection with the commencement or closure of business shall be deemed to be a transaction comprised in business;" 22. Similarly the definition of the word "sale" is defined in Section 2 (24) which reads as under:- "2 (24) "Sale" means a sale of goods made within the State for cash or deferred payment or other valuable consideration but does not include a mortgage, hypothecation, cha....
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.... or incidental to or in the course of, his business buys or sells, goods in the State whether for commission, remuneration or otherwise and includes,- (a) a factor, broker, commission agent, del-credere agent or any other mercantile agent, by whatever name called, who for the purposes of or consequential to his engagement in or [in connection with or incidental to or] in the course of the business, buys or sells any goods on behalf of any principal or principals whether disclosed or not; (b) [an auctioneer who sells or auctions goods whether acting as an agent or otherwise or, who organises the sale of goods or conducts the auction of goods whether or not he has the authority to sell the goods] belonging to any principal whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal; (c) a non-resident dealer or, as the case may be, an agent, residing in the State of a non-resident dealer, who buys or sells goods in the State for the purposes of or consequential to his [engagement in or in connection with or incidental to or in the course of, the business]; (d) any so....
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....oned therein, who sell any goods, whether by auction or otherwise, directly or through an agent, for cash, or for deferred payment, or for other valuable consideration, shall, notwithstanding anything contained in Section 2 (4) [i.e. the definition of the word "business"] or any other provisions of the MVAT Act, be deemed to be a "dealer". As can be seen from clause (vii) of the Explanation to Section 2 (8), Insurance and Financial Corporations, institutions or companies and banks included in the Second Schedule to the Reserve Bank of India Act, 1934 would be a deemed dealer under the provisions of the MVAT Act. Similarly, under clause (x) of the Explanation appended to Section 2 (8) any other corporation, company, body or authority owned or constituted by, or subject to administrative control of the Central Government, any State Government or any local authority would be a deemed dealer for the purposes of the MVAT Act. Hence, under the provisions of the MVAT Act certain categories of persons have been deemed to be dealers under Section 2 (8) of the said Act. 25. Before we procced further we must emphasize that a deeming provision in a statute basically creates a legal fiction ....
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....se of State of Bombay v. Pandurang Vinayak [(1953) 1 SCC 425 : AIR 1953 SC 244 : 1953 SCR 773]. From the facts of that case it shall appear that Bombay Buildings (Control on Erection) Ordinance, 1948 which was applicable to certain areas mentioned in the schedule to it, was extended by a notification to all the areas in the province in respect of buildings intended to be used for the purposes of cinemas. The Ordinance was repealed and replaced by an Act which again extended to areas mentioned in the schedule with power under sub-section (3) of Section 1 to extend its operation to other areas. This Court held that the deemed clause in Section 15 of the Act read with Section 25 of the Bombay General Clauses Act has to be given full effect and the expression 'enactment' in the Act will cover the word 'Ordinance' occurring in the notification which had been issued. In that connection it was said: "The corollary thus of declaring the provisions of Section 25, Bombay General Clauses Act, applicable to the repeal of the ordinance and of deeming that ordinance an enactment is that wherever the word 'ordinance' occurs in the notification, that word has to be read as an enactment.""....
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....med dealer, under clause (x), according to the Appellant, the MSTT, in impugned order No. 1, classifies it as a financial institution [i.e. under clause (vii)]. According to Ms. Badheka when one examines clause (vii) of the Explanation to Section 2 (8), it only includes financial corporations/institutions included in the second schedule to the Reserve Bank of India Act, 1934. According to Ms. Badheka, the Appellant can never fall under clause (vii) as it is not an institution or bank or company included in the second schedule of the Reserve Bank of India Act, 1934. Even if we are to assume, for the sake of argument, that Ms. Badheka is correct in her submission, the same would make little difference to the outcome of the present matter. We say this because even assuming for the sake of argument that the Appellant would not fall within clause (vii), to our mind, it would squarely be covered in clause (x) of the Explanation to Section 2 (8). As set out earlier, clause (x) of the Explanation clearly stipulates that any corporation, company, body or authority owned or constituted by or subject to the administrative control of the Central Government, any State Government or any local au....
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....s come to the conclusion that the Appellant maintains a proper account of the movable properties and the valuation reports also ensure that a proper estimate of minimum realizable value is ascertained. Further the certificates of sale also reproduced the details of the movable property sold. This argument of Ms. Badheka therefore does not hold any merit. We find that the DDQ Order passed by the Commissioner is a well-reasoned order and has taken all the arguments of the Appellant into consideration and answered them with proper cogent reasons. It is only thereafter that DDQ Order proceeds to hold that the Appellant is a "deemed dealer" for the purposes of the MVAT Act. We fully agree with the findings given by the Commissioner (in the DDQ Order) in so far as he holds that the Appellant is a "deemed dealer" under the MVAT Act. 30. Before parting on this issue, it would only be fair to deal with the decision of the Hon'ble Supreme Court relied upon by Ms. Badheka in the case of State of Tamil Nadu and Anr (supra). We have carefully perused this decision and find that the same is wholly inapplicable to the facts of the present case. The Hon'ble Supreme Court, after examining the va....
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....ircumstances, we find that the reliance placed by Ms. Badheka on the decision of the Hon'ble Supreme Court in the case of State of Tamil Nadu and Anr (supra) is wholly misplaced and does not carry her case any further. 31. In view of the foregoing discussion, we have no hesitation in answering the Questions of Law raised in MVXA No. 16 of 2016 in the affirmative, i.e. against the Appellant and in favour of the Revenue. DENYING THE BENEFIT OF PROSPECTIVE EFFECT TO THE DDQ ORDER [UNDER SECTION 56 (2) OF THE MVAT ACT] 32. This now leaves us to deal with the issue of whether the Appellant was entitled to the benefit of prospective effect to the DDQ Order as contemplated under Section 56 (2) of the MVAT Act. As mentioned earlier, by impugned order No. 2 [passed by the Larger Bench of the MSTT], the Appellant was denied this benefit, and which forms the subject matter of MVXA No. 2 of 2020. 33. Though four questions have been projected in this Appeal, the real and the only question to be decided is whether in the facts and circumstances of the present case, the Larger Bench of the MSTT was justified in rejecting the plea of the Appellant to grant prospective effect to the DDQ....
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....ngly in respect of any other person similarly situated: Provided that, no order shall be passed under this sub-section unless the dealer or the person in whose case the order is proposed to be passed has been given a reasonable opportunity of being heard: Provided further that, before initiating any action under this sub-section, the Commissioner shall obtain prior permission of the State Government. (4) If any such question arises from any order already passed under this Act or any earlier law, no such question shall be entertained for determination under this section; but such question may be raised in appeal against such order. (5) The Commissioner, in so far as he may, shall decide the applications for determination in the chronological order in which they were filed." (emphasis supplied) 35. As can be seen from these provisions, under Section 56 (1), if any question arises regarding, inter alia, a person being a dealer, or whether such person is required to be registered as a dealer, or any particular thing done to any goods amounts to or results in the manufacture of goods, or any transaction is a sale or purchase etc., and such....
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....Since the Appellant was aware that it is effecting recovery of bad debts by adopting sale of properties (movable), the liability to pay sales tax under the provisions of the MVAT Act could not have been lost sight of by the Appellant. She submitted that ignorance of law is no excuse and there is in fact no ambiguities in the provisions, and neither was the Appellant ever misled by any authority to think that the sale of movable properties under the provisions of the SARFAESI Act, 2002 would not be exigible to sales tax. In short, it was the submission of the learned Addl. G.P. that the facts and the law in the present case were extremely clear, and there being no ambiguity, no case whatsoever was made out for granting the benefit of prospective effect to the DDQ Order. 37. Ms. Chavan submitted that as far as the argument of hardship is concerned, the same cannot be a stand-alone argument. If any hardship is caused to the Appellant by virtue of its own wrongdoing, the same cannot be a ground for granting prospective effect to the DDQ Order. For all these reasons the learned Addl. G.P. submitted that there is no ground made out for interfering, either with the Commissioner's DDQ O....
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.... with Ms. Badheka that grave hardship would be caused to the Appellant if prospective effect is not given to the DDQ Order because it would now be impossible for the Appellant to recover any sales tax from the purchasers of the movable securities. Ms. Badheka is correct in her submission when she states that the Trust has no money of its own as the sale proceeds of the stressed assets have to be paid over to the Central Government, and if this liability is foisted upon the Appellant Trust, they would have to approach the Central Government in order to pay the sales tax which they are now unable to recover from their purchasers. 40. Another reason why we feel that the benefit of prospective effect ought to be extended to the Appellant is that initially, two members of the MSTT (in impugned order No. 1) had a difference of opinion on whether the Appellant ought to be granted the benefit of prospective effect to the DDQ Order. In fact, the judicial member was of the opinion that the benefit of prospective effect ought to be granted to the Appellant. The technical member did not. This itself goes to show that what was being canvassed by the Appellant was debatable and hence, on this....