Supreme Court Upholds Statutory Remedy in Tax Assessment Dispute: State of Maharashtra vs. Greatship (India) Limited (20 September 2022)

Date of the Judgment: 20 September 2022

Citation: (2022) INSC 799

Judges: M.R. Shah, J. and B.V. Nagarathna, J.

Can a High Court bypass the established appeal process and directly intervene in tax assessment matters? The Supreme Court of India addressed this critical question in a recent judgment, emphasizing the importance of adhering to statutory remedies. This case revolved around a dispute over a tax assessment order where the assessee directly approached the High Court, bypassing the designated appellate authority. The Supreme Court, in this judgment, reaffirmed the principle that High Courts should generally not entertain writ petitions when an effective alternative remedy is available under the relevant statute. The judgment was authored by Justice M.R. Shah, with Justice B.V. Nagarathna concurring.

Case Background

The respondent, Greatship (India) Limited, was undergoing assessment proceedings under the Maharashtra Value Added Tax Act, 2002 (MVAT Act) and the Central Sales Tax Act, 1956 (CST Act). The Assessing Officer issued a notice on 01 February 2018, requiring the company to produce documents and explain why it should not be assessed under Section 23 of the MVAT Act. The company submitted documents and a response on 03 May 2018. A personal hearing was scheduled for 16 March 2020, but the Assessing Officer was unavailable. Despite attempts to contact the officer on 17, 18, and 19 March 2020, no hearing took place. On 20 March 2020, the company submitted a letter stating that all relevant documents had been provided and requested a personal hearing. Subsequently, the Assessing Officer passed an order on 20 March 2020, determining the tax liability, interest, and penalty under the MVAT and CST Acts.

The company did not file an appeal before the first appellate authority. Instead, it filed a writ petition before the High Court of Judicature at Bombay, challenging the assessment order. The company alleged that the order was not passed on 20 March 2020 but in July 2020, exceeding the limitation period. The High Court entertained the writ petition and set aside the assessment order and demand notice.

Timeline

Course of Proceedings

The High Court of Judicature at Bombay entertained the writ petition filed by Greatship (India) Limited, which challenged the assessment order passed under the MVAT Act and CST Act. The High Court set aside the assessment order and the demand notice, accepting the company’s contention that the order was passed beyond the limitation period. The State of Maharashtra and others then appealed this decision to the Supreme Court.

Legal Framework

The case primarily involves the interpretation of the Maharashtra Value Added Tax Act, 2002 (MVAT Act) and the Central Sales Tax Act, 1956 (CST Act). These acts provide a mechanism for tax assessment, appeals, and revisions. The Supreme Court emphasized the importance of adhering to the statutory remedies provided under these acts. The relevant provisions include the process of assessment by the Assessing Officer and the availability of appeal before the first appellate authority, and further appeal or revision before the Tribunal.

Arguments

Appellants’ (State of Maharashtra) Arguments:

• The counsel for the State of Maharashtra argued that the High Court should not have entertained the writ petition under Article 226 of the Constitution of India against the assessment order.
• They contended that the assessee had a statutory alternative remedy available by way of appeal before the first appellate authority, which should have been pursued.
• The State argued that there were serious disputed facts regarding whether the assessment order was passed on 20 March 2020 or 14 July 2020, which should have been addressed in the appellate process.
• The State relied on several Supreme Court decisions, including Titaghur Paper Mills Co. Ltd. v. State of Orissa [(1983) 2 SCC 433], Punjab National Bank v. O.C. Krishnan [(2001) 6 SCC 569], Raj Kumar Shivhare v. Directorate of Enforcement [(2010) 4 SCC 772], and United Bank of India v. Satyawati Tondon and others [(2010) 8 SCC 110], to support their argument that the High Court should not have bypassed the statutory remedy.

Respondent’s (Greatship (India) Limited) Arguments:

• The counsel for Greatship (India) Limited argued that the High Court was justified in entertaining the writ petition because the assessment order was not passed on 20 March 2020, but later, beyond the prescribed limitation period.
• They contended that since the assessment order was time-barred, the High Court rightly intervened to quash it.
• The respondent relied on M/s Filterco & Another v. Commissioner of Sales Tax, Madhya Pradesh and Another [(1986) 2 SCC 103], Assistant Commissioner (CT) LTU & Another v. Amara Raja Batteries Limited [(2009) 8 SCC 209], and Whirlpool Corporation v. Registrar of Trademarks, Mumbai [(1998) 8 SCC 1] to support their claim that the High Court can entertain a writ petition in certain circumstances.
• The respondent also argued that since there was an earlier decision against them by the first appellate authority on merits, pursuing another appeal would be a mere formality, justifying their direct approach to the High Court.

Submissions by Parties

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the High Court was right in entertaining a writ petition under Article 226 of the Constitution of India against the assessment order, bypassing the statutory remedies available under the MVAT Act and CST Act.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court held that the High Court erred in entertaining the writ petition against the assessment order. The Court emphasized the principle that when a statutory remedy is available, it should be exhausted before invoking the writ jurisdiction of the High Court. The Court noted that there were serious disputes on facts regarding the date of the assessment order, which should have been addressed through the statutory appeal process.

How each authority was viewed by the Court?

The Supreme Court relied on the following authorities:

• Titaghur Paper Mills Co. Ltd. v. State of Orissa [(1983) 2 SCC 433]: The Court cited this case to emphasize that Article 226 is not meant to circumvent statutory procedures and that statutory remedies should be exhausted first.
• Punjab National Bank v. O.C. Krishnan [(2001) 6 SCC 569]: This case was used to reinforce the principle that when an alternative remedy is available, judicial prudence requires the court to refrain from exercising jurisdiction under Articles 226 and 227 of the Constitution.
• Raj Kumar Shivhare v. Directorate of Enforcement [(2010) 4 SCC 772]: This authority was cited to highlight that when a statutory forum is created for redressal of grievances, a writ petition should not be entertained, ignoring the statutory dispensation.
• United Bank of India v. Satyawati Tondon and others [(2010) 8 SCC 110]: This case was cited to reiterate that the High Court should not entertain writ petitions by bypassing statutory remedies.

The Court distinguished the cases relied upon by the respondent:

• M/s Filterco & Another v. Commissioner of Sales Tax, Madhya Pradesh and Another [(1986) 2 SCC 103], Assistant Commissioner (CT) LTU & Another v. Amara Raja Batteries Limited [(2009) 8 SCC 209], and Whirlpool Corporation v. Registrar of Trademarks, Mumbai [(1998) 8 SCC 1] were distinguished as not directly applicable to the issue of bypassing statutory remedies. The Court clarified that the issue was not about the maintainability of a writ petition in general, but about its entertainability when a statutory remedy was available.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle of exhausting statutory remedies before invoking the writ jurisdiction of the High Court. The Court emphasized the importance of adhering to the established legal processes and the need for judicial prudence in refraining from exercising extraordinary jurisdiction when an alternative remedy is available. The Court also noted the presence of disputed facts regarding the date of the assessment order, which should have been resolved through the statutory appeal process.

The Court’s reasoning was heavily based on legal principles and precedents, with a lesser emphasis on the specific facts of the case, which were considered more appropriate for the appellate process.

Logical Reasoning

Judgment

The Supreme Court set aside the High Court’s judgment and dismissed the writ petition filed by Greatship (India) Limited. The Court directed the company to avail the statutory remedy of appeal within four weeks. The appellate authority was instructed to decide the appeal on its merits without raising any question of limitation, subject to other conditions under the statute. The Court clarified that it had not expressed any opinion on the merits of the case and that the appellate authority should consider the matter independently, without being influenced by the High Court’s observations.

“The High Court has seriously erred in entertaining the writ petition under Article 226 of the Constitution of India against the assessment order, by-passing the statutory remedies.”

“This Court has consistently taken the view that when there is an alternate remedy available, judicial prudence demands that the court refrains from exercising its jurisdiction under constitutional provisions.”

“The respondent – assessee is relegated to avail the statutory remedy of appeal and other remedies available under the MVAT Act and CST Act.”

Key Takeaways

• High Courts should generally not entertain writ petitions under Article 226 of the Constitution of India when a statutory remedy of appeal is available.
• Taxpayers must exhaust the statutory remedies provided under the relevant tax laws before approaching the High Court.
• Disputed facts should be resolved through the established appellate process.
• The Supreme Court has reaffirmed the importance of adhering to statutory procedures and the principle of judicial restraint in exercising writ jurisdiction.

Directions

The Supreme Court directed the respondent to avail the statutory remedy of appeal within four weeks from the date of the judgment. The appellate authority was instructed to decide the appeal on its own merits without raising any question of limitation, subject to fulfilling other conditions under the statute.

Development of Law

The ratio decidendi of this case is that High Courts should not entertain writ petitions under Article 226 of the Constitution of India when a statutory remedy of appeal is available. This judgment reinforces the established legal principle that statutory remedies should be exhausted before invoking the writ jurisdiction of the High Court. There is no change in the previous positions of law, but rather a reaffirmation of existing principles related to statutory remedies and judicial restraint.

Conclusion

The Supreme Court’s judgment in the case of The State of Maharashtra and Others vs. Greatship (India) Limited underscores the importance of adhering to statutory procedures and exhausting available remedies before approaching the High Court under Article 226 of the Constitution of India. The Court set aside the High Court’s decision, emphasizing that the statutory appeal process must be followed, particularly when factual disputes exist. This judgment serves as a reminder of the principle of judicial restraint and the need for taxpayers to use the established legal channels for dispute resolution.