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TMI Blog2025 (3) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... emed 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. 2. Maharashtra Value Added Tax Appeal No. 2 of 2020 challenges th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. FACTS OF THE CASE: 4. The Appellant before us, namely M/s. Stressed Assests Stabilization Fund (SASF), is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Deed (20 years from the date of formation of the Appellant) the stressed assets were to vest in the Central Government. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that a Larger Bench of the MSTT was constituted and which finally held, by its order dated 24th February 2020 [impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 discharged the functions assigned to it by the Trust. According to Ms. Badheka, the main object of the Trust, as is clear from the pream ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 be exigible to sales tax under the provisions of the MVAT Act. 14. The next submission made by Ms. Badheka was that the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted 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 purchase effected prior to the determination. She submitted that Section 56 (2) is not attached with any conditions, and it is left to the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 this reason that the Appellant, whilst selling the securities (movable), has not collected any sales tax from the purchaser. If prospective effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 were to be paid over to the Government of India. Basically, the objects of the Trust were to manage, administer and realize the stressed assets, and for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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, charge or pledge; and the words "sell", "buy" and "purchase", with all their grammatical variations and cognate expressions, shall be construed accordingly; Explanation.- For the purposes of this clause,- (a) a sale within the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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 society, club or other association of persons which buys goods from, or sells goods to, its members; Explanation.- For the purposes of this clause, each of the following persons, bodies and entities who [sell any goods] whether by auction or otherwise, directly or through an agent for cash, or for deferred payment, or for any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 saying that something shall be deemed to have been done which in fact and truth has not been done. The Court of course has to examine and ascertain to what extent and for what purpose and between which persons such a statutory fiction is to be resorted to. Thereafter, full effect has to be given to such a statutory fiction, and it is to be carried to its logical conclusion. This position is now well settled by a catena of j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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."" (emphasis supplied) 26. Having said this, we will now examine the deeming provision as set out in the Explanation to Section 2 (8). To our mind, the deemed dealer provision under the MVAT Act becomes operational when the categories thereunder sell any goods, whether by auction or otherwise. The Explanation which introduces the deeming provision further stipulates that the deemed dealer provision would operate notwithstanding anything contained in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 authority, would be deemed to be a dealer for the purposes of the MVAT Act. It can hardly be disputed that the Appellant is a body constituted by the Central Government. This is abundantly clear from the Trust Deed which in fact constitutes and sets up the Appellant as a Trust and the settlor of this Trust is the Central Government. The Appellant therefore is clearly a body constituted by the Central Government. Once this is the case, we find that the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 various definitions in the Tamil Nadu General Sales Tax Act, 1959, came to the conclusion that the Port Trust of Madras ( for short "Port Trust") was not involved in any activity of "carrying on business" because unclaimed and unserviceable goods sold in discharge of various statutory charges, items etc, could not be treated as a "business" without any plea by the State of Tamil Nadu that the Port Trust had an independent intention to "carry on business" in the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Order under Section 56 (2) of the MVAT Act. 34. Before we proceed further, it would only be appropriate to reproduce the relevant provisions:- "56. Determination of disputed questions (1) If any question arises, otherwise than in a proceeding before a Court or the Tribunal under section 55, or before the Commissioner has commenced assessment of a dealer under section 23, whether, for the purposes of this Act,- (a) any person, society, club or association or any f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 a question/s is posed to the Commissioner, the Commissioner shall determine such question/s in terms of Section 56 (1) of the MVAT Act. Section 56 (2) gives the power and discretion to the Commissioner to direct that the determination made by him under sub-section (1) shall not affect the liability under the MVAT Act in respect of any sale or purchase effected prior to the determination. In other words, the Commissioner has the power to rule that the party posing the question would be governed by the answer only from the date of his order and not for transactions entered into prior thereto. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 Order [in so far as it denied the benefit of prospective effect to the Appellant], or with impugned order No. 2 passed by the Larger Bench of the MSTT. Consequently, she submitted that Question (a) framed in MVXA No. 2 of 2020 be answered in the affirmative, i.e. against the Appellant and in favour of the Revenue; Question (b) be answered in the negative i.e. against the Appellant and in favour of the Revenue; and Questions (c) & (d) be answered in affirmative i.e. against the Appellant and in favour of the Revenue. 38. As far as extending the benefit of prospective effect to the DDQ Order is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecover 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 ground also the Appellant ought to have been granted the benefit of prospective effect to the DDQ Order. 41. Another factor that ought to have been taken into consideration is the fact that the Commissioner, in his DDQ Order, whilst deciding the issue whether the Appellant is a deemed dealer or otherwise, had itself opined that bifurcation of goods as movable and immovable needs to be properly ascertained by the field officers and only at the appropriate stage the question of levy of tax would come up. 42. When one takes all these cumulative factors into consideration, we are of the view that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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