The petitioners challenged assessment orders issued under the Maharashtra Value Added Tax (MVAT) Act. The orders sought to levy VAT on royalty payments made by Ferrero India Pvt. Ltd. to its parent companies in Luxembourg. The petitioners argued that the assessment was issued without following the principles of natural justice, including failure to issue proper show cause notices and denial of a hearing, and that it was backdated to avoid the limitation period under the MVAT Act. The Court quashed the assessment order for violation of procedural safeguards and statutory limitations, holding that there was clear non-application of mind and legal mala fides by the tax authorities.

1. Parties and Background (Paras 1-5):

• Petitioners: M/s Soremartec S.A. and M/s Magic Production Group S.A. (Luxembourg companies), along with Ferrero India Pvt. Ltd.
• Respondents: State of Maharashtra and tax authorities.
• Petitioners 1 and 2 licensed intellectual property rights (IPR) to Petitioner 3 in India.

2. Tax Dispute (Paras 6-10):

• VAT levied on royalties paid by Ferrero India for using IPR, treated as a "sale of goods."
• Petitioners received assessment notices for FY 2015-16 but claimed no notice was served for FY 2013-14 and FY 2014-15.

3. Procedural Lapses (Paras 11-19):

• Petitioners argue that the assessment was backdated and served after the statutory limitation period had expired.
• No proper notice was served, and no opportunity for a hearing was provided.

4. Non-Application of Mind (Paras 20-23):

• The assessment order allegedly copied details from another case, showing non-application of mind by tax authorities.

5. Limitation Issues (Paras 24-30):

• The Court found prima facie evidence that the order was backdated to fit within the 8-year statutory limit.
• There was a delay of 15 months in serving the order.

6. Legal Principles and Authorities Cited (Paras 31-46):

• The Court relied on precedents concerning natural justice (e.g., Bachhittar Singh vs. State of Punjab).
• It applied the doctrine of legal malafides, highlighting gross breaches of statutory provisions.

7. Court's Findings (Paras 47-61):

• The assessment order was quashed due to breaches of Section 23(4) of the MVAT Act, violation of natural justice, and legal malafides.
• A remand for reassessment was denied as it would unfairly benefit the tax authorities, giving them extended time.

Acts and Sections Discussed:

• MVAT Act, 2002, Section 23(4): Procedure for assessment, including the requirement to issue notice and provide an opportunity for a hearing.
• Rule 21 of the MVAT Rules: Requirement to adhere to natural justice principles.

Ratio:

The Court held that failure to serve notices, denial of a hearing, and backdating the assessment order constituted a breach of the principles of natural justice. The assessment order was void due to statutory limitations expiring, improper process, and legal malafides. The Court emphasized that tax authorities must adhere strictly to procedural safeguards, and such breaches cannot be cured by remand.

Subjects:

• Tax Law, VAT, Intellectual Property Royalties, Natural Justice, Limitation Periods.
• VAT Assessment, Natural Justice, Procedural Fairness, Intellectual Property, Legal Malafides, Statutory Limitation, Bombay High Court.