Refund adjustment under Section 50 MVAT Act cannot be made against dues settled under the Settlement Act.

The Petitioner, a dealer in paper products, was subjected to investigation for tax periods 2007–08, 2008–09, and 2009–10.

Following appellate proceedings, the Petitioner was found entitled to an enhanced refund of ₹33,29,000 for the period 2007–08.

Simultaneously, for the periods 2008–09 and 2009–10, the Petitioner applied for relief under the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fees Act, 2023 ("Settlement Act"), opting for the "One Time Payment" scheme.

The Petitioner paid the requisite settlement amount for 2008–09 (₹9,12,887).

However, Respondent No. 2 issued a Settlement Order on 18th April 2024, adjusting the refund due for 2007–08 against the original tax demand for 2008–09, effectively nullifying the settlement benefit.

The Petitioner challenged this adjustment as unauthorized under the Settlement Act.

Whether the Revenue authorities can adjust a tax refund from one period against the dues of another period once the assessee has applied for and paid the requisite amount under the Settlement Act, 2023.

Whether the provisions of Section 50 of the MVAT Act, 2002, regarding refund adjustments, can be imported into proceedings governed by the Settlement Act.

The court applied the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fees Act, 2023, specifically Section 13, which mandates the discharge of liability upon payment of the "requisite amount".

It emphasized that the Settlement Act is a "self-contained code" and a special scheme intended to provide quietus to litigation.

The court also interpreted Section 50 of the Maharashtra Value Added Tax (MVAT) Act, 2002, which governs the general power of the Commissioner to adjust refunds against dues.

Relying on *TML Business Services Ltd. v. Deputy Commissioner of Sales Tax* and *Andreas Stihl Private Limited v. Joint Commissioner of State Tax*, the court affirmed that the Settlement Act overrides general recovery provisions once an amnesty application is processed.

The court reasoned that the Settlement Act and the MVAT Act operate in distinct fields; the former being a special amnesty scheme, its provisions cannot be diluted by importing general recovery powers under Section 50 of the MVAT Act.

The "designated authority" under the Settlement Act, though often the same individual as the Tax Commissioner, acts in a different legal capacity and cannot intermix powers.

Once the Petitioner paid the 20% settlement amount (₹9,12,887) for the 2008–09 period, the "arrears" for that period were legally substituted by the settlement amount.

Consequently, there were no "outstanding dues" left for the 2008–09 period against which the 2007–08 refund could be adjusted.

Furthermore, the court found the impugned order violated principles of natural justice, as the adjustment was made without affording the Petitioner a hearing as required under Section 13(2) of the Settlement Act.

The Court quashed and set aside the Settlement Order dated 18th April 2024.

It directed the Respondents to accept the Petitioner’s settlement application for the 2008–09 period without any refund adjustment and ordered the refund of ₹33,29,000 (pertaining to 2007–08) along with applicable interest under the MVAT Act to be credited to the Petitioner within two weeks.