The Bombay High Court last week dismissed the challenge to the constitutional validity of Section 48(5) of the Maharashtra Value Added Tax Act, 2002. It was argued that the provision gave unequal treatment to equals and did not provide any machinery for the purchaser to ascertain whether the seller has actually paid VAT. It did not protect the purchaser in a case where the seller has not paid the tax into the government treasury which he had collected from the purchaser. This constitutes an unreasonable classification between the seller and the purchaser. It was further argued in the case, Mahalaxmi Cotton Ginning vs State of Maharashtra, that the provision also cast an unbearable burden on the purchasing dealer. Though he has paid tax to the vendor, if a set-off is disallowed, he would be liable to pay the same amount once again together with interest and penalty. The high court rejected these contentions based on equality and freedom of trade granted by the Constitution. –

Comments >>>> {{*.*}}