The Bombay High Court has held that Stressed Assets Stabilization Fund (SASF) liable to pay Value Added Tax (VAT) on sale of movable assets.
The bench of Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla has observed that as per clause (vii) of the Explanation to Section 2(8) of the Maharashtra Value Added Tax (MVAT), Insurance and 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.
The appellant, Stressed Assets Stabilization Fund (SASF), is a trust set up by the Central Government pursuant to a Trust Deed. The purpose of setting up the aforesaid Trust was basically to acquire, by transfer, the stressed assets of the Industrial Development Bank of India (IDBI) who had accumulated non-performing assets to the tune of approximately Rs.9,000 Crores as on 31st March 2004.
It is to deal with this aspect that the Central Government, through the President of India, as the settlor, decided to set up a Special Purpose Vehicle (SPV) in the form of a Trust for acquiring the stressed assets of IDBI with a view to recover the loans that were to be acquired by the Appellant Trust from IDBI.
The Central Government allocated funds of Rs.9,000 Crores in the budget for the year 2004-05 for extending a loan to the Trust. The Trust Deed also defined “Stressed Assets” to mean the assets financed by IDBI in the form of loans and advances and which were not recovered by IDBI.
In other words, the Appellant – SASF was assigned the legal debts owed to IDBI along with the underlying securities, which were then to be disposed of/sold for recovery of loans from the defaulting borrowers. The main, or rather, the only object of the Trust was realization and recovery of dues with or without the intervention of the Courts/Tribunals.
The Appellant was visited by the Investigation Branch of the Sales Tax Authorities of Maharashtra. The Appellant produced all necessary details before the Investigating Officers, and they did not find any discriminatory material for suspicion. However, according to the Investigating Officers, the Appellant was a dealer under 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.
The appellant contended that Appellant 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.
The court confirmed the findings of the lower authorities that under the definition of the word “dealer”, the Appellant is deemed to be a “dealer”, once it sells movable goods, by auction or otherwise.
The court held that it being set up and constituted by the Central Government, and all the proceeds that it recovers from sale of stressed assets are to go to the Central Government, coupled with the fact that if for any reason the stressed assets are not sold during the tenure of the Trust, the same would vest in the Central Government, it was not liable to collect any tax on the sale of securities of the stressed assets.
Case Details
Case Title: Stressed Assets Stabilization Fund Versus The State of Maharashtra
Case No.: Maharashtra Value Added Tax Appeal No.16 Of 2016 In Appeal No.23 Of 2014
Date: MARCH 03, 2025
Counsel For Petitioner: Nikita Badheka
Counsel For Respondent: Jyoti Chavan
