[Cites 11, Cited by 0]
Madhya Pradesh High Court
M/S Indraprasth Uniforms vs The State Of Madhya Pradesh on 12 March, 2026
Author: Vivek Rusia
Bench: Vivek Rusia
1
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE PRADEEP MITTAL
ON THE 12th OF MARCH, 2026
WRIT PETITION No. 7572 of 2019
M/S INDRAPRASTH UNIFORMS
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri Ganesh Narayan Purohit, learned Senior Advocate, through Video
Conferencing with Shri Uma Parashar & Shri Eshan Tripathi, Advocate
for the petitioner.
Shri Rajvardhan Dutt Padraha, learned Government Advocate for the
respondents No. 1, 2 & 3.
ORDER
Per: Justice Vivek Rusia
The petitioner has filed the present petition under Article 226 of the
Constitution of India being aggrieved by the action of the respondents in denying
refund of the excess amount deposited during search proceedings conducted
under Section 55 of the Madhya Pradesh Value Added Tax Act, 2002 (for short
"VAT Act") on the ground that retention of such excess amount is without
authority of law and violative of Article 265 of the Constitution of India. The
petitioner has, inter alia, prayed for a direction to the respondents to refund the
excess amount collected as compounding under Section 55A(a) of the VAT Act,
along with interest.
Facts of the case, in short, are as follows:-
2. The petitioner is a registered dealer under the Madhya Pradesh Value
Added Tax Act, 2002 (hereinafter referred to as the "VAT Act") bearing TIN No.
23044105062 and has been engaged in the business of purchase and sale of cloth,
school uniforms and manufacturing of school uniforms. The petitioner was
regularly assessed under the VAT Act and Entry Tax Act. A search under Section
55 of the VAT Act was conducted at the business premises of the petitioner on
28.05.2016, upon authorisation issued by the Commissioner of Commercial Tax.
At the time of search, the petitioner was not personally present in the business
premises as his grandmother was critically ill and ultimately she expired on
21.06.2016. The search proceedings were attended by Shri Vaibhav Khandelwal,
and his statement was recorded at the conclusion of the said search. According to
the petitioner, under exceptional circumstances, Shri Vaibhav Khandelwal
accepted the alleged tax evasion of Rs.8,50,000/-. Consequently, an amount of
Rs.17,00,000/- (Rs.8,50,000/- + Rs.8,50,000/-) was deposited under Section
55A(a) towards VAT as compounding amount vide challan Nos. 30 and 36 dated
02.06.2016 and Rs.5,00,000/- was also deposited towards Entry Tax. Apart from
the above, two Demand Drafts bearing No. 32345 dated 02.06.2016 for
Rs.3,22,698/- (Entry Tax) and No.32347 dated 02.06.2016 for Rs.20,22,458/-
(VAT) were handed over to the search party as an advance payment of tax.
However, according to the petitioner, the entire amount was treated and deposited
by the search party as a compounding deposit under Section 55A(a). Thereafter,
block assessment proceedings were initiated under Section 55A of the VAT Act
for the period from 01.04.2010 to 28.05.2016. Upon verification and scrutiny of
seized documents, the Assessing Authority finally determined the tax liability of
the petitioner at Rs.5,51,537/- towards VAT and Rs.72,682/- towards Entry Tax.
3. The petitioner is not challenging the determination of liability as
assessed in the block assessment. The grievance of the petitioner is confined only
to the denial of a refund of the excess amount so deposited by it, which amounts
to Rs.29,41,752/- towards VAT and Rs.3,54,636/- towards Entry Tax. The
respondents, while passing the order dated 28.12.2017 under Section 55A of the
VAT Act, denied refund on the ground that there is no provision under the VAT
Act for refund of compounding amount once deposited under Section
55A(a). Being aggrieved by the denial of a refund and retention of the alleged
excess amount, the petitioner has approached this Court by filing the present writ
petition.
Submissions on behalf of the Petitioner:
4. Learned senior counsel appearing for the petitioner submitted that the
respondents are not justified in denying a refund of the excess amount
erroneously and coercively collected at the time of search as a compounding
deposit under Section 55A(a) of the VAT Act. It is contended that Section 55A(b)
merely bars the petitioner from challenging the evasion of tax agreed to by him;
however, the petitioner is not challenging the assessment of tax liability as finally
determined. The petitioner is only seeking a refund of the excess amount collected
over and above the liability assessed. Learned senior counsel further argued that
retention of an amount in excess of the finally assessed liability amounts to
collection of tax without authority of law, which is violative of Article 265 of the
Constitution of India. The State cannot retain any amount beyond the tax legally
assessed. It is further argued that there is no estoppel against statute. Even if an
admission was made during the search, the same cannot authorise the State to
retain an amount illegally. It is also submitted that the petitioner is entitled not
only to a refund but also to the interest, as the petitioner was deprived of use of
the funds in the course of its business.
Submissions on behalf of the Respondents:
5. Per contra, learned Government Advocate appearing for the
respondents opposed the petition and supported the impugned order. It is
submitted that the search proceedings were conducted strictly in accordance with
Section 55 of the VAT Act, 2002, pursuant to due authorisation issued by the
competent authority. During the course of the search, incriminating documents
were found indicating evasion of tax for the block period. Learned counsel for
the respondents submits that during the search proceedings, the petitioner,
through his authorised representative Shri Vaibhav Khandelwal, voluntarily opted
for compounding under Section 55A(a) of the VAT Act and agreed to pay a lump
sum amount equal to twice the amount of evasion of tax. The amount so deposited
was accepted as a compounding amount in terms of the statutory scheme. It is
contended that once the petitioner exercised the option under Section 55A(a),
sub-section (b) of Section 55A clearly provides that the dealer shall not have any
right to challenge the evasion of tax agreed to by him in any forum. Therefore,
the petitioner is now estopped from questioning the consequences flowing from
such exercise of the option. Learned Government advocate further contended that
the compounding amount deposited under Section 55A(a) is in lieu of tax, interest
and penalty; therefore, once such option is exercised, it attains finality. There is
no provision under the VAT Act for the refund of the compounding amount once
voluntarily deposited. It is further argued that the block assessment framed
subsequently under Section 55A(c) is independent and in addition to the
compounding exercised under clause (a). The statutory scheme contemplates
exclusion of the amount in respect of which the option to pay a lump sum has
been exercised while determining total evasion; however, it does not envisage
refund of the amount once compounding is opted. It is also contended that the
petitioner cannot seek a refund by segregating the amount deposited at the time
of search and characterising it as an excess payment, as the same was consciously
and voluntarily paid to settle the matter relating to evasion detected during
inspection. It is also contended that the petitioner, having accepted the option of
compounding and having deposited the amount without protest, cannot now resile
from the same after conclusion of assessment proceedings. The present petition,
according to the respondents, is an attempt to indirectly challenge the
compounding proceedings, which are impermissible under Section 55A(b) of the
Act. With regard to the contention based on Article 265 of the Constitution of
India, learned counsel submits that the amount collected was strictly under
statutory authority and therefore the petition, being devoid of merit, deserves to
be dismissed.
Appreciation and conclusion:
6. The facts of the case as narrated above are not in dispute. A search was
conducted under section 55 of the VAT Act in the business premises of the
petitioner on 28.5.2016 by the authorities of the Commercial Tax Department.
Whatever may be the circumstances prevailed at the stage of conclusion of the
search, the petitioner's representative accepted the tax evasion of Rs.8,50,000/-
[Rupees Eight Lacs Fifty Thousand only] and handed over a challan of Rs.17 lacs
under section 55A(a) of the VAT Act and Rs.5,00,000/- [Rupees Five Lacs]
towards Entry Tax vide challan dated 01.6.2016. The petitioner also gave two
Demand Drafts of Rs.3,22,698/- & Rs. 20,22,458/- bearing Nos. 23345 & 23347
respectively. The petitioner is not disputing the contents of the statement of Shri
Vaibhav Khandelwal recorded by the search party. In this assessment, the block
period under section 55A is 01.4.2010 to 28.5.2016 for the purpose of verification
of the seized documents. Under the assessment proceedings, the tax payable was
Rs. 5,51,537/- in respect of VAT and Rs. 72,682/- towards Entry Tax, which the
petitioner is not challenging but claiming a refund of the excess amount deposited
as compounding amount under section 55A(a), amounting to Rs.29,41,752/- for
VAT and Rs.3,54,636/- for Entry Tax. The issue which is under consideration in
this petition is whether, in view of the provisions of section 55A of the Act, the
petitioner is entitled to claim a refund of the excess amount of the tax deposited
voluntarily under the settlement with the Commercial Tax Department.
7. Section 55A of the Act is reproduced below:-
"55-A. Special provision for assessment of cases relating to detection
and prevention of tax evasion.
Notwithstanding anything contained in any other provisions of this
Act,-
(a) Where a requisition is made under clause (a) of sub-section (3)
of section 55 or an inspection is conducted under clause (b) of the
said sub-section against a dealer, the dealer, subject to such
restrictions and conditions and in such manner as may be
prescribed, may opt to pay in lieu of tax, interest and penalty payable
under the Act, a
lump sum amount equal to twice the amount of evasion of tax agreed
to by the dealer relating to the block period on the basis of evidence
found as a result of requisition or inspection, of books of account or
other documents and such other materials or information as is
available with the commissioner and relatable to such evidence, at
the time of requisition or inspection.
(b) Once the dealer has exercised the option under clause (a), he shall
not have any right to challenge the evasion of tax agreed to by the
dealer in any forum.
(c) The commissioner shall proceed to assess the amount of tax
evaded by the dealer during a block period in accordance with the
provisions of this Act and the amount in respect of which option to pay
lump sum has been exercised under clause (a) shall be excluded from
the amount of evasion of tax assessed under this clause.
(d) The total evasion of tax relating to the block period shall be
assessed irrespective of the year or years to which such tax relates
and irrespective of the fact whether regular assessment for any one or
more of the relevant years is pending or not
(e) The assessment under this section shall be in addition to the
regular assessment in respect of each year included in the block
period.
(f) The total evasion of tax relating to the block period shall not
include the tax assessed in any regular assessment or the tax paid
along with the returns filed by the dealer, as tax of such block period.
(g) The tax assessed under this section shall not be included in any
regular assessment of any year included in the block period.
(h) Where the dealer proves to the satisfaction of the commissioner
that any part of the tax referred to under this section relates to a year
for which the year has not ended or the date of filing returns has not
expired, and the transactions relating to such tax are recorded on or
before the date of requisition or inspection, in the books of account
or other documents maintained in the normal course relating to such
years, the said tax shall not be included in the block period.
(i) The provisions of section 20 shall mutatis mutandis apply to the
assessment made under this section.
Explanation.--For the purpose of this section the expression "block
period" shall mean the period comprising of six years preceding the
year in which the requisition was made or the inspection was
conducted and shall include the period up to the date of requisition or
inspection."
8. Under sub-section (A), a Dealer may opt to pay, instead of tax, interest
and penalty payable under the Act, a lump sum amount equal to twice the amount
of evasion of tax, agreed to by the Dealer relating to the block period on the basis
of material, books of accounts and other documents. Therefore, there is no
compulsion on the part of the Commercial Tax Department or the pressure upon
the dealer to opt for payment of lumpsum amount equal to twice the amount of
evasion of tax. Sub-section (b) of Section 55-A operates as an estoppel because
once the dealer has exercised the option under clause (a), he shall have no right
to challenge the evasion of tax in any forum. The Commissioner shall proceed to
assess the amount of tax evaded by the Dealer during the block period in
accordance with the law, and lumpsum amount paid shall be excluded from the
evasion of tax under the said clause. Under section 55A, there is no provision of
refund of the amount paid under sub-section (a). The details of the amount
deposited by the petitioner are as under:-
Sl.No. Amount In respect of
1. Rs.3,83,666/- Section 13 of Entry Tax Act r/w Section 55(6)(c ) of VAT Act
2. Rs.27,93,966/- VAT under Section 55(6)(c) of VAT Act.
3. Rs.5,00,000/- Section 13 of Entry Tax Act r/w Section 55-A (a) of VAT Act.
4. Rs.8,50,000/- VAT under section 55-A(a) of VAT Act
5. Rs.8,50,000/- VAT under section 55-A(a) of VAT Act
6. Rs.3,22,368/- Section 13 of Entry Tax Act r/w Section 55-A(a) of VAT Act
7. Rs.20,22,458/- VAT under section 55-A of VAT Act
9. The respondent filed a reply enclosing a copy of Form 65-A at Page
14, which bears the signature of Shri Vaibhav Khandelwal, details of challan,
amount & date of deposit by the petitioner. Scanned copy of Form 65-A is
reproduced:-
10. Initially, the petitioner did not dispute the aforesaid Form, but later on,
by way of amendment, the petitioner has challenged the said entries in the Form
by submitting that the petitioner has not made any surrender in respect of sum of
Rs.3,22,368/- paid vide DD No.032345 for ET and Rs.20,22,458/- by DD
No.032347 dated 02.6.2016. The petitioner prepared Demand Drafts and
deposited them by way of challan; therefore, now he cannot dispute that no
surrender was made. Therefore, the petitioner cannot make an allegation that the
respondent has included these two amounts in Form 65-A. The petitioner also has
no right to challenge after surrender/deposit under sub-section (a). The allegation
of the petitioner that Form 65-A has been produced to cover up the mistake
committed by the respondents. If this allegation is accepted, then the petitioner
has to explain as to why he prepared two Demand Drafts of Rs.3,22,368/- and
Rs.20,22,458/- for making payment on the same day of the search i.e. 02.2.2016.
The contention of the petitioner also cannot be accepted that he deposited the
aforesaid amount by way of advance tax.
11. Shri Purohit, learned senior counsel, has placed reliance on the decision
of the Apex Court in the case of Commissioner of Income Tax Vs. Shelly
Products, [2003] 129 Taxman 271 (SC), which is of no help to the petitioner
because in that case the refund advance amount of tax was allowed in view of
section 240 of the Income Tax Act. While the present case is not of deposit of
advance tax, it is a case of surrender and deposit of lumpsum amount, which is
equal to twice the amount of evasion of tax, interest and penalty.
12. Shri Purohit, learned senior counsel, has also placed reliance on
Salonah Tea Company Ltd. Etc. Vs. Superintendent of Taxes, Nowgong &
others 1988 (33) E.L.T. 249 (S.C.), in which the Apex Court has held that under
Article 226 of the Constitution, the High Court has the power to pass an order
and issue a writ of mandamus directing the State to refund alleged illegal tax
collected by the State. In the present case, the amount is deposited by the
petitioner under section 55-A voluntarily, and the same cannot be treated as an
amount illegally collected by the State. Hence, no writ can be issued against the
statutory provisions.
13. The decision relied upon by the learned senior in the case of
Corporation Bank Vs. Saraswati Abharansala, 2009 (233) E.L.T. 3 (S.C.) deals
with the excess amount of tax paid under normal circumstances, which was
directed to be refunded, but in the present case, it was deposited voluntarily after
the conclusion of the search.
14. The Commercial Tax Officer, in compliance with the order of this Court
dated 19.7.2022, has filed an affidavit explaining the breakup of Rs.45,44,826/-
mentioned in Form 65A. Paragraph 5 of the same is reproduced below:-
"5. That, it is most respectfully submitted that the figure of Rs.
45,44,826/- as
mentioned in Form 65-A (Annexure AR-1 of the additional return)
is the double of the figure of Rs. 22,72,413/- which is also
mentioned in the Form 65-A. The amount of Rs. 22;72,413/- is
actually the amount of evasion of Tax agreed by the petitioner.
It is most respectfully submitted that the aforesaid amount of
Rs.45,44,826/- was deposited by the petitioner in the following
manner (as mentioned in Form 65-A also .
i. Challan No. 46/Rs. 5,00,000/-/dated 01.01.2016/SBI Main
Branch.
ii.Challan No. 30/Rs. 8,50,000/-/dated 02.06.2016/SBI Mahaveer
Nagar.
iii. Challan No. 36/Rs. 8,50,000/-/dated 02.06.2016/SBI
Mahaveer Nagar.
iv. DD No. 032346/Rs. 3,22,368/-/dated 02.06.2016.
v. DD No. 032347/Rs. 20,22,458/-/dated 02.06.2016"
15. In view of the above, the petitioner is not entitled to the reliefs claimed.
The writ petition is absolutely misconceived, accordingly, the same stands
dismissed.
(VIVEK RUSIA) (PRADEEP MITTAL)
JUDGE JUDGE
RM
DN: c=IN, o=HIGH COURT OF MADHYA
RAJESH
PRADESH JABALPUR,
2.5.4.20=0a6945bd54f15a018f6b40c1a19ae91
2b2ac61a2c6708bee598e0e94ece3fd57,
ou=HIGH COURT OF MADHYA PRADESH
MAMTANI
JABALPUR,CID - 7057862, postalCode=482001,
st=Madhya Pradesh,
serialNumber=12531f5d3203601d3913ea4d0
d5141a3d6cd4708b694440693af94978932eee
f, cn=RAJESH MAMTANI
Date: 2026.03.12 15:22:37 +05'30'
