Merck KGaA vs State of Maharashtra — Bombay HC (2025) — LawSathi Research

Merck KGaA vs State of Maharashtra — Bombay HC (2025) — LawSathi Research

What the court decided

AI extract

Outcome

Rule issued and disposed of without costs order; Petitioner permitted to institute appeals directly before the Tribunal (bypassing the first appellate authority under Section 26(1)(b) MVAT Act) within three weeks, after complying with pre-deposit and other prescribed formalities; Tribunal directed to adjudicate such appeals on their own merits alongside the other appeals without adverting to limitation; all contentions on merits left open to the Tribunal in the first instance; Respondent barred from enforcing demands during the appeals' pendency and from taking coercive action during the interim three weeks, failing which recovery per law is permitted; all concerned to act on an authenticated copy.

Issue for consideration

Whether these three writ petitions challenging MVAT assessment orders on royalty payments — filed despite an available statutory appeal under Section 26(1)(b) of the MVAT Act to the Joint Commissioner — should be disposed of by adopting the course followed in Kellogg Company and M/s. Mestra A. G. Switzerland, i.e., permitting the Petitioner to institute appeals directly before the Tribunal after pre-deposit, with limitation not to bar the Tribunal hearing. +1 more

Court's answer

Adopting the same course of action as in Kellogg Company (supra), the Court disposed of the petitions by allowing the Petitioner to institute appeals directly before the Tribunal within three weeks from the date of the order, after complying with the requirement of pre-deposit and other prescribed formalities; if such appeals are instituted, the Tribunal is directed to dispose of them on their own merits along with the other appeals without adverting to the issue of limitation — a direction consistent with Kellogg Company (supra) and M/s. Mestra A. G. Switzerland (supra).

Ratio / Principle

The Court did not adjudicate the merits: all contentions of all parties on merits were left open to the decision of the Tribunal in the first instance.

Key takeaways

Upon institution of the appeals within three weeks after making the pre-deposit, the Respondent will not enforce its demands during the pendency of the appeals before the Tribunal; further, since counsel stated on instructions that the appeals would be instituted within three weeks after pre-deposit, no coercive action is to be taken to enforce the demand even during that three-week window; however, if no appeals are instituted within that period after pre-deposit, the Respondent would be at liberty to recover its demands in accordance with law.ratio¶¶54

Detailed headnote1 paragraphs

Bombay High Court (Ordinary Original Civil Jurisdiction), 26 August 2025 — M. S. Sonak & Jitendra Jain, JJ. (order per M. S. Sonak, J.) — Three writ petitions of Merck KGaA (WP No.340 of 2025; WP No.5311 of 2024; WP No.504 of 2025) challenging assessment orders passed by the Deputy Commissioner of State Tax levying tax under the Maharashtra Value Added Tax Act, 2002 on royalty payments made by the subsidiary (Merck Life Science Pvt. Ltd.) for FY 2015-16, FY 2016-17 and FY 2017-18 on the allegation that the royalties amount to consideration for transfer of right to use of trademarks, were DISPOSED OF (not decided on merits) despite an available statutory appeal under Section 26(1)(b) MVAT Act to the Joint Commissioner. Following the precedent of Kellogg Company (WP No.1661 of 2019, order dated 27.07.2022, which disposed of 3 WPs No.2934/2038/2925 of 2021 of subsidiary Merck India) and M/s. Mestra A. G. Switzerland (WP No.12297 of 2021, order dated 16.02.2022; apex-court clearance via SLP(C) No.10336/2022 dated 04.11.2024, which did not interfere and granted liberty to approach the Tribunal), the Court allowed the Petitioner to institute appeals directly before the Tribunal within three weeks after complying with pre-deposit and other prescribed formalities; the Tribunal is directed to dispose of such appeals on their own merits along with the other appeals WITHOUT ADVERTING TO LIMITATION; all contentions of all parties on merits were left open to the Tribunal's decision in the first instance; upon institution of the appeals after pre-deposit the Respondent shall not enforce demands during pendency, and no coercive action is permitted during the three-week window — failing timely institution, the Respondent may recover per law. Rule disposed of without costs order; parties to act on authenticated copy. (Article 286 of the Constitution figures only within the quoted Kellogg extract; Tribunal appellate jurisdiction lies under section 27 MVAT Act.)

Procedural history

How this case reached the court

AI extract

Order under challenge
Assessment orders passed by the Deputy Commissioner of State Tax levying tax under the Maharashtra Value Added Tax Act, 2002 on royalty payments made by subsidiary Merck Life Science Pvt. Ltd. to Merck KGaA for FY 2015-16, FY 2016-17 and FY 2017-18, on the allegation that the royalties amount to consideration for the transfer of right to use of trademarks.¶¶26
Deputy Commissioner of State Tax
Prior proceeding
Statutory remedy context: a first appeal was available under Section 26(1)(b) of the MVAT Act to the Appellate Authority (Joint Commissioner), yet the petitions invoked the writ jurisdiction of this Court.¶¶27
Prior proceeding
Precedent — M/s. Mestra A. G. Switzerland (Writ Petition No.12297 of 2021, order dated 16.02.2022), same royalty-under-MVAT challenge: by order dated 16 February 2022 this Court did not entertain the petition on merits, pointed to Tribunal appellate jurisdiction under section 27 of the MVAT Act, and was inclined not to relegate the petitioner to the first appellate remedy but to allow a direct Tribunal appeal subject to pre-deposit, with limitation waived if the appeal was filed within six weeks.¶¶35
Prior proceeding
Precedent — Kellogg Company (Writ Petition No.1661 of 2019, order dated 27.07.2022): a Co-ordinate Bench, bound by the Mestra findings, disposed of a group of petitions (including 3 Writ Petitions No.2934, 2038 and 2925 of 2021 filed by the Petitioner's other subsidiary Merck India) in terms of directions in paragraphs 27 and 28 of that order — direct appeal before the Tribunal, requisite pre-deposit (balance filed with acknowledgment), and limitation waived if the Tribunal appeal was filed within six weeks.¶¶44
Prior proceeding
Apex-court validation: the Hon'ble Supreme Court (Special Leave to Appeal (C) No(s).10336/2022 dated 04.11.2024) did not interfere with the Mestra and Kellogg orders, granted liberty to approach the Tribunal as stated by this High Court, and observed that limitation would not be raised by the Tribunal if appeals were filed within eight weeks.¶¶45