Party Seeking Sales Tax Reference Cannot Withdraw It as of Right; Court May Decline To Answer: Bombay HC [Read Order]

Mumbai: The High Court of Judicature at Bombay has disposed of two Sales Tax References filed by Tata Motors Limited without answering the referred questions of law, holding that while a party at whose instance a reference was made by the Tribunal cannot be permitted to withdraw it as of right, the High Court is not bound to answer the reference when the party itself expresses disinterest in pursuing it and the other side concurs. In such circumstances, the appropriate course is to decline to answer the reference while keeping the questions of law open.

A Division Bench of Justice G.S. Kulkarni and Justice Aarti Sathe, pronouncing the order on February 26, 2026, in Sales Tax Reference No. 81 of 2010 and Sales Tax Reference No. 105 of 2011, disposed of both references without costs.

The references had been made by the Maharashtra Sales Tax Tribunal, Mumbai, by orders dated November 12, 2009, and March 17, 2010, respectively, under Section 61(1) of the Bombay Sales Tax Act, 1959. The questions referred in Sales Tax Reference No. 81 of 2010 were whether vehicles affixed with a trademark, sold, thereafter repurchased, and resold to others on hire purchase without fixing any further trademark, were ineligible for resale under the Bombay Sales Tax Act, and whether the premium realised on hire purchase would form part of taxable turnover even though the same amount of hire-purchase premium was subject to levy of service tax under Chapters V and VA of the Finance Act, 1994. The second question was whether the Tribunal was justified in holding that hire-premium charges recovered from the hirer of the vehicles formed part of the sale price as defined under Section 2(29) of the Bombay Sales Tax Act, 1959, ignoring the fact that Parliament, in exercise of its powers under Entry 97 of List I to the Constitution of India, had held such hire-premium charges taxable under the Finance Act, 1994. Sales Tax Reference No. 105 of 2011 raised a substantially similar question, namely, whether hire-premium charges recovered from the hirer of vehicles formed part of the sale price under the said provision.

The proceedings were circulated at the instance of the applicant, Tata Motors Limited, which sought withdrawal of the reference. On behalf of the applicant, it was contended that it was no longer interested in the reference being answered, as the Tribunal had already held in favour of the department in the second appeal, and that the Revenue would evidently also not be interested in the reference being answered.

The Court requested Mr. Atul Jasani, amicus curiae, to assist it on the legal position regarding the course of action to be adopted when the party at whose instance a reference was made itself takes the position that it should not be answered. The Court surveyed the relevant precedents and noted that a coordinate Bench of the Bombay High Court in Sales Tax Reference (L) No. 30 of 2007, Commissioner of Sales Tax, Maharashtra State v. M/s. Trinity Engineers Limited, had, in similar circumstances, disposed of the references by accepting the position of the party that had caused the reference that no useful purpose would be served, while clarifying that the questions of law were kept open to be answered in an appropriate case.

The Court extensively referred to the decision of the Division Bench of the Madhya Pradesh High Court in Gajadhar Prasad Nathu Lal v. Commissioner of Wealth-Tax, M.P., CWT (1970) 76 ITR 615 (MP), wherein the Court had elaborately surveyed the legal position on withdrawal of references. The Madhya Pradesh High Court had held that since a reference is made by the Tribunal and not by the party at whose instance it is made, the power to withdraw a reference lies only with the Tribunal and cannot be claimed by the party. However, it had also held that if the party at whose instance the reference was made fails to appear, or appears and states that it is not interested in the reference being answered, the High Court is not bound to answer the reference, since the preliminary condition of the relevant sub-section requiring a hearing of the case would not be satisfied. In that case, the Madhya Pradesh High Court declined to answer the reference, noting that neither the assessee nor the department was interested in it being answered. The Court also referred to the subsequent decision of the Madhya Pradesh High Court in Gwalior Rayon Silk MFG. (WVG.) Co. Ltd. v. Commissioner of Income Tax, where a similar course was adopted.

Applying the principles emerging from these decisions, the Division Bench held that it could not permit withdrawal of the reference, but that the matter ought to be disposed of by declining to answer the reference while keeping the questions of law open. Both references were accordingly disposed of without costs. Sales Tax Reference No. 105 of 2011 was disposed of in the same terms.

Details:

• Case Titles: Sales Tax Reference No. 81 of 2010 - M/s. Tata Motors Ltd. v. The State of Maharashtra; Sales Tax Reference No. 105 of 2011 - M/s. Tata Motors Ltd. v. The State of Maharashtra
• Court: High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction
• Bench: Justice G.S. Kulkarni and Justice Aarti Sathe
• Citation: 2026:BHC-OS:5809-DB
• Date of Order: February 26, 2026
• Counsel for Applicant (Tata Motors Ltd.): Mr. Tanishq Dube with Mr. R.P. Shinde, instructed by Khare Legal Chambers
• Counsel for Respondent State: Ms. Jyoti Chavan, Additional Government Pleader, with Mr. Himanshu Takke
• Amicus Curiae: Mr. Atul Jasani

[Read Order]