GIST OF LATEST JUDGMENTS & COURT DECISIONS ON TRADE TAX, ENTRY TAX & CST

The Commissioner of Trade Tax, U.P. Lucknow
Vs.
M/S Universal Traders, Dhampur

Rate of tax –Section 3-A –U.P. Trade Tax Act, 1948 –Notification prescribing rate of tax for “Beltings of all kinds” –Old conveyor belting purchased by the assessee as old, discarded, obsolete conveyor belt and sold after cutting etc. as old conveyor belting –assessee claiming sale of old belting as old, discarded, obsolete goods.
Where old, discarded, obsolete conveyor belt has been purchased and has been sold as old conveyor belting after removing unusable portion from it, whether the old conveyor belting, sold after removing unusable portion by cutting etc., remains old, discarded, obsolete conveyor belting?

Held-No. The Apex Court in the case of Rainbow Steels Limited, Meerut Road, Muzaffarnagar Versus Commissioner of Sales Tax (supra) held that machinery was usable and, therefore, it was not covered by the entry “Old, discarded, obsolete -------“
In the present case, dealer purchased old discarded obsolete conveyor belt, but after cutting etc. non usable portion appears to have been removed and conveyor belt which was usable have been sold and, thus, assessing authority levied the tax under the entry “Beltings of all kinds” at the rate of 8% and not under the entry “Old, discarded, obsolete ------“. Perusal of the order of the tribunal shows that this aspect of the matter has not been examined.

(Allahabad High Court)

M/S Hindustan Liver Limited, Meerut
Vs.
The Commissioner of Trade Tax, U.P. Lucknow

Taxability of cattle feed –Section-4 –U.P. Trade Tax Act, 1948 –Notification No. ST-3714 providing for exemption on sale of “cattle fodder including green fodder, chuni, chhilka, choker, Javi (popularly known as ghurjai), Gowar, Deoiled cake, De-oiled Rice Polish, De-oiled rice bran and rice husk –Assessee manufacturing cattle feed in concentrated form.
Whether cattle feed is covered under the entry relating to cattle fodder and its sale was exempt from payment of tax?

That the taxability of Cattle feed has been considered by the Court in the case of Cattle Feed Plant, Pradeshik Co-operative Dairy Federation Limited, Merrut Vs. Commissioner of Trade Tax, U.P. Lucknow (supra) in detail and it is held exempted from the tax under the Notification no.ST-II-3714/X-6(1)/85-U.P. Act 15/48-Order 85dated 5.6.1985 under the entry “Cattle Fodder” including green fodder, chuni, chhilka, choker, Javi (popularly known as ghurjai), Gowar, D-Oiled cake, D-Oiled Rice Polish, D-Oiled rice bran and rice husk.
Respectfully following the aforesaid decision, it is held that the turnover of the cattle feed manufactured and sold by the applicant, is not liable to tax during the year under consideration.

(Allahabad High Court)

The Commissioner of Trade Tax, U.P. Lucknow
Vs.
S/S Flex Pouches Pvt. Ltd., Noida

Sale- Section 2 cluase (h) and section 3-F - The U. P. Trade Tax Act, 1948 –Contractee supplying material to contractor for use in works contract and deducting value of goods from the bill of the contractor.
Whether supply of material by the contractee to the contractor for use in the works contract is sale of material by the contrctee to the contractor?
Held-Yes, On the facts of the case, issue involved is squarely covered by the decisions of the Apex Court, which has been followed by this court in Trade Tax Revision No.1614 of 1993, M/s Majestic Auto Limited Vs. CST, decided on 21.9.2004. In the aforesaid cases, it has been held that the supply of material to the contractor has been held as sale and liable to tax.

(Allahabad High Court)

The Commissioner of Trade Tax, U.P. Lucknow
Vs.
S/S Hanif Ahmad Thekedar, Harra, Dhampur

Liabilty of Tax –Section 3-F – U.P. Trade Tax Act, 1948-Deduction of turnover of goods where tax has been paid on purchases - Assessment made ex parte- Appellate Authority and Tribunal allowed deduction of turnover of goods claimed to have been purchased from within the State.
For the purpose of computing turnover liable to tax, Section 3-F provides for deduction of value of goods whereof tax has been levied or leviable under the Act at any earlier Stage – Whether the Appellate Authority and the Tribunal were legally justified in allowing deduction of value of goods, on the ground that the same have been purchased from within the State?
Held-No, Mere purchases within the State of U.P. is not sufficient for allowing deduction under section 3-F of the Act.

[ALLAHABAD HIGH COURT]

STATE OF KARNATAKA AND ANOTHER Vs. SHREYAS PAPERS PRIVATE LTD. AND OTHERS

(A) Transfer of “ownership of business” –Scope of - Transfer of one or more species of assets – Whether transfer of land, building, plant and machinery amounts to transfer of ‘ownership of business’? Held –No.
Business is an activity, directed with a certain purpose, more often towards producing income or profit. Ownership of assets is merely an incident rather than a characteristic of business. Hence, the mere transfer of one or more species of assets does not necessarily bring about the transfer of the ‘ownership of business’ for ‘ownership of business’ is much wider than mere ‘ownership of discrete or individual assets’. In Fact, ownership of business is much wider than the sum of the ‘ownership of the business’ constituent assets. Above all, transfer of ‘ownership of business’ requires that business be sold as a going concern.

Andhra Pradesh General Sales Tax Act – Sections 6, 9(1) Schedule I, Entries 18 and 19 – Andhra Pradesh General Sales Tax Amendments, 22 of 1995, 27 of 1996 and 30 of 1997 - Two rates of tax on sale of cement – One rate of tax where sale price of cement is inclusive of price of packing material and other Rate of tax on sale of cement where sale prices of cement and packing material are shown separately and two sales are claimed – Constitutional Validity of provision prescribing two different rates of tax for cement.
Two rates of tax adopted to get over artificial billing – Dealer having option to bill either way -Whether provisions prescribing two different rates of tax on sale of cement are discriminatory in view of Article 14 of the Constitution of India? Held –No.

Entry 18 of the Schedule I to the Andhra Pradesh General Sales Tax Act, 1957, as substituted by the Andhra Pradesh General Sales Tax (Amendment) Act, 1996, providing for sales tax at the rate of 16 paise in the rupee where the sale price of cement includes the value of the packing material and a higher rate of 20 paise in the rupee where the packing material and cement are sold separately and /or the sale price of cement does not include the value of the packing material is valid and is not violative of article 14 of the Constitution of India.
The Legislature distinguished between two categories of sale cement recorded by the dealer as in these categories there is considerable variation in the turnover base. In the transactions falling in clause (a) of entry 18 taxable turnover includes the value of the cement and the value of the packing materials. The category of transactions falling under clause (b) the taxable turnover includes only the value of the cement; it does not include the value of the packing materials. Discrimination does not arise for any dealer because the dealer can avail any one of the options available in clauses (a) and (b).
The imposition of a higher rate of tax under clause (b) of entry 18 is to check the tax avoidance measures. Contrary to normal business practices and modalities of sale of cement, manufacturers, in order to claim the tax benefit had restored the modus operandi of the sale of containers (bags) by bifurcating the price. When evidence is created prima facie in supporting the plea of separate sale of packing material, it would be difficult for the taxing authorities to establish otherwise even though the design and purpose of creating such evidence by the process of billing, etc., is quite evident. To obviate uncertainties and long drawn enquiries, the Legislature has laid down a straight formula prescribing the rate of tax on cement dependent on the two categories envisaged in clauses (a) and (b) of entry 18. It is rationalization of the entries and is regulatory in nature. Such classification would not amount to discrimination or be violative of article 14 of the Constitution of India.

ASSOCIATED CEMENT COMPANIES LTD. Vs. GOVERNMENT OF ANDHRA PRADESH AND ANOTHER

(SUPREME COURT )

M/s Carbons Crafts Pvt. Ltd.
Vs.
The State of U. P. and another

Coal and coke- Dictionary meanings thereof – Expression ‘coal’ used in Entry 17 of the U. P. Tax on Entry of Goods Act and expression ‘coal including coke in its all forms but excluding charcoal’ used in section 14 of the Central Sales Tax Act – Whether Calcined Petroleum Coke, a by-product of petroleum, is included in the expression ‘coal’ used in Entry 17 of the U. P. Tax on Entry of Goods Act? Held – No.
          The Schedule of the U. P. Tax on Entry of the Goods Act, 2000 contains list of goods notified for the purpose of levy of Entry Tax. Entry 17 of the Schedule uses the expression ‘coal’. The Assessing Authority, treating the Calcined Petroleum Coke covered under the said entry of the said schedule, issued notice to the petitioner to pay Entry Tax on Calcined Petroleum Coke, brought by it into the local area. In the writ petition, the petitioner contended that Calcined Petroleum Coke was not covered under the expression ‘coal’ used in entry no 17 of the Schedule of the said Act. In the judgment, the hon’ble Court held as follows:
          According to the general rule of interpretation, nothing can be added or extracted. On this principle, ‘coal’ cannot include ‘coke’; the two are entirely different commodities as per definitions contained in English Dictionaries.
     Item No. 17 using the expression ‘coal’ in the Schedule in question does not include ‘coke’.

[ALLAHABAD HIGH COURT]

The Commissioner of Trade Tax U. P.
Vs.
U. P. Sahakari Katai Mill Bareilly

Levy of penalty on account of realisation of amount as sales tax, or purchase tax, in excess of tax legally payable -In the exemption period in which no tax was payable, amount realized @ 2% in the name of service charges -No service rendered - After expiry of the exemption period, amount realized @2 % in the name of Trade Tax and no amount realized as service charges - Whether levy of penalty was justified where assessee had not realized any amount as sales tax or purchase tax? Held -Yes.

Clause (qq) of sub-section (1) of section 15-A of the U. P. Trade Tax Act, 1948, before its amendment with effect from 25-4-1990 provided for levy of penalty on account of realization of any amount as sales tax, or purchase tax, where no sales tax or purchase is legally payable or in excess of the amount of tax legally payable under the Act. The dealer, the opposite party effected sales of self manufactured cotton yarn during assessment years 1988-89 and 1889-90. Turnover of sales was exempt from payment of tax under section 4-A of the aforesaid Act. During the exemption period, the dealer realized amount @ 2% of the turnover of sale in the name of service charge. After the exemption period was over, the dealer discontinued realising amount as service charge and started realization of amount @ 2 % of the turnover of sale in the name of sales tax. The assessing authorities drew the conclusion that in the exemption period, the dealer had realized amount as sales tax. The dealer contended that amount realized as service charge could not be said as the amount realised as sales tax and therefore, provision for levy of penalty was not attracted. Rejecting the contention of the dealer, the assessing authority levied penalty. The Tribunal accepted the plea of the dealer and deleted the penalty.

On revision by the Commissioner, the hon'ble Court set aside the orders under the revision and restored the orders of penalty. The hon'ble Court held as follows:

"In absence of any explanation for charging 2 per cent as service charges, without providing any service to the customers, there is no hesitation in holding that the dealer opposite party charged sales tax by giving it lable of service charges. This view further gets support from the fact that for the period subsequent to the completion of exemption period, the dealer opposite party has charged 2 per cent as sales tax and did not charge any amount towards the service charges."

[ALLAHABAD HIGH COURT]

The Commissioner Trade Tax, U. P. Lucknow
Vs.
S/S Ram Ashrey Ram Adhar, Fatehpur

The U. P. Trade Tax Act, 1948 –Section 12-B-Additional evidence on appeal – Additional evidence taken on record by the Appellate Authority – Reasonable opportunity for challenge or rebuttal to the Commissioner –A legal requirement.
Whether the Appellate Authority can accept additional evidence taken on record after examination by it and without affording reasonable opportunity to the Commissioner for challenge or rebuttal? Held –No.
        During the assessment year, the dealer opposite party declared inter-state purchases for ex-state principals and dispatched the goods to ex-state destinations. The dealer did not produce Form ‘F’ before the assessing authority. In appeal, the dealer produced additional evidence in 345 pages. The Appellate Authority did not afford the opportunity to the Assessing Authority for challenge or rebuttal of the additional evidence. The Appellate Authority, after examination of the papers, allowed benefit to the dealer. Appeal, filed by the Commissioner before the Tribunal on the ground of non affording of opportunity for challenge or rebuttal of additional evidence, was dismissed.
        On revision by the Commissioner, the hon’ble Court set aside the orders passed by the Appellate Authority and the Tribunal and sent back the matter to the Appellate Authority to decide the appeal afresh in accordance to law after giving opportunity to the Assessing Authority as contemplated under section 12-B of the Act. The hon’ble Court observed as under:
        “Section 12-B of the Act says that after taking the additional evidence on record reasonable opportunity for challenge or rebuttal shall be given to the assessing authority. Perusal of the order of the first Appellate Authority and the Tribunal shows that no opportunity was given to the assessing authority for challenge or rebuttal of those papers. Thus, order of the first Appellate Authority was vitiated and order of Tribunal confirming the said order is erroneous.”

[ALLAHABAD HIGH COURT]

M/s Tarun Intemation Ltd. Ghaziabad
Vs.
The Commissioner of Trade Tax, U. P. Lucknow

[ALLAHABAD HIGH COURT]

M/s Radhey Shyam & Company
Vs.
The Commissioner of Trade Tax, U.P., Lucknow

The U.P. Trade Tax Act, 1948 –Section 6 –Objection to jurisdiction of assessing authority – when can be raised before Appellate Authority, Revising Authority or the Tribunal?
Held – A bare perusal of the aforesaid section shows that question of territorial jurisdiction of the assessing authority shall not be allowed to be raised before any authority or revising authority or the Tribunal unless following twin conditions are satisfied:

(i) The said objection was raised before the assessing authority at the earliest possible opportunity.

(ii) Unless in the opinion of the appellate or revising authority or the Tribunal there is failure of justice.

Unless and until it is established that there is consequential failure of justice the question of territorial jurisdiction cannot be permitted to be raised as it does not go to the very root of the matter.

[ALLAHABAD HIGH COURT]

The Commissioner of Trade Tax, U.P. Lucknow
Vs.
S/S South M.P. Freight Carrier, Delhi

Origin and destination places of goods declared outside the State of U.P.- Transit Authorisation obtained by the driver of the vehicle - Vehicle alongwith goods found at the business place of the transporter within U.P. -Period allowed by the officer in-charge of the Entry Check-post un-expired - Seizure of goods by the Trade Tax Officer on the presumption that goods will be sold inside the State -Tribunal directing release of goods after accepting security in form of bank guarantee of the fifty per cent of the maximum amount of penalty that can be levied and for releasing the security if transit pass is surrendered at the Exit Check-post - Whether decision of the Tribunal is legally justified?
Held - Yes. The Tribunal has directed the release of the goods on furnishing of security in the form of bank guarantee to secure the interest of revenue and to insure the transportation of goods outside the State of U.P.

[ALLAHABAD HIGH COURT]

The Commissioner of Trade Tax, U.P. Lucknow
Vs.
M/S Shaiwal Chemicals, Ghazipur

The U.P. Trade Tax Act, 1948 – Section 3-B – Liability on issuing false or wrong declaration or certificate – Notification and Recognition Certificate both entitling the dealer for partial exemption on purchase of goods – Dealer issuing Form prescribed for full exemption, after obtaining from its assessing authority –Dealer claiming that Forms were issued by the assessing authority after proper inquiry and therefore, it cannot be said that he (the dealer) had issued wrong and false Form while making the purchases – Whether it can be said that dealer had not issued false or wrong forms of declaration within the meaning of section 3-B of the Act?
Held –No.
Dealer could not become entitle to avail the benefit of full exemption and to issue Form 3-B for full exemption merely because it was erroneously issued by the assessing authority on the basis of misrepresentation made by the dealer. The dealer cannot take the advantage of wrong committed by the assessing authority. Issuance of Form 3-B for full exemption for which the dealer was not entitled, amounts to be issuing a wrong and false certificate. In the circumstances, assessing authority had rightly invoked the provisions of Section 3-B and demanded a differential amount.

[ALLAHABAD HIGH COURT]

The Commissioner of Trade Tax, U. P. Lucknow
Vs.
S/S Shyam Babu Gupta, Jalaun

[ALLAHABAD HIGH COURT]

Commissioner Trade Tax
Vs.
Uma Export Industries Estate

The U.P. Trade Tax Act, 1948 – Section 3-A – Provision for notifying of rate of tax for the purpose of levy of tax on sale of goods – Section 4-B –A provision for issue of notification for specifying goods for the purpose of allowing concession or exemption on purchase of raw material and packing material to be used in manufacture and packing of such notified goods –Whether notification issued for the purpose of specifying notified goods for the purpose of Section 4-B of the Act should be interpreted in the light of the notification issued under section 3-A? Held –No.

[ALLAHABAD HIGH COURT]

The Commissioner Trade Tax, U.P. Lucknow
Vs.
M/S Jagdamba Agencies, Farrukhabad

The U.P. Trade Tax Act, 1948 – Section 10-B –Power of Commissioner to review an order on the basis of illegality and impropriety – Section 21 – Assessment or re-assessment of turnover escaped from assessment – Scope of Section 10-B and Section 21 for initiating proceedings -Whether proceedings under Section 10-B cannot be initiated where proceedings under Section 21 have been initiated? Held –No.
Both the sections operate on a different field and under different circumstances. If the assessing authority is of the view that there was an escapement, on the basis of the material came in the knowledge of the assessing authority subsequently, proceedings under section 21 can be initiated. However, power of section 10-B of the Act can be exercised to examine the legality and propriety of any order on the basis of the material existed on record at the time of assessment proceedings.
The submission of the learned counsel for the opposite party that once notice under section 21 was issued proceedings under section 10-B of the Act could not be taken, cannot be accepted. This argument can be accepted only in a situation when proceeding under section 10-B of the Act is initiated on the basis of the fresh material which resulted to the escaped assessment because on the basis of such material, proceedings under section 21 of the Act could only be initiated and not under section 10-B of the Act.

[ALLAHABAD HIGH COURT]

M/S Jai Prakash And Sons, Muzaffarnagar
Vs.
Commissioner of Trade Tax, U. P.

Dealer's version that the shop was given on rent to another dealer and stock of fertilizer found at the time of survey belonged to such other dealer. Such other dealer had purchased the goods from another dealer. Dealer also disclosed names of such two other dealers. Assessing authority, disbelieving the version of the assessee, assessed tax on the basis goods found at the time of survey. On appeal by the dealer, case remanded to assessing authority for making assessment after conducting proper inquiry from such other dealers - Assessing authority issued notices and summons to such dealers - Such other dealers did not appear before the assessing authority but they, in their letter to assessing authority, denied the statement of assessee- Assessing authority, without taking note of summons issued by it and after accepting the version of such other dealers, passed assessment order- In appeal by the dealer, Appellate authority remanded the case for affording opportunity of cross examination with the other dealers- In appeal before the Tribunal, the assessee challenged remand order on the ground that second inning was not permissible. The Tribunal allowed the appeal. In revision by the Commissioner, the hon'ble Court set aside the order of the Tribunal.

Held - Though assessing authority had only issued summons to the aforesaid two parties and they have also responded but the assessing authority had not asked those parties to appear and had not given any opportunity for cross examination. Therefore, enquiry was not properly conducted. In these circumstances, direction of the first appellate authority to make proper enquiry and summon the aforesaid two parties to provide opportunity of cross examination cannot be said to be unjustified.

[HIGH COURT ALLAHABAD]