Civil Appeal No. 9687 of 2003

Rapti Commission Agency
vs.
State of U.P. & Ors.

Date of Decision : 02nd August, 2006

Tax Deduction at Source-The U.P. Trade Tax Act, 1948-Section 8-E-Tax deduction at source by purchasing commission agent making inter-state purchases for Ex-U.P. principals-Detention of Mentha Oil by Mobile Squad on the ground that tax was not deducted by commission agent from sellers/agriculturists-Legislative competence of a State to make a provision relating to deduction of tax on inter-state transactions-Constitutional validity-Rule of construction of Statute.

Whether it was necessary for the High Court to decide the constitutional validity of Section 8-E of the U.P. Trade Tax Act, 1948 in a case in which seizure of goods was made on the ground that tax was not deducted by the purchasing dealer in respect of purchases made by him for his Ex-U.P. principals?

Held-No, The High Court instead of focusing on the factual aspects dealt with issues not relevant, and that too giving clearly indefensible interpretations. The factual aspects should have been asked to be dealt with by the authorities. By directing the authorities to do it after laying down the law, which as noted down was not the correct position in law, would really serve no purpose. On the facts of the case, there is no need to decide the question relating to validity of Section 8-E of the Act except stating that the provision is subject to what has been stated in Steel Authority's case (supra) and M/s Nathpa Jhakri's case (supra), for which the factual determination has to be done by the authorities.

Whether the High Court, in the light of the principle of reading down the provisions of a law for the purpose of saving it from a constitutional challenge, was justified in holding that the language of Section 8-E of the U.P. Trade Tax Act should be narrowed down so as to make it applicable only to the intra-State sales/purchases?

Held-No, The rule does not apply when the offending words have only one meaning e.g. when the restricted meaning makes them useless or redundant. (See M.P. Cement Manufacturers' Association v. State of M.P. and Ors. (2004 (2) SCC 249).

In other words, the rule applies only where two views are possible as to the meaning of the statutory language. In neither Steel Authority's case (supra) nor M/s Nathpa Jhakri's case (supra) that was the position. The basic issue related to power to provide for any deduction of tax in respect of inter-state transactions. There was no issue relating to intra-state transactions. Therefore, the question of any reading down was of no relevance.

Whether provision of tax deduction at source can be applied in a case where person making sale of goods is not liable for payment of tax at all, at any time ?

Held-No, it would be appropriate to remind the legislatures of what was stated in Bhawani Cotton Mill's case (supra) that if a person is not liable for payment of tax at all, at any time, the collection of a tax from him, with a possible contingency of refund at a later stage, will not make the original levy valid, because if sales or purchases are exempt from taxation altogether, they can never be taken into account, at any stage, for the purpose of calculating or arriving at the taxable turnover and for levying tax. The view was reiterated in Steel Authority's case (supra) and Nathpa Jhakri case (supra). In the latter case, it was noted, echoing the view in Bhawani Cotton Mill's case (supra) that it is no solace to say that such a person can get refund after completion of assessment. If the principles indicated in these cases are followed, large number of unnecessary litigations can be avoided.

Civil Appeal Nos. 1760-1761 of 2001

Commissioner of Trade Tax, U.P
vs.
M/s. Modipan Fibres Company

Date of Decision : 02nd August, 2006

Exemption to New Units-The U.P. Trade Tax Act, 1948-Section 4-A-Unit seeking expansion –Exemption or reduction in rate of tax on production in excess of “base production-Notification No. S. T.-2-1093/XI-7(42)-68 U.P. Act XV-48-Order-90 dated 27-7-1991- availability of the exemption.

Whether the High Court, in view of the Notification No. S. T.-2-1093/XI-7(42)-68 U.P. Act XV-48-Order-90 dated 27-7-1991 issued under section 4-A of the U.P. Trade Tax Act, 1948, was justified in holding that the exemption from payment of tax could be granted on the sale of goods after the base production was achieved?

Held-No, Purpose of granting exemption under the dated 27.7.1999 was to promote the development of certain industries in the State. By the said notification exemption from payment of tax or reduction in rate of tax was granted to new units as also to the units which had undertaken expansion, diversification or modernization. The units of dealers in all the revisions are units, which had undertaken expansion/modernization. The units of the dealers (respondents) are covered by Clause (1-B) (a) of the Notification. Exemption granted is on the turnover of sales of quantity of goods manufactured in excess of base production.

        Under clause 6(a) of the said Notification, turnover of sale of goods in any assessment year to the extent of quantity covered by the base production of that year and balance stock of base production of previous years, shall be deemed to be turnover of the base production. Under clause 6(b) of the Notification, the facility of exemption can be availed on the turnover of goods in "any assessment year" in excess of the quantity referred to in sub-clause (a) of clause 6. A conjoint reading of Clause (1-B) (a), clause 6(a) & (b) makes it clear that the dealer is entitled to claim exemption in respect of the turnover of sale of goods of an assessment year in excess of the base production. "Assessment Year" has been defined in Section 3 (j) to mean the twelve months ending on March 31. If that be the case then the extent of entitlement to exemption will depend on the sale of goods in the assessment year minus the base production determined under the Act. Simply because dealer has to file returns from month to month and deposit the admitted tax at the time of filing of the return does not mean that question of exemption on the turnover of the production in excess of the base production can be considered only after the base production is achieved.

Civil Appeal No. 7882 of 2002

with Civil Appeal Nos. 7883 to 7885 of 2002

Rom Industries Ltd.
vs.
State of Jammu and Kashmir and Another

Date of Decision : 04.08.2005

Exemption to small-scale industrial units- The Jammu & Kashmir General Sales Tax Act, 1962- Notifications S.R.O. 122 dated 31 -3-1997 and S.R.O. 87 dated 4-4-1995 –Edible oils- Withdrawal of exemption by Notification S.R.O. 122 dated 31-3-1997- Principle of promissory estoppel – Addition of edible oils in the negative list.

Whether the High Court was justified in holding that the State Government of Jammu & Kashmir was not bound by the principle of promissory estoppel by its order in 1995 granting exemption from general sales tax uptil 2000?

Held-Yes.

        Dismissing the petitions, the Hon'ble Supreme Court has observed as under:-

        “We are not prepared to hold that the Government Policy by itself could give rise to any promissory estoppel in favour of the appellants against the respondents since the Policy itself made it absolutely clear that it would come into effect only on appropriate notification being issued. The notification was issued in exercise of the admitted powers of the State Government under the State General Sales Tax Act. The State Government having power and competence to grant the exemption was equally empowered to withdraw it. As we have also noticed there was nothing either in the notification or in the Policy which provided that the negative list would not be amended or altered. On the contrary Clause (vii) of paragraph 7 to G.O. 10 of 1995 expressly reserved the Government's right to amend the negative list. The right if any of the appellants was a precarious one and could not found a claim for promissory estoppel.”

Whether, in view of the decision of the Supreme Court in the case of Shree Mahavir Oil Mills [1996] 11 SCC 39 of (i) holding that the action of the State Government in granting total exemption in favour of the small-scale industries in Jammu and Kashmir producing edible oil was unconstitutional; and (ii) setting aside S.R.O. 93, the State Government of Jammu & Kashmir was legally justified in adding edible oils in the negative list?

Held-Yes, As far as the second submission of the appellants is concerned, Shree Mahavir Oil Mills [1996] 11 SCC 39 set aside S.R.O. 93 of 1991. It did so on the basis that the State was incompetent to grant relief in respect of the edible oil industries (vide paragraph 23 of the judgment). It was said that the action of the State Government in granting total exemption in favour of the small-scale industries in Jammu and Kashmir producing edible oil was unconstitutional, particularly being contrary to Articles 301 and 304 thereof and was unsustainable in law. There can be no manner of doubt that this Court in Shree Mahavir Oil Mills [1996] 11 SCC 39 had expressly and in no uncertain terms set aside S.R.O. 93. The benefit which was granted to the appellants was also under this very notification. As we have observed, the edible oil industries were entitled to the benefit of S.R.O. 93 since edible oil was not an industry mentioned in the negative list. The State Government, in view of the decision of this Court had no other option but to place edible oils in the negative list. The question whether Shree Mahavir Oil Mills [1996] 11 SCC 39 has been rightly decided or not and whether it is in conflict with the principles enunciated in Video Electronics Pvt. Ltd. [1990] 3 SCC 87 are moot. But while the decision stands, the State Government is bound to comply with it.

Trade Tax Revision Nos. 536 & 537 of 1999

M/s Ansari Gur Bhandar, Padrauna
vs.
Commissioner of Trade Tax, U.P., Lucknow

Date of Decision : 23rd March, 2006

Best judgment assessment-The U.P. Trade Tax Act, 1948-Section 7(3)-Recovery of two loose parchas from employee of the assessee-Out of the information received from Mandi Samiti, entry of Gur for 6 trucks not found in the books of account- Best judgment assessment justified.

Whether the Trade Tax Tribunal was legally justified in upholding the rejection of declared turnover where it had found that out of the information received from Mandi Samiti about gur for 81 trucks, the dealer had not made entry of gur for 6 trucks in its books of account and where the employee of the assessee was found in possession of two loose parchas?

Held-Yes, On the basis of the material available on record, rejection of the books of account and the estimate of turnover cannot be said to be arbitrary or without any basis.

Levy of tax on purchase of gur-The U.P. Trade Tax Act, 1948-Section 3-D-Purchases claimed to have been made by the commission agent for ex-State principals – In support of purchase of gur, 9 R, purchase order or any instructions not produced- Details of the purchases and dispatch of the goods also not submitted-Purchases rightly held as intra-state purchases.

Whether the Trade Tax Tribunal and the authorities below were legally justified in holding purchases of gur as intra-state purchases where the assessee had claimed such purchase made on behalf of ex-State principals but had failed to produce 9 R, purchase order or any instructions and details of the purchases and dispatch of the goods?

Held-Yes, The claim of the purchases through commission agency on behalf of Ex-U.P. Principal was rejected on the ground that the applicant did not produce 9 R, purchase order or any instructions. The details of the purchases and dispatch of the goods were also not submitted. In absence of the documents, it has been held that the applicant was not able to establish the purchases in its commission agency.

        In the absence of any evidence to prove that the goods have been purchased in commission agency on behalf of Ex-U.P. Principal, Tribunal and the authorities below have rightly rejected the claim and confirmed the levy of tax. Findings of the Tribunal is finding of fact based on the material on record, which needs no interference.

Trade Tax Revision Nos. 1889 & 1892 of 1998

Commissioner, Trade Tax, U.P., Lucknow
vs.
S/S Kanchan Tabak Purana Pan Dariba, Varanasi

Date of Decision : 15th September, 2005

Review by the Commissioner-The U.P. Trade Tax Act, 1948-Section 10-B-Validity of proceeding initiated on the basis of material received after passing of the assessment order.

Whether the Trade Tax Tribunal was legally justified in quashing the order passed under section 10-B of the U.P. Trade Tax Act by the Joint Commissioner (Executive) Trade Tax where proceedings under section 10-B were initiated on the basis of the material which had come on record after the assessment order, sought to be reviewed, had already been passed?

Held-Yes, The bare reading of provision of Section 10-B of the Act shows that the Revising Authority can examine the legality or propriety of the order on the basis of the material available on record. In the case of Zila Bhatta Samiti, Muzaffarnagar vs. CST reported in 2004 NTN (Vol. 25) 838 and M/s A.K. Corporation and Another vs. State of U.P. reported in 1994 UPTC 75 and M/s Shyam Lal Om Prakash, Arhati, Gulaoti, Bulandshahr vs. Revising Authority reported in 1994 UPTC 525, the Court held that the proceeding under Section 10-B of the Act can be taken only on the basis of the record available at the time of the assessment proceeding and not on the basis of the material which was not available at the time of the assessment proceeding.

Trade Tax Revision No. 1369 of 1998

Commissioner, Trade Tax, U.P., Lucknow
vs.
S/S Harish Oil Mill, Jalaun

Date of Decision : 30th August, 2005

Exemption from tax-The U.P. Trade Tax Act, 1948-Section 3-D-Disclosed purchases supported by Form III-C(2) and purchase vouchers-Registered selling dealer alleged to be dummy firm and established with a view to evade payment of tax-No collusion established in between the selling dealer and the purchasing dealer-Denial of exemption on purchase unjustified.

Whether the Trade Tax Tribunal was legally justified in allowing exemption from tax on the purchases which were found supported by Form III-C(2) and purchase vouchers and where the assessing authority had recorded a finding that selling firm was a dummy firm and was established with a view to evade payment of tax but the assessing authority had failed to establish collusion between the selling dealer and the purchasing dealer and the assessing authority had also not found that forms were forged or obtained as a result of collusion with the party?

Held-Yes, Once the dealer submitted the details of the transactions and furnished the requisite forms in respect of the claim of exemption unless the forms are found to be forged or obtained as a result of collusion with the party, the claim of exemption cannot be refused in the hand of the dealer. In case, if it was the case of the revenue that M/s Kohinoor Industries, Jalaun was dummy firm and was open with a view to evade the tax, it was the responsibility of the Assessing Authority to prove its case. If the Assessing Authority had any doubt about the genuineness of the firm or about the genuineness of Form 3-C-2, the burden lies upon the Assessing Authority to prove it, which the authority fails to prove it. It is settled principle of law that unless the form is found to be forged and obtained as a result of collusion between the parties, the exemption against the forms cannot be denied to the dealer, who has received and furnished in support of the claim. Reliance is placed on the decision of the Apex Court in the case of Chunni Lal Parsadi Mal vs. CST, reported in 1986 UPTC, 747 SC and the decision of this Court in the case of Bharat Iron Stores vs. CST, reported in 1994 UPTC, 130, M/s Indra Steels vs. CST, reported in 1995 UPTC, 4 and M/s Gaurav Traders, Meerut vs. CTT, reported in 1996 NTN (Vol. 9), 262.

Trade Tax Revision Nos. 1294 & 1296 of 1998

Commissioner, Trade Tax, U.P., Lucknow
vs.
S/S Sitaram Santosh Kumar, Hamirpur

Date of Decision : 30th August, 2005

Assessment of escaped turnover-Service of notice-The U.P. Trade Tax Act, 1948 Section 21(1) - The U.P. Trade Tax Rules, 1948-Rule-77 -Service of notice not in accordance with Rule 77-Participation of assessee in the proceedings-Proceedings under section 21 without jurisdiction in absence of proper service of notice .

Whether the Trade Tax Tribunal was legally justified in quashing the assessment order passed in exercise of powers under section 21 of the U.P. Trade Tax Act, 1948 where it had found that service of notice was not proper in view of the provisions of Rule 77 of the U.P. Trade Tax Rules, 1948?

Held-Yes, Perusal of the order shows that the notice under Section 21 of the Act was alleged to have been served on one Sri Hari Om on 15.03.1989. Dealer claimed that the business was closed in the year 1986-87 and Hari Om was neither partner nor adult male member of the family nor employed nor in any way authorized to receive the notice under Section 21 of the Act and, therefore, the service of the notice under Section 21 of the Act was not valid. Tribunal in the impugned order held that Hari Om was not the employee of the firm nor the family member of any of the partner of the firm. Learned Standing Counsel submitted that after the service of the notice, dealer participated in the proceeding and appeared before the Assessing Authority and therefore, the proceedings under Section 21 of the Act should not be quashed. I do not agree with the submission of learned Standing Counsel. Mere participation in the proceeding is not sufficient. Notice under Section 21 of the Act is jurisdictional notice and by proper service of the notice in accordance with Rule 77 Assessing Authority assumes the jurisdiction to proceed. Therefore, proper service of the notice is condition precedent for the valid proceeding. In the absence of the proper service of the notices under Section 21 of the Act authority cannot assume the jurisdiction to proceed. Reliance is placed on the decision of this Court in the case of Laxmi Narain vs. CST, reported in 1980 UPTC, 125.

Trade Tax Revision No. 1915 of 1998

Commissioner, Trade Tax, U.P., Lucknow
vs.
S/S Steel Engineers, Meerut

Date of Decision : 30th August, 2005

Penalty-The U.P. Trade Tax Act, 1948-Section 13 A –Sub-sections (3) & (4)-Seizure of goods found on survey as the same were not proved to have been recorded in the books of account-Notice for imposition of penalty fixing the date of hearing on 15-03-1990 issued on 08-02-1990-None appeared-Next notice dated 16-03-1990 fixing the date of hearing on 20.03.1990 issued -Again none appeared-Legal provision of allowing 30 days time for replying the notice-On the basis of notice dated 16-03-1990, assessee alleged that proceedings completed without allowing 30 days time were invalid and goods found were meant for use in manufacture of steel structure to supplied to Ware Housing Corporation-Tribunal allowed the appeal-Order of Tribunal of quashing the penalty unjustified.

Whether, in the facts and circumstances of the case, the Trade Tax Tribunal was legally justified in deleting the penalty imposed under section 13 A (4) of the U.P. Trade Tax Act, 1948 without considering the initial notice dated 08-02-1990 and assuming that penalty was imposed on the basis of illegal notice dated 16-03-1990?

Held-No, Tribunal has not considered the initial notice issued on 08.02.1990 in which date of hearing was fixed on 15.03.1990. Thus 30 days time was given in the notice as required under Section 13-A (3) of the Act. Tribunal has only proceeded on the basis of second notice dated 16.03.1990. Therefore, order of the Tribunal is vitiated.

Whether the Trade Tax Tribunal was legally justified in deleting the penalty imposed under section 13 A(4) where it had found that the assessee had not produced books of account at any stage to prove that goods found at the time of survey were accounted for?

Held-No, Admittedly, at the time of survey dated 04.11.1986 books of account could not be produced for verification of the entries. Books of account have also not been produced during the course of penalty proceeding to show the entries of the stock found at the time of survey. It is wholly irrelevant that the dealer was carrying on the business of manufacturing and sale of steel structure and was mainly supplying the goods to the Central Ware Housing Corporation and the seized goods have been used in the manufacturing of steel structure. For the purpose of penalty under Section 13-A (4) of the Act if the goods was found to be omitted from being shown in the books of account, document or register, penalty is liable to be imposed. At no stage it was the case of the dealer that the entry of seized goods was available in the books of account and, therefore, view of the Tribunal in this regard is erroneous.

Trade Tax Revision Nos. 1104, 1108, 1142 & 1170 of 1997

Commissioner, Trade Tax, U.P., Lucknow
vs.
S/S Ram Autar & Sons, Hapur

Date of Decision : 15th September, 2005

Purchases for Ex-State Principals-The Central Sales Tax Act, 1956-Section 3-Purchases made by commission agent for ex-State principals in compliance of the orders of Ex-State Principals –Levy of tax under the State Act not justified.

Whether the Trade Tax Tribunal and the authorities below were legally justified in holding purchases of gur as intra-State purchases, where the dealer, in compliance of the orders of Ex-U.P. Principals, had purchased gur and dispatched the same to his Ex-U.P. Principals, the same day or within a day or two on the availability of transport, especially when the stand of the dealer could not be controverted by the authorities below and which otherwise, stood proved by the documents furnished by the assessee/appellant in the form of Satti bahi, bill-book and goods receipts?

Held-No, It was the further case of the dealer that in compliance of the orders of Ex-U.P. Principals, he had purchased gur and despatched them to their Ex-U.P. Principals, the same day or within a day or two on the availability of transport. This stand of the dealer could not be controverted by the authorities below, which otherwise, stands proved by the documents furnished by the assessee/appellant in the form of Satti bahi, bill-book and goods receipts.

        The Hon'ble Supreme Court, in the matter of M/s Bakhtawar Lal Kailash Chandra Adhiti (supra) and in the matter of M/s Hanuman Trading Co. vs. CST (supra), the Hon'ble High Court of Allahabad have laid down broad principles of law in determining whether a particular transaction in inter-State purchase. They are to the effect that if the purchases are made as commission agent in the State and on behalf of the Ex-U.P. Principals from cartmen and agriculturists in the fulfillment of their orders and goods are sent to them on payment of commission and expenses and if the purchase of gur and the movement of goods are inseparably connected, such purchases are inter-State purchases, not eligible to purchase tax under Section 3-D of the U.P. Trade Tax Act, 1948. While applying the said principles of law in the present cases, we find that the established facts, as are on record, go to show that the grounds relied upon by the authoritative below for rejection of the plea of the appellant that he had made inter-State purchase of gur for Ex-U.P. Principals are neither convincing nor supported by any evidence on record. From the facts of the case, established by the dealer, we find that the dealer is a commission agent, that he is the extended hand of Ex-U.P. Principals, that the Ex-U.P. Principals contracted with the dealer to purchase gur on their behalf and despatched them to their Ex-U.P. destinations, that the dealer received their orders on telephone which he recorded in register of orders, that the dealer, in fulfillment of contract, purchased gur and despatched them without any delay to the Ex-U.P. Principals, that there was no break in purchases and dispatch of gur, that the goods moved from U.P. to Ex-U.P. as a result of contract, that the purchases were completed when the goods reached to the Ex-U.P. Principals, that the said contract was not divisible, that the dealer charged his commission and also packing and labour charges and that the purchases thus made by the dealer are inter-State purchases as provided in Section 3 of the Central Sales Tax Act, 1956. Thus, the law declared by the Hon'ble Supreme Court in the matter of M/s Bakhtawar Lal Kailash Chand Adhiti (supra) exactly covers the present case.

Trade Tax Revision No. 1220 of 1999

Commissioner of Trade Tax, U.P., Lucknow
vs.
S/s Prakash Trading Company, Shahjahanpur

Date of Decision : 24th March, 2006

Assessment of escaped turnover-The U.P. Trade Tax Act, 1948-Section 21-Turnover accepted in the original assessment-Matter of seizure of goods, available on record, not considered-Seized goods were not supported by any document-Escaped turnover and tax determined in proceedings under section 21-Alleged that proceedings were based on change of opinion-Appeal allowed by the Tribunal-Decision of the Tribunal unjustified.

Whether the Trade Tax Tribunal was legally justified in setting aside the assessment order on the ground of change of opinion where the proceedings under section 21 of the U.P. Trade Tax Act, 1948 were initiated on the basis of a case of seizure of goods and where the original assessment order was passed without considering such case of seizure of goods?

Held-No, Perusal of original assessment order passed under Rule 41 (8) on 7.1.1992 reveals that the inspection dated 27.1.1989/28.1.1989 on which, 150 bags of paddy was seized and found outside the books of account has not been considered, therefore, the view of the Tribunal that the order passed by the Assessing Authority under Section 21 of the Act was on account of change of opinion, is patently erroneous. Thus the order passed by the Tribunal is liable to be set aside and the estimate of suppressed turnover of Rs. 1,31,732.25 in the order passed under Section 21 of the Act is up held.

Rate of tax -The Central Sales Tax Act, 1956- Sale of goods liable to tax @4 % under the State Act – Notification, issued by the U.P. Government under Section 8(5)of the CST Act in respect of goods liable to tax @4 % under the State Act, prescribed for levy of Central Sales Tax @4 percent even if sale was not supported by Form “C” or Form “D”-State Act also provided for levy of additional tax, to be computed on the amount of tax payable, over and above the tax-Determination of rate of tax for the purpose of the Central Sales Tax Act.

Where additional tax was to be calculated on the amount of tax payable, whether the Trade Tax Tribunal and the authorities below were legally justified in holding that for the purpose of determining the rate of tax for levying tax under the Central Sales Tax Act, 1956, rate of tax under the State Act would be taken as the aggregate of rates of additional tax and rate of tax applicable to particular goods under the State Act?

Held- No.
        Allowing the revision filed by the assessee, the Hon'ble Court has held as under:-
        “On conjoint reading of Section 3-A, 3-D and 3-E of the Act, I am of the view that the Section 3-E of the Act provides for the payment of additional tax at the rate of 1 per cent on the tax payable, over and above the tax payable as per the notification. It does not provide any rate of tax on the goods, while Section 3-A and 3 and notification issued thereunder referred hereinabove provides rate of tax on the goods. Thus, for the purposes of the notification dated 1.10.1994 issued under Section 8 (5) of the Act referred hereinabove, the rate of tax on the electronic goods at the rate of 4 percent under the notification issued in exercise of powers under Section 3-A of the Act is relevant and since the total rate of tax under the U.P. Trade Tax Act on the electronic goods is only 4 per cent the aforesaid notification applies. The subsequent notification dated 31.1.1995 is clarificatory in nature and clarified that the rate of tax means excluding additional tax.
        In the case of Pappu Sweets and Biscuits etc. vs. The Commissioner of Trade Tax reported in 1998 U.P.T.C. 1086, the Apex Court held that the subsequent notification is relevant to interpret the earlier notification. The subsequent notification dated 31.1.1995 appears to be clarificatory in nature to remove the doubts in the earlier notification and shows the intention of the legislature.”

[Allahabad High Court]

Trade Tax Revision Nos. 287, 969 & 970 of 1996
and
Trade Tax Revision Nos. 235 & 238 of 1997
AND
Trade Tax Revision Nos. 1639, 1640 & 1711 of 1998

The Commissioner, Trade Tax, U.P., Lucknow
vs.
S/S Electra ( India ) Ltd., Partapur, Meerut

Date of Decision : 07th February, 2006

Works Contact-The U.P. Trade Tax Act, 1948-Section 3-F-Contract for repairing and testing of damaged distribution transformers-Scope of work to include opening of the transformers, removal of the damaged parts and replacement, supply of parts, fitting, fixing and connection and completion in all respect etc.- One consolidated price for value of the parts, fitting, fixing, connection etc. charged. Nature of contract-A sale contract and a works contract.

Where the price mentioned in the schedule was not related to the individual part but included the fitting of the parts as well as labour charges relating to the removal, fitting, fixing and connection, whether the Trade Tax Tribunal was legally justified in upholding the contract as works contract and not a contract of sale of parts?

Held-Yes, Perusal of contract shows that it was for repair and testing of Copper wound damaged distribution of transformers at the rate as per the Annexure-1. Annexure-1 referred hereinabove, shows that the different prices were stipulated for the different work Item No. 1 is the labour work only. Item No. II is the work, which appears to be in dispute, which involved “removal of damaged parts requiring replacement, supply of parts, fittings, fixing and connection and completion in respect thereof.” Below the aforesaid heading, the prices per unit with reference to the various parts are mentioned. The prices mentioned with reference to the various parts was not exclusively for the value of parts, but it included labour charges involved in the removal of damaged parts, fittings, fixing, connection etc. Thus, a composite price for parts required to be replaced and labour charges for removal of damaged parts, fittings, fixing and connection etc. was provided.
        Looking to the facts that the contract was for repair of transformers and the price stipulated included the value of parts and labour charges for removal of damaged parts, fittings, fixing and connection. The replaced parts were therefore, passed on to the Electricity Board only when the damaged parts were removed and the new parts were fitted, fixed and connected in a transformer. Thus, in my opinion, in view of the principle laid down by the Apex Court in the case of State of Rajasthan vs. Industrial Corporation (supra) and in the case of Sentinel Rolling Shutters and Engineering Co. (P) Ltd. vs. Commissioner of Sales Tax, Maharashtra (supra) , the repairing of transformers, which involved removal of damaged parts, replacement of parts, its fittings, fixing and connection amounts to works contract and not the contract for sale. It may be mentioned here that the charging of tax in the bill and receiving Form 3-D would not decide the nature of transactions, if the contract is a works contract in law, it will remain works contract and will not become contract of sale, merely because tax is charged and Form 3-D have been received. However, it may be mentioned here that if the tax had been charged on the works contract, the same may be dealt with in accordance to the provisions of Section 29-A.

Trade Tax Revision No. 304 of 2005

R. L. Virendra & Company, Kalserganj Road , Meerut
vs.
Commissioner of Trade Tax, U.P., Lucknow

Date of Decision : 12th April, 2006

Evidence-Filing of Affidavit- Affidavit not controverted- Averments made in the affidavit contrary to the record-Acceptance of Affidavit unjustified.

Whether the averments made in the affidavit, which are not controverted are liable to be accepted even if such averments are contrary to material on records?

Held-No, that the averments made in the affidavit cannot be accepted as a gospel truth. No doubt, its worthiness has to be examined and tested. If the averments made in the affidavit remain uncontroverted and there is no contrary material on record, the same should normally be accepted, but if the averment of the affidavit is contrary to the record, though it is uncontroverted cannot be accepted.

Trade Tax Revision No. 68 of 2006

M/s Linc Marketing Services (Alld.), Allahabad
vs.
Commissioner of Trade Tax, U.P., Lucknow

Date of Decision : 12th April, 2006

Penalty – The U.P. Trade Tax Act, 1948-Section 15-A(1) (o)-Import of 240,000 pieces (100 Boxes) of Gel pens- On verification at check-post, no difference in quantity of goods found and that recorded on Form-31-Invoice showing value of 216,000 pieces-Assessee's contention that 24,000 pieces were supplied by the seller free of cost under the business promotion scheme-After rejecting the contention penalty imposed-Penalty upheld by the first Appellate Authority as well as by the Tribunal-Intention to evade payment of tax missing -Tribunal's decision not sustainable.

Where the assessee, while importing the goods, had mentioned in Form- 31 total quantity of goods and had contended that in the invoice, accompanying the goods, value of part of the consignment of goods was not mentioned because the same were supplied free of cost under the business promotion scheme, whether the Tribunal was legally justified in upholding the penalty under section 15-A(1)(o) of the U.P. Trade Tax Act?

Held-No, It may be noticed that the goods were accompanied by requisite documents, the quantity as verified by the Check Post Officer was found to be correct. The per price had also been disclosed.
        In the opinion of the Court the issue as to whether the 24,000 pieces of Linc Pen were liable to be treated as free of cost as per the Invoice or not, would be subject matter of consideration during the assessment proceedings against the assessee. The facts as noticed do not make out a case for any finding being recorded by the Check Post Officer that an attempt to evade the liability of tax was being made or that the provisions of Section 28-A of the 1948 Act were not complied with.
        In the facts of the present case, inasmuch as this Court has come to the conclusion even on the admitted facts of the case, that there was no attempt to evade the tax on part of the assessee. The order of penalty under Section 15-A (1) (o) of the Act as well as the order of Tribunal and First Appellate Court cannot be legally sustained.

Trade Tax Revision Nos. 69 & 70 of 2000

Commissioner, Trade Tax, U.P.
vs.
S/S Arora Brothers, C-86, A- Sector-8, Noida

Date of Decision : 22nd February, 2006

Ex parte Order-The U.P. Trade Tax Act, 1948-Section 30 (1) –Proviso - Amount of tax admitted by the dealer to be due-Sales shown against Declaration Forms-Tax paid by the assessee at concessional rate of tax-Forms not submitted alongwith the application under section 30-Rejection of application under section 30 -Not justified.

Whether the Trade Tax Tribunal was legally justified in accepting application for setting aside the ex parte assessment order under section 30 of the U.P. Trade Tax Act, 1948 where the assessee had claimed liability of tax at concessional rate of tax against submission of Declaration Forms but had not submitted such Forms alongwith the application?

Held- Yes, The provision to Section 30 provides that no application shall be entertained unless it is complete by satisfactory proof of “payment of amount of tax admitted by the dealer to be due”. Section 30 is a beneficial provision and is to be interpreted liberally to achieve the object of the provisions. The “amount of tax admitted by the dealer to be due” means, tax admitted by the dealer and not amounts to tax due under the Act as required under Section 9 of the Act. Moreover, dealer has a right to furnish Forms during the course of assessment proceedings and even before the Appellate Authority. In case, if an ex-parte order is being passed, dealer could not get an opportunity to submit Form and documents, thus, it cannot be said that the dealer was required to deposit the tax at higher rate, in case of non furnishing of Forms for maintainability of application under Section 30 of the Act. If such requirement is made under Section 30 of the Act, it may lead to unreasonable result and frustrate the purpose of beneficial provisions. The object of Section 30 of the Act is to provide remedy to the dealer to get ex-parte order recalled and to avail opportunity of hearing. Thus, in my opinion, for maintainability of application under Section 30 of the Act under the proviso, tax admitted by the dealer is, only required to be deposited. The said tax is not the tax, which according to the Assessing Authority is due. The question of liability of tax under the Act is to be determined during the course of assessment proceedings and not at the stage of maintainability of the application under Section 30 of the Act.

Trade Tax Revision Nos. 889, 895 & 896 of 1996

Commissioner of Trade Tax, U.P., Lucknow
vs.
S/S Modi Xerox Ltd., Rampur

Date of Decision : 12th April, 2006

Limitation-The U.P. Trade Tax Act, 1948-Section 3-B-Proceedings initiated after expiry of period of four years-Not barred by time.

Whether the proceedings, initiated under section 3-B of the U.P. Trade Tax Act, 1948 after expiry of the period prescribed for making assessment, were barred by limitation?

Held- No, Order of the Tribunal so far as it held that the initiation of proceeding under Section 3-B of the Act was barred by limitation, is concerned, is wholly erroneous. It is contrary to the view taken by the Division Bench decision of this Court in the case of M/s Bharat Pumps and Compressors Ltd., Naini, Allahabad vs. State of U.P. and Another reported in 1995 UPTC page 256. The Division Bench of this Court held that the period of limitation does not apply to Section 3-B of the Act.

Trade Tax Revision Nos. 889, 895 & 896 of 1996

Commissioner of Trade Tax, U.P., Lucknow
vs.
S/S Modi Xerox Ltd., Rampur

Date of Decision : 12th April, 2006

Whether, in the facts and circumstances of the case, the Trade Tax Tribunal was legally justified in holding that “electronic goods”, being raw material, were covered by the recognition certificate?

Held-No. The exemption flows only from the Recognition Certificate. In case if the dealer is not holding a Recognition Certificate, it is not entitled for the benefit of concessional rate of tax. In the Recognition Certificate, admittedly, dealer was allowed to purchase “packing material” only at a concessional rate. It is true, that in the application in Form 18 “packing material, raw-material and other allied materials” which were required in the manufacturing of Xerographic Equipment and System was mentioned, but from the perusal of letter dated 26.6.1985, it appears that at that time, since the dealer was required to purchase only Corrugated Boxes, Wooden Pallets and Packing Crates, therefore, informed the Assessing Authority vide the aforesaid letter that the said items are being purchased at present and accordingly, Recognition Certificate was issued for “packing material” only. If the dealer intended to have a Recognition Certificate for the raw-material and other allied materials, there was no occasion to write a letter dated 26.6.1985.
        Dealer further moved an application on 25.9.1985 for addition of paints and allied Chemicals. This also shows that the dealer was fully aware that it was holding a Recognition Certificate only for “packing material” and on the further requirement, request was made for further addition of paints and allied Chemicals.
        The aforesaid letter starts with the word “kindly refer to the Recognition Certificate under sub-section (2) of Section 4-B of U.P. Sales Tax Act” which shows that the dealer was fully aware about the contents of the Recognition Certificate and sought addition on the ground that the paints and allied Chemicals were not added and without mentioning of the items in the Recognition Certificate, benefit of concessional rate of tax could not be availed.

Trade Tax Revision Nos. 889, 895 & 896 of 1996

Commissioner of Trade Tax, U.P., Lucknow
vs.
S/S Modi Xerox Ltd., Rampur

Date of Decision : 12th April, 2006

Whether, in the facts and circumstances of the case, the Trade Tax Tribunal was legally justified in holding that, in respect of purchase of “electronic goods” being raw material, the dealer had issued Form III-B under bonafied belief?

Held-No. it cannot be said that dealer was under the bonafide belief that the Recognition Certificate was also in respect of raw material and other allied materials. If it was so, there was no necessity for moving the application for addition of paints and allied Chemicals, inasmuch as, raw-material and other allied materials fully covered the said items. Thus, it cannot be accepted that the dealer was under the bonafide belief that it was holding a Recognition Certificate for the raw-material and thus entitled to purchase electronic goods at a concessional rate and if the dealer issued Form 3-B knowingly that it was not entitled to avail the benefit of concessional rate of tax under the Recognition Certificate in respect of electronic goods and availed benefit of concessional rate of tax, it amounts to issuing a wrong and false Certificate, when the dealer was purchasing electronic goods as raw material and intending to issue Form 3-B, why electronic goods were not got added, is best known to the dealer. Thus, the demand raised under Section 3-B is therefore, justified.

Trade Tax Revision Nos. 889, 895 & 896 of 1996

Commissioner of Trade Tax, U.P., Lucknow
vs.
S/S Modi Xerox Ltd., Rampur

Date of Decision : 12th April, 2006

Whether interest is payable on the amount imposed under section 3-B of the U.P. Trade Tax Act, 1948?

Held-No, In the case of CST vs. R.S. Steel Works reported in 1987 UPTC, 28 it has been held that the demand raised under Section 3-B is not a tax, therefore, the interest could not be charged under Section 8 (1) of the Act.

Trade Tax Revision Nos. 1120 & 1121 of 2005

M/s Shree Chemicals, Ghaziabad
vs.
Commissioner of Trade Tax, U.P., Lucknow

Date of Decision : 23rd August, 2005

Condonation of delay-The U.P. Trade Tax Act, 1948-Section 9 read with section 5 of the Limitation Act-Delay due to gross negligence and latches on the part of the assessee-Rejection of application for condonation of delay justified.

Whether the Trade Tax Tribunal was legally justified in upholding the order, of rejection of application for condonation of delay, passed by the First Appellate Authority where it had found that the applicant had not acted bonafidely and there was gross negligence and latches on his part?

Held-Yes.
        Dismissing the revisions, the Hon'ble Court has held as follows:-
        “Overall fact shows that the applicant has not acted bonafidely and there was gross negligence and latches on his part. It is true that in the matter of condonation of delay, pragmatic and liberal view should be taken, but at the same time, gross negligence and latches cannot be condoned. The facts of the present case clearly establish the gross negligence and latches on the part of the applicant. In the circumstance, I do not find any error in the order of the Tribunal.”