judgment10

Assessment- The U.P. Trade Tax Act, 1948-Section 7- Determination of Turnover-Assessee a manufacturer of Katchch and Kaththa- Assessing authority accepted that 10,000 kgs loose kaththa was available in the stock and some loose kaththa was also used in the manufacturing of solid kaththa - In appeal filed by the Commissioner against the order of First Appellate Authority, observation of the Tribunal that the entry of 10,000 kgs of loose kaththa was not in the stock register and burden lies upon the applicant to prove that such stock was available is erroneous.

Where the assessing authority, in the assessment order passed by it, had accepted that 10,000 kgs loose kaththa was available in the stock and some loose kaththa was also used in the manufacturing of solid kaththa, whether the Tribunal, in the appeal filed by the Commissioner against the order of First Appellate Authority, was legally justified in making observation that the entry of 10,000 kgs of loose kaththa was not in the stock register and burden lies upon the applicant to prove that such stock was available?

“Assessing authority has accepted in its assessment order that 10,000 kgs loose kaththa was available in the stock and some loose kaththa was also used in the manufacturing of solid kaththa. Therefore, Tribunal has erred in observing that the entry of 10,000 kgs of loose kaththa was not in the stock register and burden lies upon the applicant to prove that such stock was available. Observation of the Tribunal that 1540 kgs kaththa should be manufactured in excess and same was not entered in the books of account is perverse. From the manufactured kaththa as per stock register up to 18.8.1999, inference was drawn by the assessing authority, that Khair wood must have been purchased outside the books of account. There was no allegation that manufactured kaththa was not shown in the books of account. Observation of the Tribunal that the applicant was not able to prove that loose kaththa was not useable, is without any basis and meaningless. Nowhere, it was the case of the applicant that such loose kaththa was non useable. To the contrary, it was the case of the applicant that that the loose kaththa, which was available in stock, was used in the manufacturing of solid kaththa. In this view of the matter, Tribunal has adjudicated the issue on the wrong premises.”

Rate of tax-The U.P. Trade Tax Act, 1948-Section 3-AAAA-Purchase of timber from unregistered dealers by manufacturer of veneer –Notification providing rate of tax on sale of timber @15% - Commissioner’s Circular directing subordinate authorities for not realizing tax, including interest on purchase of timber by manufacturers of veneer, which exceeds 2.5%- Applicability of Rate of tax for the purpose of assessment of tax.

Where the Commissioner, in the cases of manufacturers of veneers from timber where such timber had been purchased by such manufacturers from unregistered dealers, had directed its subordinate authorities that amount of tax, including interest, which was in excess of 2.5% would not be realized in respect of purchase of such timber, whether the Tribunal was legally justified in holding that tax on the turnover of purchase of such timber should be assessed @15%, as prescribed by the notification?

“Learned Counsel for the applicant submitted that in view of the Circular dated 04.05.2000, liability of tax is only 2.5% on the purchases of Timber under Section 3-AAAA of the Act, thus, the Tribunal has erred in confirming the levy of tax @ 15% on the purchases of Timber under Section 3-AAAA of the Act. Argument of learned Counsel for the applicant is misplaced. Learned Counsel for the applicant is not able to show any Notification under which, Timber was liable to tax @ 2.5%. Circular dated 04.05.2000 which has been issued by the Additional Commissioner, Trade Tax on the basis of Government Order dated 24.4.2000 with the direction to the Deputy Commissioner, Trade Tax, Assistant Commissioner, Trade Tax and the Assessing Officer not to realize tax and interest more than 2.5% on the purchases of Timber used in the manufacturing of Veneer under Section 3-AAAA of the Act during the period 1.10.1997 to 15.9.1999. On the basis of the aforesaid Circular, the Assessing Authority has to take decision and to pass appropriate order waiving the amount of tax and interest exceeding 2.5% on the purchases of Timber. For waiver of the tax and interest over and above 2.5%, dealer has to approach the Assessing Officer. It appears that the dealer has not approached the Assessing Officer for waiver of the tax and interest. Learned Counsel for the applicant submitted that necessary directions be given to the Assessing Officer to consider the Circular and waive the amount of tax and interest. There is no need to issue any direction. It is expected from the Assessing Officer to pass appropriate order in accordance to Circular dated 04.05.2000.”

Additional evidence in Appeal-The U.P. Trade Tax Act, 1948-Section 12-B-Appeal against ex parte assessment order-For the first time exemption on 3 lakh bricks, on the basis of two certificates of Corporator and Architect, claimed in appeal-Nothing on record to show that certificates were filed along with application under section 12-B of the Act- Opportunity had been given to the assessing authority to rebut those two documents, not clear –Order of First Appellate Authority allowing the claim, as upheld by the Tribunal, is erroneous.

(i) assessment order was passed ex parte and no exemption was claimed before the assessing authority by the dealer in respect of 3 lakh bricks;

(ii) the dealer had claimed relief in respect of such bricks in appeal before the First Appellate Authority and had submitted two certificates from Corporator and Architect;

but where there was nothing on record to show that certificates were filed along with application under section 12-B of the Act and opportunity had been given to the assessing authority to rebut those two documents, whether the Tribunal was legally justified in upholding the order passed by the First Appellate Authority who had allowed claim of exemption on such bricks on the basis of such certificates?

“I find substance in the argument of the learned Standing Counsel. Admittedly, the dealer could not appear before the assessing authority and could not produce any books of account and has also not made any claim that three lacs bricks have been used in the construction of the house. For the first time, dealer had made the claim that three lacs bricks have been used in the construction of the house and in support of such claim, certificates of Corporator and Architect was filed. Perusal of the order of the first appellate authority does not reveal that these two certificates have been filed along with application under section 12-B of the Act. It is also not clear that any opportunity has been given to the assessing authority to rebut these two documents. In this view of the matter, first appellate authority has erred in allowing the claim of three lacs bricks claimed to have been used in the construction of the house, merely on the basis of the certificates of Corporator and the Architect. Tribunal without giving any reason affirmed the order of the first appellate authority. It may be mentioned here that the entire order of the first appellate authority was subject matter of dispute before the Tribunal and, therefore, the Tribunal ought to have examined each and every aspect of the order of the first appellate authority. Tribunal without assigning any reason has confirmed the order of the first appellate authority, which is wholly unwarranted.”

Appeal before the Tribunal-The U.P. Trade Tax Act, 1948-Section 10-Appeal decided without considering material on record –Appeal order not sustainable.

Whether the Tribunal was legally justified in allowing the appeal filed by the Commissioner without considering the documents which were submitted by the assessee in first appeal and which were relied upon by the First Appellate Authority in granting relief to the assessee?

“I find substance in the argument of learned counsel for the applicant. Tribunal is the last Court of fact, ought to have considered all the documents filed by the applicant before the authorities below. Tribunal also ought to have considered the documents, which have been considered and relied upon by the first appellate authority while reversing the order of the first appellate authority. Perusal of the order of the Tribunal shows that the certificate of Gram Pradhan and the agreement, which are referred in the order of the first appellate authority have not been considered and thus, order of the Tribunal is vitiated. Matter is remanded back to the Tribunal to adjudicate the question with regard to 2.23 lacs bricks claimed to have been used by the partners in the construction of their house afresh, after considering the agreement and the certificate of Gram Pradhan, which are referred in the order of the first appellate authority.”

Penalty Section 4-B (5) –The U.P. Trade Tax Act, 1948-Section 4-B-Relief to Certain Manufacturers-Department’s allegation that dealer had not used the component of tin in cut sizes in the manufacturing of container for packing and had sold as such – Dealers claim that the component parts in cut sizes have been processed in machines. Cut, twisted and converted in to desired sizes and, thereafter, handle etc. were also fixed and for making containers these parts were only required to be fixed or to be welded and for the convenient of transportation of the goods, they had been sold in knocked down condition-Tribunal allowed appeal without ascertaining facts-Tribunal’s order not sustainable.

Where the assessing authority had levied penalty under section 4-B (5) of the U.P. Trade Tax Act, 1948 inferring that assessee had sold component of tin in cut sizes without manufacturing as against the claim of the assessee that component parts in cut sizes had been processed in machines, cut, twisted and converted into desired sizes and, thereafter, after fixing of handle etc, for the convenient of transportation of the goods, they had been sold in knocked down condition, whether the Tribunal was legally justified in deleting penalty without without recording a finding that assessee had sold tin containers in knocked down form?

“From the perusal of the order of the Tribunal, it is not clear that whether the individual parts of the components were sold or tin containers had been sold in knocked down condition. Tribunal in its order has not recorded any finding in this regard. Thus, in my view, matter requires reconsideration. Tribunal has to consider whether the component of tin containers in cut sizes had been purchased by the dealer against Form 3-B had been subjected to process or not and whether they had been sold as such or as tin containers in a knocked down condition. After examination of the aforesaid fact, Tribunal may decide whether the penalty under section 4-B (5) of the Act is leviable or not.”

Seizure of goods-The U.P. Trade Tax Act, 1948-Section 13-A (1)-At the exit check-post, on physical verification of goods loaded on the vehicle, certain goods found in addition to goods declared in Transit Authorisation - No other documents produced in respect of such additional goods even at the time of physical verification- Bill and builties produced on issue of show cause notice –Explanation given that said goods could not be mentioned in Transit Authorisation as the driver was illiterate and Transit Authorisation was prepared by munshi, working near check-post, who did not mention particulars of two challans in Transit Authorisation- Seizure of goods justified.

Where, on physical verification of goods loaded on the vehicle at the exit check-post, certain goods were found in addition to goods declared in Transit Authorisation (Transit Pass) and no other documents were produced at the time of physical verification, whether the Check-post Officer was legally justified in seizing such additional goods?

“I find substance in part in the argument of learned counsel for the applicant. Admittedly, at the check post transit pass was not applied for the impugned goods. At the exit check post, at the time of physical verification also the documents relating to the impugned goods could not be produced. Thus, prima facie it can not be said that the seizure of the goods was not justified. In the circumstances, at this stage no interference is called for so far as the seizure of the goods is concerned.”

Security for release of goods-The U.P. Trade Tax Act, 1948- Section 13 A (6)-Goods seized under section 13-A - Security towards penalty likely to be levied –Demand of security towards tax not justified.

Whether, in a case of seizure of goods under section 13-A of the U.P. Trade Tax Act, 1948, the Officer, seizing the goods, was legally justified in demanding security towards tax in addition to amount of security towards penalty likely to be levied?

“So far as demand of tax is concerned, I find that the demand is not justified. Under section 13-A (6) of the Act, Check Post Officer can only demand the security in lieu of the penalty likely to be imposed and tax can not be demanded. Therefore, demand of tax at Rs.44,488/- is not justified.”

Levy of amount –The U.P. Trade Tax Act, 1948 – Section 3-B-Levy of amount on account of issue of wrong or false declaration or certificate- Recognition Certificate, granted to contactor engaged in the business of road construction, cancelled-Form 3-B issued by the contractor for purchases during the period in which recognition certificate was valid-Levy of amount under section 3-B on account of wrong or false issue of declaration certificate not justified.

Where the assessing authority, after canceling the recognition certificate granted to the assessee, had levied amount under section 3-B of the U.P. Trade Tax Act, 1948 for wrong or false issue of declaration or certificate in respect of purchases, of goods mentioned in his recognition certificate and made during the period in which the assessee had held valid recognition certificate, whether the Tribunal was legally justified in deleting the levy of amount under section 3-B of the U.P. Trade Tax act, 1948?

“It has not been shown by the learned Standing Counsel that the recognition certificate, which was cancelled on 28th March, 2001 was with retrospective effect prior to the date on which the purchases were made and Form 3-B were issued. Dealer was holding valid recognition certificate and, therefore, the Form 3-B issued in respect of the said purchases were valid Forms and were neither false nor wrong. Section 3-B of the Act is applicable only in case, if the declaration Form is found to be false or wrong.”

Writs -Constitution –Article 226-The U.P. Tax on Entry of Goods Act, 2000- Wood and timber notified by the Government for the purpose of levy of tax - Assessee, carrying on business of manufacture of Cricket Bats, imported willow cleft into local area without admitting liability of Entry Tax-Assessing Authority imposed tax for 2003-2004 and issued for provisional assessments for the months of April, May, June and July, 2006-Appeal against assessment order for 2003-2004 pending before the Appellate Authority- Neither the jurisdiction of the Assessing Authority to make provisional assessment nor the vires of the provisions of the U.P. Tax on Entry of Goods Act or the notification challenged in the Writ Petition - Writ for issuing direction to the assessing authority not to make provisional assessments not maintainable.

The Honourable Court was pleased to dismiss the Writ Petition with the following observations:-

“Applying the principles laid down by the Apex Court in the aforesaid case to the facts of the present case, we find that the jurisdiction of the respondent no.2 to make provisional assessment has not been challenged nor there is any challenge regarding vires of the provisions of the U.P. Tax on Entry of Goods Act or the notification issued thereunder. The question as to whether a particular commodity falls under the one entry or the other entry, is to be decided by the Assessing Authority.

13. We also find that in respect of the assessment made for the assessment year 2003-04 the question as to whether the English willow cleft falls under the category of timber or is a timber product, is already subject matter of appeal preferred by the petitioner and we, therefore, do not want to pre-empt its decision.

14. The petitioner would have ample opportunity to represent its case before the respondent no.1 and place all material and evidence in support of its claim before the said authority.”

Assessment of escaped turnover –The U.P. Trade Tax Act, 1948-Section 21 (1)-Assessment order dated 3.2.1989 for 1984-85 passed on the basis of information relating to particular dealer - The Tribunal quashed the assessment order by its order dated 11-5-1992 and held that the information related to 1983-84 –Assessing authority issued notice for assessment of escaped turnover for 1984-85 on the basis of information received on 17-9-1990, relating to same dealer for 1984-85 - Notice challenged in the present writ petition on the ground that initiation of reassessment proceeding on the same turnover which had already been considered in the original assessment without any fresh material on record, was illegal -Proceedings under section 21 of the Act held valid.

Where information, relating to a particular dealer and used in making original assessment, was held by the Tribunal to relate to some different year, whether the assessing authority was legally justified to issue notice for assessment of escaped turnover on the basis of information relating to same dealer, received after passing the original assessment order?

The Hon’ble Court was pleased to dismiss the writ petition filed by the dealer with the following observations:-

“9. In order to satisfy ourselves as to whether the information on the basis of which the present proceeding have been initiated, were received after the passing of the assessment order and whether there was any information regarding the transactions of sale during the assessment year in question, the Court, vide order dated 21.8.2006, directed the learned Standing Counsel to produce the relevant record. In compliance thereof, the records have been produced which we have perused. From the perusal of the record, we find that there is a letter dated 12.9.1990 sent by M/s Bhagwan Das Shobhalal Jain, Chameli Chowk, Sagar (M.P.) to the Sales Tax Officer, Sector VII, Allahabad, by registered post which had been received by the respondent no.2 on 17.9.1990, in which copies of the account of the petitioner for the year 1983-84 and 1984-85 were enclosed. It had mentioned that during the year 1984-85 it had not made any purchases from the petitioner but had made payment for the purchases made during the year 1983-84. It appears that the accounting period of M/s Bhagwan Das Shobhalal Jain, Chameli Chowk, Sagar (M.P.) starts from Diwali and there are four transactions of purchase which falls during the period April to October, 1984, which is relevant for the assessment year 1984-85, insofar as the petitioner is concerned, even though it was during the accounting period 1983-84 of M/s Bhagwan Das Shobhalal Jain, Chameli Chowk, Sagar (M.P.). Thus, it cannot be said that this information was not relevant for taking proceedings under Section 21 of the Act. This information was received by the respondent no.2 much after the original assessment order under the Central Act had been passed, i.e., after about one and a half year.

10. We are further of the view that the Tribunal in its order dated 11.5.1992 had not considered these informations which were specific for the assessment year in question. The informations which were the subject matter of assessment and up for consideration in appeal, was held by the Tribunal to be relatable to the previous assessment year, i.e., 1983-84. Thus, the petitioner cannot take any advantage of the order dated 11.5.1992 passed by the Tribunal in respect of the original assessment proceeding for the assessment year in question.”

Penalty –The U.P. Trade Tax Act, 1948-Section 15 A (1) (a)-Penalty for not depositing the amount of tax due on the turnover shown in the return without reasonable cause- Business of Pan Masala containing Tobacco commonly known as Gutka-Dealer submitted return and claimed turnover of Gutka exempt from tax-Penalty proceedings initiated under section 15 A (1) (a) of the Act –Penalty proceedings invalid.

Where the assessee had not deposited any tax alongwith return on the turnover of Gutka and had claimed sales exempt from tax, whether the assessing authority was legally justified in initiating proceedings under section 15 A(1)(a) of the Act?

Dismissing the revision filed by the Commissioner, the Hon’ble Court has observed as under:

“Under Section 15-A (1) (a) of the Act, penalty is imposable in case if, without reasonable cause, dealer failed to deposit tax due under this Act, before furnishing the return or alongwith the returns as required under the provisions of this Act. Rule 41 (1) provides furnishing of returns. Section 7 (1-A) provides that before submitting the return under sub section (1) or along with such return, the dealer shall deposit, in such manner as may be prescribed, the amount of tax due on the turnover shown in such return. The amount of tax, due on the turnover shown in the return, was required to be deposited. The dealer was not required to deposit the amount of tax which according to it was not due. However, if the Assessing Authority is of the view that the return furnished by the dealer is incorrect, it is always open to the Assessing Authority to pass provisional assessment order under rule 41 (6) and raise the demand. Without passing the provisional assessment orders under rule 41 (6), it cannot be said that the return filed by the dealer disclosing the turnover and admitting or non-admitting liability of tax is incorrect. The penalty has been levied under Section 15-A (1) (a) of the Act merely on the ground that according to the Assessing Authority, there was liability of tax on the turnover of Gutka and the dealer should have deposited the tax @ 10%. This approach of the Assessing Authority was wholly unjustified. Moreover, the Tribunal held that for the same period. The Assessing Authority has exempted the turnover of Gutka in the assessment. In the circumstances, the Tribunal has rightly deleted the penalty. In the facts and circumstances of the case, I do not find any error in the order of the Tribunal, which is accordingly up held.”

Best Judgment Assessment-The Central Sales Tax Act, 1956-Section 9(2) read with Rule 41 of the U.P. Trade Tax Rules, 1948-Parchas seized at the time of survey not revealing suppression in sales in the course of inter-state trade-No justification for estimating suppressed inter-state sales.

Where there was no material to reveal suppression in inter-state sales, whether the Tribunal was justified in upholding estimation of suppressed inter-state sales?

Allowing the revision filed by the assessee, the Hon’ble Court has observed as under:

“Perusal of the order of the Tribunal does not reveal any material relating to the suppression of inter-State Sales. In my view, on the basis of the parchas the presumption of the suppression of the intra-State Sales can be drawn, but in the absence of any material of suppression of inter-State sales suppressed turnover of inter-State sales cannot be estimated. Thus, in the absence of any material of suppression of turnover under the Central Sales Tax Act, estimate appears to arbitrary and liable to be set aside.”

Registration-The U.P. Trade Tax Act, 1948-Section 8-A-Main business of trading of all kinds of scrap in the course of export-Rejection of registration application on several grounds including ground that business place was shown in a room taken on rent in a school-In a case of export business, rejection of application on the ground of location of business place in a room in a school not justified.

Where the assessee had disclosed trading business of export of all kinds of scrap and had disclosed that business was being run from a school room taken on rent, whether the assessing authority was justified in rejecting the registration application taking one of the grounds relating to place of business?

Remanding the case to the assessing authority for fresh consideration, the Hon’ble Court has observed as under:

“In my opinion, matter requires fresh consideration by the assessing authority. The turn over disclosed by the applicant reveals that its main business was of export. As against the total sales disclosed at Rs.7,86,718/-, the export sale was to the extent of Rs.7,64,083/- Thus, main business was of export. To carry on the business of export, it was not necessary to have a shop or big godown at a commercial place. It could be carried on from the small place and from non-commercial place. However, for granting the registration, the satisfaction of the assessing authority is necessary to the extent that whether the company is a genuine company intending to carry on the business and the interest of the revenue is secured or not. Thus, the assessing authority is directed to examine the matter afresh in the light of the observations made above and pass appropriate order in accordance to the law.”

Entries in Schedule-The U.P. Trade Tax Act, 1948-Sections 4 and 28-A-CCF imported against use of Form of Declaration for import-Form of Declaration for Import prescribed for importing taxable goods-CCF, being textile exempt from levy of tax under section 4 of the Act-Exemption disallowed on account of use of Form for Declaration of Import-Denial of exemption not justified.

Where the assessee had used Form of Declaration for Import while importing CCF, whether the Assessing Authority was legally justified in disallowing exemption on sale of CCF on the ground that had the CCF been exempt from tax, the assessee would not have used Form of Declaration for Import?

Dismissing the revision filed by the Commissioner, the Hon’ble Court has observed as under:

“I do not find any error in the order of Tribunal. Tribunal held that the dealer imported CCF and made declaration of the goods as CCF in Form-31 and also sold CCF. Merely because, it was imported against declaration form, the nature of goods may not change. If the goods which is subject matter of dispute is CCF (Cotton Coated Fabrics), it is not liable to tax being one of the variety of cotton fabrics under the entry “Cotton Fabrics of all varieties”. In the case of CST Vs. M/s Arora Material Store, reported in 1982 UPTC, 50, this Court held that the cotton coated fabrics is one of the variety of the cotton fabrics and held exempted form tax. In the case of Reliance Trading Company Vs. State of Kerala, reported in (2006) 147 STC, 211 (SC), Apex Court held that cotton based tarpaulin is a cotton fabrics exempted from tax under Kerala General Sales Tax Act.”

Appeal-The U.P. Trade Tax Act, 1948-Section 9 –Appellate Authority allowed the appeal filed by the dealer against rejection order of application under section 30 for setting aside the ex parte assessment order and dismissed the appeal against ex parte assessment order treating it infructuous-Order dismissing the appeal against ex parte assessment order legally justified.

Where the Appellate Authority had allowed the appeal filed by the dealer against rejection order of application under section 30 for setting aside the ex parte assessment order whether the Appellate Authority was legally justified in dismissing the appeal against ex parte assessment order treating it infructuous?

Allowing the revision filed by the Commissioner, the Hon’ble Court has observed as under:

“5. I find substance in the argument of the learned Standing Counsel. Once the appeal against the order rejecting the application under Section 30 of the Act has been allowed and the case has been reopened under Section 30 of the Act and direction was issued to the assessing authority to pass assessment order afresh, the appeal filed against the order under Section 21 of the Act stood infructuous and the same was rightly rejected as infructuous. In these circumstances, there was no occasion for the dealer to file appeal before the Tribunal against the order of the Deputy Commissioner (Appeals) rejecting the appeal as infructuous. Tribunal has without application of mind decided the appeal on merit. The approach of the Tribunal is wholly unwarranted. In the circumstances, the order of the Tribunal is liable to be set aside.”

Rectification of apparent mistake in order-The U.P. Trade Tax Act, 1948 Section 22-in the original order Tribunal recorded a finding that the First Appellate Authority had illegally examined the nature of transactions in the penalty proceeding while the nature of transactions should be examined in the assessment proceedings - The Tribunal also inferred that the books of account have been prepared subsequently-In order under section 22 of the Act, the Tribunal deleted the portions “rnqijkUr izLrqr ys[kk iqLrdsa ckn esa cukbZ xbZ izrhr gksrh gS” and “^leFkZu fd;k tkrk gSA” Tribunals order under section 22 not sustainable.

Where the Tribunal in appeal order had inferred that account books seemed to have been prepared subsequently and had recorded its finding that First Appellate Authority had illegally examined the nature of transactions in the penalty proceeding while the nature of transactions should be examined in the assessment proceedings, whether the Tribunal was legally justified in rectifying the order under section 22 of the U.P. Trade Tax Act, 1948 by deleting the portions “rnqijkUr izLrqr ys[kk iqLrdsa ckn esa cukbZ xbZ izrhr gksrh gS” and “^leFkZu fd;k tkrk gSA”?

Allowing the revision filed by the Commissioner, the Hon’ble Court has observed as under:

“6. I find substance in the argument of learned Standing Counsel. Under Section 22 of the Act, only mistake apparent on the face of record, can be rectified. Under Section 22 of the Act, the authorities have no power to review its order. The perusal of impugned order dated 18.8.1999 reveals that the Tribunal has examined the facts and circumstances of the case afresh and reviewed its earlier order dated 12.10.1998 which is beyond the scope of Section 22 of the Act. The order of the Tribunal dated 18.8.1999 is not sustainable and is liable to be set aside.”

Condonation of delay-The U.P. Trade Tax Act, 1948-Section 9 read with section 5 of the Limitation Act-Delay of seven years and 255 days-Evidence not led to substantiate claims- Applicant neither vigilant about his rights nor careful-Application for condonation of delay rightly rejected.

(i) service of order on employee who forgot to inform the Director and later on left the company;

(ii) one of the Director of the company had been suffering from severe heart decease;

(iii) came to know about ex parte assessment order after the recovery amin contacted;

and where the Tribunal found that appellant had led no evidences to substantiate its claim, no proof about illness of Director produced and no evidence had been adduced about the payment of salary, fee and expenses etc. and the entries of such payment in the books of account, whether the Tribunal was legally right in upholding the rejection of application for condonation of delay?

Dismissing the revision filed by the assessee, the Hon’ble Court has observed as under:

“7. I have given my deepest consideration on the explanation given by the applicant for the condonation of delay. It is true that in the matter of condonation of delay, liberal and pragmatic view should be taken and the approach of the Court should be a justice oriented approach but the Court can not give the relief to the applicant for his own negligence. The court can not allow the benefit to the person who is not vigilant about his own rights and commit gross negligence.

8. In the present case, the facts of the case show that the applicant was not vigilant about his rights and was not careful. One can understand the explanation of the applicant upto February, 1999, some reasonableness about the explanation of the applicant upto March, 1999. Order rejecting the application under section 30 of the Act was served on 17th March, 1999 but the explanation for five years thereafter, can not be said to be sufficient explanation by any stretch of imagination. It is beyond the understanding of a prudent man. In my opinion, it is the case of gross negligence and not a bonafide act and, therefore, delay in filing the appeal is not liable to be condoned. The decisions cited by learned counsel for the applicant are based on facts of that case and thus are not applicable to the present case.”

Inter-State sale-The Central Sales Tax Act, 1948-Section 2(g) read with sections 3 and 6(2) -Purchase of goods by purchasing agent in its own name outside the State by participating in auction sales-Took delivery of goods and dispatched goods in its own name and subsequently endorsed builties in favour of Principals-Sales by purchasing agent assessed to tax by the Assessing Authority treating sales by so called purchasing agents in their own account-Tribunal held that here was no sale in between purchasing agent and the Principal and goods were purchased by purchasing agents under the purchasing agency contract –No error in the order of the Tribunal.

Whether the Tribunal was legally justified in holding that assessee had purchased goods for Principal under the purchasing agency agreement where the assessee, after entering into the contract with the Principal, had, for making purchase of goods, participated in the auction sales outside the State and after taking delivery had obtained dispatch receipts in its own name and subsequently had endorsed such receipts in the name of Principal?

Dismissing the revision filed by the Commissioner, the Hon’ble Court has held as under:

“Learned Standing Counsel submitted that, admittedly the goods were purchased by the dealer in its own name and thereafter, they were dispatched in its own name and subsequently, builties were endorsed in favour of the aforesaid two parties of Kannauj and thus, such dispatches were the inter-State sales under Section 3 (b) of the Central Sales Tax Act. I do not find any substance in the argument of learned Standing Counsel. The genuineness of the agreement dated 01.12.1094 has not been disputed. When the purchases were made by the dealer at Tamil Nadu in an auction, the said agreement was in existence. Thus, there is no reason to disbelieve that the purchases were not made in an auction at Tamil Nadu as a Purchasing Commission Agent, in pursuance of the agreement dated 01.12.1984 for S/S Ram Narain Raj Narain, Kannauj and S/S Indian Fragrances and Chemicals Works, Kannauj. The books of account were accepted. The Tribunal held that after making the purchases, necessary entries were made in the books of account in the account of the aforesaid two parties and the dealer had only received the commission. This finding of the Tribunal is also undisputed. Thus, there appears to be no reason to disbelieve that the purchases were made on behalf of the aforesaid two parties of Kannauj. Merely because, the purchases were made in the name of dealer, is not sufficient to dispute the claim of purchases, as a Commission Agent on behalf of aforesaid two parties. In the case of Commissioner of Sales Tax Versus M/S Bakhtawar Lal Kailash Chandra reported in 1992 UPTC page 971, the Apex Court held that the purchases of goods made by the Purchasing Commission Agent on behalf of Ex- U. P. Principal and their dispatch outside the State of U. P. at the destination of the Ex- U. P. Principal were in the course of inter-State purchases. In this case also, the purchases were made by the Purchasing Commission Agent in its name. On the facts of the case, it cannot be said that there was any privity of contract between the dealer and S/S Ram Narain RajNarain, Kannauj and S/S Indian Fragrances and Chemicals Works, Kannauj. In this view of the matter, I do not find any error in the order of the Tribunal.”

“5. There is another aspect of the matter. Admittedly the movement of goods had commenced from the State of Tamil Nadu and admittedly, dealer had not obtained any Form from the authorities within the State of U. P. in respect of transactions in dispute under the Central Sales Tax Act. Under Section 9 of Central Sales Tax Act, the State from where, the movement of goods commenced has a jurisdiction to levy and collect the tax. Since the movement of goods commenced from Tamil Nadu and not from State of U. P., the State of U. P. had no jurisdiction to levy central sales tax. The proviso to Section 9 (1) of the Act is not applicable because dealer had not obtained any Form from the authority of State of U. P.”

Sale by transfer of right to use goods-The U.P. Trade Tax Act, 1948-Section 2(h)-Transfer of trucks- payment towards the insurance charges and other expenses namely road tax etc. to be paid by owner of trucks-Assessing authority observed that possession of trucks was transferred and assessed tax treating sale by transfer of right to use goods-First Appellate authority did not treat it sale –Tribunal upheld the order of First Appellate Authority without considering the terms of the agreement -On revision, case remanded.

Whether Tribunal, without considering the terms of the contract, was legally justified in upholding the order of the First Appellate Authority that the case did not involve transfer of right to use goods?

Allowing the revision filed by the Commissioner, the Hon’ble Court has remaded the case to the Tribunal with the following observations:

“9. I have perused the order of Tribunal and the authorities below. In my opinion, the order of the Tribunal is not sustainable. The Tribunal has not considered the terms of the agreement. For the application of Section 3-F of the Act, relevant consideration is whether at any point of time, possessions of the Vehicles have been transferred for use or not. The transfer of possession is Sine qua Non for applicability of Section 3-F of the Act. The transfer of possession may be at the time of agreement or on a later stage, but at some stage, there should be a transfer of possession to use the goods. The payment of insurance charges and other expenses by the present dealer under the terms of agreement are not the relevant consideration. Perusal of order of the Tribunal reveals that the Tribunal has not considered the terms of the agreement and has not examined whether under the terms of agreement, the possession of the Vehicles for use have ever been transferred to M/S Sudarshan Freight Carrier, Shahjahanpur. In the circumstances, matter requires reconsideration by the Tribunal.”

In the case, the following observations by the Hon’ble Court are of immense importance:

“7. With respect, the decision in 20th Century Finance Corporation Limited Vs. State of Maharashtra, cannot be cited as authority for the proposition that delivery of possession of the goods is not a necessary concomitant for completing a transaction of sale for the purposes of Article 366 (29A) (d) of the Constitution. In that decision the Court had to determine where the taxable event for the purposes of sales tax took place in the context of sub-clause (d) of Article 366 (29A). Some States had levied tax on the transfer of the right to use goods on the location of goods at the time of their use irrespective of the place where the agreement for such transfer of right to use such goods was made. Other States levied tax upon delivery of the goods in the State pursuant to agreements of transfer while some other States levied tax on deemed sales on the premise that the agreement for transfer of the right to use had been executed within that State (vide paragraph 2 of the judgment as reported). This Court upheld the third view namely merely that the transfer of the right to use took place where the agreements were executed. In these circumstances the Court said that:-

“No authority of this Court has been shown on behalf of respondents that there would be no completed transfer of right to use goods unless the goods are delivered. Thus, the delivery of goods cannot constitute a basis for levy of tax on the transfer of right to use any goods. We are, therefore, of the view that where the goods are in existence, the taxable event on the transfer of the right to use goods occurs when a contract is executed between the lessor and the lessee and situs of sale of such a deemed sale would be the place where the contract in respect thereof is executed. Thus, where goods to be transferred are available and a written contract, is executed between the parties, it is at that point situs of taxable event on the transfer of right to use goods would occur and situs of sale of such a transaction would be the place where the contract is executed.

In determining the situs of the transfer of the right to use the goods, the Court did not say that delivery of the goods was inessential for the purposes of completing the transfer of the right to use. The emphasized portions in the quoted passage evidences that the goods must be available when the transfer of the right to use the goods takes place. The Court also recognized that for oral contracts the situs of the transfer may be where the goods are delivered (see para 26 of the judgment).

In our opinion, the essence of the right under Article 366 (29A) (d) is that it relates to user of goods. It may be that the actual delivery of the goods is not necessary for effecting the transfer of the right to use the goods but the goods must be available at the time of transfer must be deliverable and delivered at some stage. It is assumed, at the time of execution of any agreement to transfer the right to use, that the goods are available and deliverable. If the goods, or what is claimed to be goods by the respondents, are not deliverable at all by the service providers to the subscribers, the question of the right to use those goods, would not arise.”

Inter-Sale by transfer of right to use goods –The Central Sales Tax Act, 1956 –Section 2(g)- Purchase of machinery from a manufacturer Punjab, after signing of Letter of Intent with the lessee -Machinery dispatched to State of U.P. and after the machinery was received in U.P., contract of transfer of right to machinery executed at Mumbai.

Sale outside the State –The Central Sales Tax Act, 1956 –Section 4 - Purchase of machinery from a manufacturer Punjab, after signing of Letter of Intent with the lessee -Machinery dispatched to State of U.P. and after the machinery was received in U.P., contract of transfer of right to machinery executed at Mumbai.

Sale in U.P. by transfer of right to use goods –The U.P. Trade Tax Act, 1948 –Section 2(h) read with clause (ii) of Explanation I and Section 3-F - Purchase of machinery from a manufacturer Punjab, after signing of Letter of Intent with the lessee -Machinery dispatched to State of U.P. and after the machinery was received in U.P., contract of transfer of right to machinery executed at Mumbai.

(i) the letter of intent between lessor and lessee provided that it had been decided that lessor will purchase machinery, specified in the letter on intent, and would provide the same on lease to lessee and detailed Agreement to be finalized later on;

(ii) lessor purchased machinery from a manufacturer of Punjab and dispatched such machinery to U.P.;

(iii) after the machinery reached in U.P., lease agreement was executed at Mumbai,

whether the Tribunal was legally justified in upholding the levy of tax valid in U.P. as the lease agreement was executed after the machinery had arrived in U.P. and at the time of execution of the agreement it was in U.P.?

With the following important observations, the Hon’ble Court was pleased to dismiss the revisions filed by the assessee:

“34. Under U.P. Trade Tax Act by Clause (ii) of Explanation-I of Section 2 (h) of the Act, the legislature has created a fiction and fix the situs of the sale in the State where the goods are used, notwithstanding that the agreement for lease has been entered outside the State. In view of the decision of the Apex Court, such fiction is valid. Therefore, the place of the execution of the agreement at Mumbai has no relevance in the present case.

35. Further, in view of the decision of the Apex Court in the case of 20th Century Finance Corporation Ltd and another Versus State of Maharashtra (supra) and Clause (i) of Section 3-F (2) (a) of the Act the amount representing the value of the goods covered by Sections 3, 4 and 5 of the Central Sales Tax Act are to be excluded from gross turnover. Thus, the amount representing the sale value of the goods, which is imported in the course of inter-State under Section 3 of the Act would not be subject to tax under Section 3-F.

36. Now on the facts of the present case, question for consideration is whether the impugned transactions are covered by Section 3 of the Central Sales Tax Act with reference to the transfer of right to use such goods. Under Section 3 of the Central Sales Tax Act, sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase occasions the movement of goods from one State to another. It means that to be a inter-State sale, movement of goods should be in pursuance of prior contract of sale. In this regard, it is relevant to examine, that in the present case when, there was transfer of right to use the goods.

It has been decided that Goa Carbon Limited will purchase “ONE NUMBER 15T/HR CAPACITY FLUIDISED BED BOILER MODEL MTFH-20 MAKE ‘’THERMAX’, 22 KG / C.M. (g) WITH SUPERHEATER FOR 360 C TEMPERATURE CHIMNEY AND OTHER REQUIRED ACCESSORIES AND ONE NUMBER ‘’ A.P.E. BELLISS’ MADE MS-26, MULTISTAGE BACK TURBINE INLET STEAM 21 KG/ CM (g) WITH ‘’KIRLOSKAR’ MAKE 1000 KW, 1500 RPM, 415 VOLTS ALTERNATOR- ALONGWITH REQUIRED ACCESSORIES” and will provide the same on lease to Kesar Enterprises Limited. Detailed Agreement to be finalized later on.”

By the aforesaid letter of intent, there was no transfer of right to use the goods. The goods were not in existence and were not in a deliverable stage. The right to use the machinery was transferred only by the agreement dated 24th March, 1991 and not prior to that. When the lease agreement was executed on 24th March, 1992, the impugned machinery were already in existence inside the State of U.P. Admittedly, they have not been imported in the course of inter-State transaction from outside the State of U.P. in pursuance of the agreement dated 24th March, 1992. Thus, the applicant cannot claim the benefit of Clause (i) of Section 3-F (2) (a) of the Act.”