Trade Tax Revision No. 191 of 2006

M/s Divisional Superintendent Engineering (C) Northern Central Railway, Allahabad

vs.

Commissioner, Trade Tax, U.P., Lucknow

Date of Decision : 26th April, 2006

Whether the activity of the transportation of goods and passengers by the Railway is the activity of commerce within the definition of ‘business' under the U.P. Trade Tax Act?

Held-Yes, in the case of the applicant itself, the Apex Court held that the activity of the railway is of the nature of trade or commerce.

Whether railway is liable to pay tax on its sales of unserviceable materials and scraps?

Held-Yes, the activity of the appellant in the selling of unserviceable material and scrap iron etc. would be “business” within Clause (i) of the definition of the word ‘business' introduced by the Amending Act. The word ‘business' according to Clause (i) of that definition would include any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not it is carried on with a motive to make gain or profit. So even if it be assumed that the activity involved in selling unserviceable material and scrap iron etc. would not amount to carrying on business in the normal connotation of that term, it would be ‘business' within sub-clause (i) of that clause as introduced by the Amending Act.

        The case of the applicant is squarely covered by the decision of the Apex Court in the case of The District Controller of Stores, Northern Railway, Jodhpur vs. Assistant Commercial Taxation Officer (supra), which is in the case of the applicant itself. After the decision of the Apex Court in the case of the applicant itself, there is no scope of any further argument.

        After the decision of the Apex Court in the case of The District Controller of Stores, Northern Railway, Jodhpur vs. Assistant Commercial Taxation Officer (Supra), the law relating to the liability of tax on the sale of iron scrap by the railway had been settled and there was no manner of doubt about the taxability of iron scrap.

Whether railway was liable to pay interest under Section 8(1) of the Act on the unpaid amount of tax on the turnover, of sale of iron scrap and unserviceable materials, admitted by it?

Held-Yes, After the decision of the Apex Court in the case of The District Controller of Stores, Northern Railway, Jodhpur vs. Assistant Commercial Taxation Officer (Supra), the law relating to the liability of tax on the sale of iron scrap by the railway had been settled and there was no manner of doubt about the taxability of iron scrap. The applicant ought to have deposited the tax on the sale of iron scrap along with return and if the tax has not been deposited, it was the fault of the applicant. The tax on the iron scrap was the tax due under the Act, thus liable to be deposited within the time specified, along with the return, the applicant is liable for interest under Section 8 (1) of the Act on the non-deposited amount as held by the Apex Court in the case of Commissioner of Sales Tax vs. Qureshi Crucible Centre reported in 1993 UPTC 901.

Trade Tax Revision No. 191 of 2006

M/s Divisional Superintendent Engineering (C) Northern Central Railway, Allahabad

vs.

Commissioner, Trade Tax, U.P., Lucknow

Date of Decision : 26th April, 2006

Held-Yes, the activity of the appellant in the selling of unserviceable material and scrap iron etc. would be “business” within Clause (i) of the definition of the word ‘business' introduced by the Amending Act. The word ‘business' according to Clause (i) of that definition would include any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not it is carried on with a motive to make gain or profit. So even if it be assumed that the activity involved in selling unserviceable material and scrap iron etc. would not amount to carrying on business in the normal connotation of that term, it would be ‘business' within sub-clause (i) of that clause as introduced by the Amending Act.

        The case of the applicant is squarely covered by the decision of the Apex Court in the case of The District Controller of Stores, Northern Railway, Jodhpur vs. Assistant Commercial Taxation Officer (supra), which is in the case of the applicant itself. After the decision of the Apex Court in the case of the applicant itself, there is no scope of any further argument.

        After the decision of the Apex Court in the case of The District Controller of Stores, Northern Railway, Jodhpur vs. Assistant Commercial Taxation Officer (Supra), the law relating to the liability of tax on the sale of iron scrap by the railway had been settled and there was no manner of doubt about the taxability of iron scrap.

Where the assessee had disclosed the turnover of purchase of khandsari in the returns without admitting liability of tax but failed to produce tax exemption form, whether the Tribunal was legally justified in deleting the demand of the interest under section 8(1) of the U.P. Trade Tax Act, 1948, especially when the dealer had taken the plea that he had not deposited the tax as his application, under section 4-B of the Act, which was subsequently rejected, was pending for decision?

Held-No, The dealer had purchased khandsari, which was liable to tax at the point of purchase. Exemption on the purchases could be claimed only if the requisite form as required under Section 3-D (7) of the Act could be furnished. Admittedly, no such requisite form was furnished and, therefore, the dealer was liable to tax under Section 3-D of the Act on the purchases of khandsari. In respect of some of the transactions, dealer had issued Form 3C (1) and own the liability of tax on such purchases. Even after the issue of Form 3-C (1), dealer could not pay the tax on the purchases.

        The dealer had admitted the purchases but has not shown the tax in the return, which was payable under the Act for no valid reason and the claim of non deposit of tax on the ground that an application under Section 4-B of the Act was pending cannot be accepted inasmuch as the application under Section 4-B of the Act was misconceived and was subsequently rejected. Thus, the interest under Section 8 (1) of the Act was rightly demanded by the Assessing Authority.

Trade Tax Revision No. 465 of 1999

Commissioner, Trade Tax, U.P., Lucknow

vs.

S/S Ovject De Art India, Rampur Road , Moradabad

Date of Decision : 09th March, 2006

Whether the process of grant of REP license by the licensing authority can be treated manufacture of REP license and authority granting the license can be treated manufacturer of REP license?

Held-No, The movable goods can broadly be categorized under two heads:

•  Corporeal, Tangible or Visible goods.

•  Incorporeal, Intangible or Invisible goods.

        It is obvious that REP Licenses, even though, fall under the category of goods but they are incorporeal, intangible or invisible. The definition of the term manufacture applies only to corporeal, tangible and visible goods. The definition of the term manufacture as contained in Section 2 (e-1) refers to various processes undertaken to bring in a new commodity. These processes can be performed only on tangible goods and not on intangible goods as will be demonstrated by the following decisions of the Hon'ble Supreme Court and our own High Court.

        That some process has to be carried out on a commodity to obtain a new manufactured commodity. In every case of manufacture there has to be some process whether slight or extensive. This act of processing can be carried out only in tangible goods and not in respect of intangible goods, therefore, definition of the term manufacture given under Section 2 (e-1) of the Act apply only to tangible goods and not to intangible goods. REP Licenses/Exim Scrips being intangible goods are incapable of being manufactured in the sense in which term manufacture has been defined under U.P. Trade Tax Act. Thus, the authority granting licence cannot be treated as manufacturer of licence.

Trade Tax Revision Nos. 412, 413 & 414 of 1999

M/s Allied Agencies, Kanpur

vs.

Commissioner of Trade Tax, U.P., Lucknow

Date of Decision : 09th March, 2006

Where the Notification No. ST-II-303/X-89-7 (5)-88-U.P. Act-XV/48-Order-89, dated 1.2.1989, provided for exemption from tax on sale of “canvas cloth, tarpaulins and water-proof cloth”, whether the assessing authority was legally justified in levying tax on the sale of ‘canvas cloth made of jute' under the Notification No. ST-II-7551/X-7 (23)-83-U.P. Act XV-48-Order-85, dated 31.10.1985, which provides for levy of tax on the sale of “Jute and Hemp goods”?

Held-Yes, From the perusal of the dictionary meaning, there is no doubt that the canvas cloth can be made of jute also. It is mainly defined as strong, stout cloth. To my mind, the cloth manufactured by the applicant may be a canvas cloth, but being made of jute, is a jute cloth. Jute cloth is specifically excluded from the Textile under the Notification, therefore, it cannot be held exempted from tax. Canvas cloth which is one of the items mentioned in Annexure and included in textile has to be read as a canvas cloth other than jute cloth. In this view of the matter, canvas cloth made of jute being jute cloth is not exempted from tax under Notification No. ST-II-3714/X-6 (1)/85-U.P. Act 15/48-Order-85 dated 5.6.1985 and Notification No. ST-II-303/X-89-7 (5)-88-U.P. Act-XV/48-Order-89, dated 1.2.1989. Canvas cloth made of jute, being made of jute is a jute goods and liable to tax under the entry “Jute and Hemps goods”. The order of the Tribunal is accordingly, upheld. The decisions cited by learned Counsel for the applicant are not relevant and are not applicable to the present case. In my view, there is no ambiguity in the entry. Under the entry of “Textile”, jute cloth is specifically excluded. Thus, Canvas cloth made of jute being jute cloth would be considered to be excluded from entry of “Textile”. In the Annexure of the entry, canvas cloth is mentioned and is included in the entry of “Textile”. The inclusion is of canvas cloth and not of “Canvas cloth made of Jute”. If the inclusion would be of canvas cloth made of jute, it may lead to confusion and give a scope of interpretations. Thus, in my view, canvas cloth made of Jute is not covered under the entry “Textile” of Notification No. ST-II-303/X-89-7 (5)-88-U.P. Act-XV/48-Order-89, dated 1.2.1989.

Trade Tax Revision No. 1185 of 1999
&
Trade Tax Revision No. 703 of 2000

M/s Suraj Automobiles Ltd., Saharanpur

vs.

Commissioner, Trade Tax, U.P., Lucknow

Date of Decision : 12th April, 2006

Entries in the Schedule-The U.P. Trade Tax Act, 1948-Section 3-A- Rate of tax on sale of Three-Wheeler chassis on and from 1-6-1993-Difference between motor vehicle and chassis of motor vehicle-Assessee claiming sale of three-wheelers and liability of tax @5%-Department contending sale of chassis of Three-wheelers attracting tax liability of 10%- The sale of the frame with wheel, engine etc., without any body is sale of chassis and liable to tax @10%.

Whether the assessee was justified in claming sale of Motor Vehicles and Motor cars, other than those specified in sub-item (a) of the relevant notification, designed for the transport of less than 10 persons, when it had sold three wheeler chassis as such without body?

Trade Tax Revision No. 495 of 1997
Connected with
Trade Tax Revision No. 498 of 1997
AND
Trade Tax Revision No. 558 of 1998

Commissioner of Trade Tax, U.P., Lucknow

vs.

S/s Metal Cane ( India ) Pvt. Limited

Date of Decision : 29th August, 2005

Whether the Tribunal was legally justified in not treating the transaction of supply of Copper, Zinc and solders supplied by contractee to contractor for use in manufacture of Tin containers as sale where value of material was adjusted from Bill of the contractor?

Held-No, The Tribunal has distinguished the judgment of Supreme Court given in the case of M/s N.M. Goel and Others (Supra) on the ground that agreement with the contractors by the dealer opposite party is quite different than the agreement which was involved in the case of M/s N.M. Goel and Others (supra). The distinction as pointed out by the Tribunal is that in the case of M/s N.M. Goel and Company, the contractors were entitled to take away the material after paying its price or such sum as may be agreed upon but in the present case the position is not so. The contractor in the case is not entitled to take away any material and he has to return it to the dealer opposite party, after getting the work done. The said distinction pointed out by the Tribunal to distinguish ratio as laid down in the case of M/s N.M. Goel & Company is without any substance. Undisputed fact is that the material supplied by the dealer opposite party to the contractor and consumed by the contractors, its price is realized or recovered from the bills of the contractors. In this situation it has been held by Supreme Court in the aforesaid case of M/s N.M. Goel & Company that supply of materials by the dealer to the contractor is sale within the meaning of relevant Sales Tax Act.

        The case of N.M. Goel (supra) has been subsequently considered by Supreme Court in the case of Rashtriya Ispat Nigam Limited vs. State of Andhra Pradesh, 1998 Vol. (8) SCC 439. In that case an unsuccessful attempt was made to distinguish the judgment of M/s N.M. Goel & Company (Supra) in the case of Rashtriya Ispat Nigam Limited (Supra). Recently Supreme Court in the case of Karyapalak Engineer, C.P.W.D. vs. Rajasthan Taxation Board, Ajmer, 2004 UPTC 1178 has held that by use or consumption of materials supplied in the work of construction, there was passing of the property and by virtue of receipt of such transferred property by way of adjustment in bill the consideration has also passed which satisfies the definition of sale in the Sales Tax Act. Coming to the fact of the present case it cannot be disputed that on proper construction of the term of contract the property in goods is not passed to the contractor.

        In view of clear stipulation in between the dealer and its Contractor with regard to the supply of materials and recovery of cost of the materials from the Contractor's bill there is a sale at the hands of the dealer.

        In view of the above discussion the Assessing Authority was right in treating the supply of materials as sale to the contractors by the dealer opposite party. Contrary view taken by the Tribunal is hereby set aside.

Whether the Tribunal was legally justified in reaching the conclusion that transaction did not amount to transfer of right to use goods where the dealer had realised transport charges and the Tribunal had found that there was no transfer of possession of vehicle?

Held-Yes, there is no illegality in the order of the Tribunal. The Tribunal has found that in the Assessment Year 1989-90 the dealer opposite party had realized a sum of Rs. 2,10,300/- towards transport charges for transporting the goods to M/s Parag Vanaspati Product. The finding recorded by the Tribunal is that there was no transfer of possession of the vehicle to M/s Parag Vanaspati product. No illegality on this point could be pointed out by the learned Standing Counsel. Therefore, the order of the Tribunal on this point is confirmed.

Trade Tax Revision No. 136 of 2000

Hari Prasad Tiwari

vs.

Commissioner of Trade Tax, U.P.

Date of Decision : 27th April, 2006

Whether the Tribunal was legally justified in rejecting the documents treating them after thought where the transporter had furnished such documents to prove that goods covered by Form-34 were not sold inside the State of U.P. ?

Held-No, In view of the decisions of the Apex Court , in view of the Tribunal is not correct. It is always open to the person concerned to produce evidence to prove that the goods have gone outside the State of U.P. and have not been sold in side the State and to rebut the presumption under Section 28B. If documents are filed to rebut the presumption unless those documents are found to be false or incorrect it cannot be presumed that the goods are sold in side the State of U.P.

        Tribunal should have examined those documents referred above which the applicant has filed to prove the goods have not been sold inside the State of U.P. Tribunal out to have examined those documents instead of rejecting those documents on the ground that they were filed subsequently as after thought.

Whether imposition of penalty for breach of provisions of section 28-B is justified where documents produced prove that goods covered by Form-34 were taken outside the State?

Held-No, In case if document prove that goods mentioned in Form 34 had crossed the State of U.P. the presumption under Section 28B stands rebutted and no proceeding can be taken under Section 15-A (1)(q) for alleged breach of Section 28B.

Trade Tax Revision Nos. 449 and 450 of 1999

The Commissioner, Trade Tax, U.P., Lucknow

vs.

S/s Singhal Traders, Shahpur, Muzaffarnagar

Whether the Tribunal was legally justified in allowing the appeal of the assessee by accepting the account books on the ground that assessee could not be asked to prove the negative burden where-

•  the assessing authority had passed the best Judgment assessment on the basis of information about issuance of Mandi Samiti Gate Passes and entries of trucks in the records of Check-post of Haryana State ;

•  assessing authority had found that part of the transactions were entered in the books of accounts of the assessee. Certificates from Mandi Samiti about some of the gate passes, disowned by the assessee were accepted. No certificate was produced in respect of some of the gate passes, found unrecorded in the books of the assessee. Out of the trucks in respect of which information was received from the heck-post, some of the trucks were found entered in the books and rest were denied; and

•  the first Appellate Authority had remanded the case for re-assessment after enquiry from Mandi Samiti and after confronting the assessee with the information in original received from the check-post?

Held-No, on the facts and circumstances of the case, there was no justification on the part of the Tribunal to interfere with the order of the First Appellate Authority. In the present case, during the course of the assessment proceeding, Assessing Authority had obtained the register of Mandi Samiti, Shahpur relating to the issuance of gate passes. Such register in original was confronted to the dealer and some of the transactions of the register have been found entered in the books of account of the dealer. In some of the cases where the name of the purchaser was wrongly mentioned, certificate from the Mandi Samiti had been obtained; the statement of the dealer was accepted. With regard to 13 impugned gate passes, dealer though denied to have obtained the mandi gate passes but could not furnish any certificate from the Mandi Samiti as in other cases it was furnished. It is true, if the dealer denied to have obtained such gate passes, the Assessing Authority should make enquiry and should verify from the original applications moved for obtaining the alleged gate passes to ascertain the identity. No doubt, the entry in the register relating to the issuance of the mandi gate passes in an evidence to show that the gate passes have been issued in favour of the dealer, but it is always open to the dealer to adduce evidences to the contrary. In the present case, dealer failed to have obtained the certificate from Mandi Samiti inasmuch as also could not made any request to the Assessing Authority to summon the applications on the basis of which the alleged mandi gate passes have been issued. In the circumstances, if the First Appellate Authority remanded back the matter to the Assessing Authority with the direction to make the enquiry from the Mandi Samiti about the applications on the basis of which gate passes have been issued, such direction cannot be said to be unjustified. Similarly, direction of the First Appellate Authority to confront the information received in original from Garhmarakpur, Check Post, Haryana for drawing adverse inference cannot be said to be unjustified. It is settled principle of law that before drawing any adverse inference against the dealer on the basis of information, same should be confronted in original and the authenticity of such information be established.

        For the reasons stated above, order of the Tribunal is set aside and the order of the First Appellate Authority is restored. Matter stands remanded back to the Assessing Authority for making fresh assessment in accordance to the law and in view of the directions given by the First Appellate Authority.

Sales Tax Revision No. 1739 of 1992

Commissioner of Sales Tax, U.P., Lucknow

vs.

S/s Anuj Coal Agency, Ballia

Date of Decision : 13th September, 2005

Whether the Tribunal was legally justified in allowing the appeal of the dealer where the first appellate authority, after giving its findings, had remanded the case to the assessing authority and where the findings recorded by the first appellate authority had not been adverted before the Tribunal?

Held-No, Perusal of order of Tribunal shows that the findings recorded by the First Appellate Authority had not been adverted before the Tribunal. Thus the order of Tribunal is vitiated. The matter is remanded back to the Tribunal to decide the appeal afresh with the direction to consider the findings recorded by the First Appellate Authority and the law laid down by this Court in the case of Commissioner of Trade Tax, U.P., Lucknow vs. Ramapati Tewari Jainath Tewari, Varanasi and Commissioner of Trade Tax vs. S/s Sharma Coal Co., Azamgarh (supra).

Trade Tax Revision No. 906 of 2001

M/s Rum Plast Pvt. Ltd., Kanpur

vs.

The Commissioner, Trade Tax, U.P., Lucknow

Date of Decision : 08th December, 2005

Whether the Tribunal was legally justified in rejecting the application of the assessee company where, in the application produced for condonation of delay, cause of delay was stated to be illness of both of the Directors of the company and application was supported by medical certificates and affidavits but enquiry revealed that one of the Directors had signed returns and applications for obtaining Form -31 during the period of delay?

Held-No, the order of the Tribunal is not sustainable. While rejecting the application for condonation of delay, the Tribunal has taken pedantic view while in the matter of condonation of delay a pragmatic and liberal view should be taken. In the present case, applicant has explained that the appeal was filed beyond time due to the illness of the two directors of the company and in support of the illness; medical certificates of the two doctors and affidavits have been filed. On enquiry, the Assistant Commissioner (Assessment) found that both the doctors have acknowledged the issue of the medical certificates, thus in my view rejection of the explanation of delay is not justified. Reasons given for the delay is sufficient and the delay is accordingly condoned.

        The law of limitation is enshrined in the maxim interest reipublicae up sit finis litium (it is for the general welfare that a period be put to litigation). Rules of Limitation are not meant to destroy the rights of the parties, rather the idea is that very legal remedy must be kept alive for a legislatively fixed period of time.

Whether the measure to which rate of tax is to be applied on single point transaction of sale of any formulation by the wholesaler to the retailer can be something notional which is not related to subject of tax or to say in other words, whether MRP to be chargeable subsequent to taxing event by a retailer when he sells the same goods to consumer can provide a basis which has a nexus with taxable event to provide a valid measure to which rate of tax can be applied?

Held-No, In the context of meaning assigned to expression 'sale of goods' or price or consideration element of such 'sale of goods' as taxable event, the conclusion that can fairly be reached is that for the taxing event of sale, if the price is to be the basis for measuring tax, it must relate to actual transaction of sale that become subject of tax and not to a different transaction that may take place in future at a price.

Whether the High Court of Rajasthan was legally justified in holding that Section 4A of the Rajasthan Sales Tax Act, 1994, to the extent that tax on first point sale of drugs, medicines or any formulation or for that matter any other commodity by a manufacturer/wholesaler / distributor to retailer where "Minimum Retail Price" (in short 'MRP') was published on package, measure to which rate of tax was to be applied could not be with reference to such published MRP which was neither charged nor chargeable by the wholesaler from the retailer whether the tax was charged on sale or on purchase by the parties to sale under Section 4A and the concerned Notification in this regard, was not sustainable ?

Held-Yes, By devising a methodology in the matter of levy of tax on sale of goods, law prohibits taxing of a transaction which is not a completed sale and also confine sale of goods to mean sale as defined under the Act. This cannot be overridden by devising a measure of tax which relates to an event which has not come into existence when tax is ex-hypothesi determined, much less which can be said a completed sale and which cannot be subject of legislation providing tax on 'sale of goods' by transplanting a sum related to as "likely price" to be charged for subsequent sale to be taxed by the devise of measuring tax for the completed transaction which has become subject of tax.

        The charging Section 4 stipulates that the tax payable by a dealer under the Act shall be at single point in the series of sales by successive dealers, as may be prescribed and shall be levied at such rates not exceeding fifty per cent on the taxable turnover, as may be notified by the State Government in the Official Gazette. This shows that there is no scope for multi point levy of tax and the tax is levied on the first point sale within the State in a series of sales and tax is leviable at rate applied to aggregate of price received or receivable by the dealer on such sales.

        Section 4A does not become workable unless read along with definition of "turnover" and "taxable turnover".

        When the wholesaler sells any formulation to a retailer in bulk quantity, taxable event of sale of goods takes place where wholesaler and retailers are the parties to contract, the goods in question are the formulations and the consideration is one which is agreed to between the parties to that transaction within the limits permissible by law. By substituting the assumed quantity of goods or a price which is not subject matter of that contract of completed sale for the purpose of measuring tax the legislature assumes existence of contract of sale of drugs by legal fiction which has not taken place and which cannot be considered to be a sale in the manner stated in the Sales Act, which alone can be subject of tax under Entry 54 in List II. Substitution of assumed price or the assumed quantity in place of actual price/quantity in a completed sale transaction, for the purpose of levy of tax on the subject matter of tax results in taking away from it the character of 'sale of goods' as envisaged under the Sales Act.

        Every transaction of sale is independent and can be subject to levy of tax and the components and the measure which can make the tax levy effective must have nexus with the taxable event.

Civil Appeal No. 4408 of 2001

M/s. Falcon Tyres Limited

vs.

State of Karnataka and Others

Whether rubber, in view of the judgment of the Apex Court in the case of M/s Karnataka Forest Development Corporation Ltd., Vs. Cantreads Pvt. Ltd. , 1994 (4) SCC 455, can be considered to be covered under the definition of the expression “ agricultural or horticultural produce” provided in Section 2(A) (1) of the Karnataka Tax on Entry of Goods Act, 1979 and exempt from levy of tax in view of the entry at Sl. No. 2 of the Second Schedule to the Act?

Held-No. Affirming the view expressed by the Karnataka High Court, the Hon'ble Apex Court has held as under:-

        “ In our opinion, the definition of the agriculture and horticulture produce does not say as to what would be included in the agriculture or horticulture produce, in substance it includes all agriculture or horticulture produce but excludes tea, coffee, rubber, cashew, cardamom, pepper and cotton from the definition of the agriculture or horticulture produce though all these products as per dictionary meaning or in common parlance would be understood as agricultural produce.

        From the reading of the definition under Section 2 (A) (1), it unequivocally emerges that rubber and few other items enumerated therein are excluded from being agricultural produce or horticulture produce. For all intent and purposes as far as the present Act is concerned, it is the definition given in the Act which will govern the expression 'agricultural produce'. While reading Entry 2 in the Second Schedule to the Act there is no scope to include rubber from being exempt from payment of entry tax. Entry 2 of Second Schedule creates exceptions regarding few of the excluded items from payment of Entry Tax but not all excluded items. The items for which an exception has been created in Entry 2 of the Second Schedule would only be exempt from payment of entry tax and not all the items, which have been excluded from being agricultural produce in the definition clause. While interpreting the provisions of present Act the legislative intention will have to be given effect to inconsonance with the definition as contained in the statute.

        In the definition clause of Section 2 (A) (1) rubber is excluded form the agricultural produce, sub-section (6) of Section 3 provides for exemption in respect of goods specified in the Second Schedule. At Sl. No. 2 of the Second Schedule, only tea, coffee and cotton (whether ginned or un-ginned) have been given exemption from payment of Entry Tax and not other items such as rubber, cashew, cardamom and pepper and such other agricultural produce which has been subjected to any process for making it fit for human consumption. Intention of the legislature is that though tea, coffee and cotton have been excluded in the definition clause from the agricultural produce but for the purposes of the Entry Tax Act tea, coffee and cotton are exempted from payment of Entry Tax. This is an exception created by the legislature. If the legislature intended to create exception for rubber also it could have done it but it chose not to do it. Simply because the legislature has included tea, coffee and cotton in the Second Schedule exempting it from payment of Entry Tax does not mean that all other agricultural produce items which have been excluded from the definition of the agricultural produce would stand included in the Second Schedule to the Act exempting them from payment of Entry Tax. This would be doing violation to the Act as well as acting contrary to the intent of the legislature.

        Learned counsel for the appellant relied upon Karnataka Forest Development Corporation Ltd. vs. Cantreads Private Limited and Others, 1994 (4) SCC 455, to contend that rubber is an agricultural produce. This was a case under the Karnataka Forest Act, 1963 for the purposes of levy of the Forest Development Tax. The meaning assigned to the agricultural produce in the present Act is different from what was assigned to it in the Karnataka Forest Act, 1963. The same is not relevant. Similarly, he cited two other judgments which are not germane to the point and need not even be noticed.

        The Legislature has deliberately excluded certain items from being agricultural produce and therefore while interpreting the provisions of the present Act, the legislative intention will have to be given effect to in consonance with the definition as contained in the statute.”

Civil Misc. Writ Petition No. 782 (Tax) of 2006

M/S K. Electric Works (P) Ltd., Kanpur Nagar

vs.

State of U.P. and Others

Date of Decision : 26th April, 2006

Whether, in view of the circular dated 13-11-2005 issued by the Commissioner, the assessing authority was legally justified in refusing to pass an order under section 8-D of the Act for making tax deduction at source at a rate which was lower than 4% where the petitioner (contractor) failed to establish that it had not included tax amount in the gross amount of the contract either at a rate of 4% or at a rate higher than 4%?

Held-No.

        Allowing the writ petition, the Hon'ble Court had held as under:-

        “While considering the above rival submissions we have also considered the fact that the tax deducted at source is not the final word. It is only a tentative deduction and at the time of filing return or assessment any excess tax paid or deducted at source is liable to be refunded. Similarly, any short fall in the tax paid or tax deducted at source is to be made good by the dealer upon a self-assessment. It is common knowledge that the process of refund from the government departments is a tedious and long drawn out process, where as collection of short falls in tax by the departments is comparatively an easier process. Further, collection of excess tax at the tentative stage of TDS is likely to block the business capital of the dealer.

        In view of the above, we are of the opinion that the better interpretation in such matter is not to place the burden upon the dealer but to leave it to the Assessing Authority to find out with the help of the material furnished by the contractor, either voluntarily, or upon the demand made by the Assessing Authority, about the extent of the tax liability passed on under the contract and also not to allow the Assessing Authority to refuse lower rate of TDS in cases where the composition has been allowed, unless the Assessing Authority is in a position upon the materials aforesaid to record a finding with the cogent reasons that the tax liability passed on under the work contract is 4% or higher.

        Now, where the work contract specifically and separately mentions the rate of trade tax the liability which is being passed on by the contractor, no difficulty would arise.

        But where the contract amount does not disclose separately the rate of trade tax passed on, we are of the view that it will be for the Assessing Authority to examine the contract and such other material as it may be entitled to call for from the dealer/contractor for determining as to whether the contractor has passed on trade tax burden at 4% or higher. If the material which becomes thus available with the Assessing Authority is sufficient for the Assessing Authority to record a cogent reasoned finding about the rate of tax liability passed on in the work contract in respect of the goods transferred under the same and the finding so recorded shows that the tax liability passed on is 4% or higher, only in such event, the Assessing Authority will be justified under Section 8-D of the Act in refusing reduced rate of TDS in accordance with the circular.

        However, if the Assessing Authority finds itself unable to record a positive and reasoned finding that the tax liability passed on under the work contract is 4% or higher, it would not be proper for the authority to reject the application seeking reduced rate of TDS on the ground that the contractor has not been able to establish that he is not passing on a tax liability of 4% or higher.”

Trade Tax Revision No. D-619 of 1999

M/s Asha Trading Corporation, Sawan Katra, Agra

vs.

Commissioner of Trade Tax, U.P., Lucknow

Whether the Assessing Authority was legally justified in levying penalty without issuing summons under Rule 75 to the transporter and purchaser of the goods when the transporter and the purchaser had not responded to the notices issued by the Assessing Authority and where the First Appellate Authority had remanded the case with the direction that order should be passed after making enquiry from the transporter and the purchaser?

Held-No.

        Allowing the revision by remanding the case to the assessing Authority, the Hon'ble Court had held as under:-

        In the opinion of the Court, once First Appellate Authority has remanded the matter to the Assessing Authority with a certain direction and the order of the First Appellate Authority having not being challenged by the department, the subordinate Assessing Authority is duty bound under law to act in strict adherence to the direction issued under the order of remand. If the transporter and purchaser had not responded to the notice sent by the Assessing Authority, he was under legal obligation to take recourse of Rule 75 of the Trade Tax Rules for enforcing their attendance. Such a recourse have not been adopted.

        In the opinion of the Court unless and until the Assessing Authority took steps for enforcing the attendance of the transporter and the purchaser, as contemplated by Rule 75, in the facts of the present case he was legally not justified in drawing an adverse inference against the Assessee, nor the order passed on remand can be said to be in strict compliance of the order of remand.

        In such circumstances, recourse having not been taken to the statutory provision for enforcing the attendance of the transporter and the purchaser, the order passed by the Assessing Authority stands vitiated. The order passed by the First Appellate Authority as well as Second Appellate Authority confirming the order of penalty without appreciating the aforesaid legal aspect of the matter are also rendered illegal.

Trade Tax Revision Nos. 76, 77, 78, 79 & 80 of 1999

M/s Indian Oil Corporation Ltd.

vs.

Commissioner of Trade Tax, U.P., Lucknow

Penalty-The Central Sales Tax Act, 1956-Section 10-A clause (b) –False representation that items being purchased were covered by registration certificate-Dealer engaged in the business of manufacture and whole sale and bulk distribution of all type of Petroleum products, lubricants and greases such as motor spirit, HSD, CDO Kerosene, lubricants, grease, furnace oil, liquefied petroleum gas (Indane), Naphtha, Aviation Turbine fuel, aviation gasoline, MTO Petroleum cape, waxes - Purchase of LPG Cylinder, Safety Boots, Wooden Sleeper, Mica Brick, Ladder, RCC Pipe, Kambal (Blanket), Vessels, Cement, Yarn, Trailer, Hospital Equipment, Transmitter, Fire Fighting Pump, Cement Paint, Film, G.I. Wireness, Seal, Brush, Rassi, Sticker, Aguigay, Puller Earth, Welding Pipe Fitting, Electrode, Aluminium, Bearing- Such items not mentioned in the registration certificate Dealer claiming purchases made under bonafide belief-No valid explanation.

Held-No, under the registration certificate empty packages is mentioned for resale and not for use in the manufacturing. Gas were sold filled in cylinder. Cylinders were never sold. It is not the case of the applicant that the gas has been sold along with cylinders. Thus cylinder was not resold. It is also not intended for use in the manufacturing because the filling of gas in the cylinder is after manufacturing of gas and is required for delivery of the manufactured goods and not for the manufacturing. It has also been stated by the Tribunal that in the registration certificate LPG Cylinder was added in the registration certificate. The dispute relates to the purchases of LPG cylinders prior to 12.08.1982 when the LPG cylinder was not mentioned in the registration certificate. For the aforesaid reasons, in my view the issue of Form C for the purchase of LPG cylinders prior to 12.08.1982 was not proper and the inference drawn by the authorities below that while issuing Form C for the purchase of LPG cylinder applicant had made false representation that it was registered for the said item, is correct.

Held-No, Safety Boot, Wooden Sleeper, Mica Brick, Ladder, R.C.C., Pipe, Kambal, Cement, Yarn, Trailer, Hospital Equipment, Transmitter, Fire Fighting Pump, Cement Paint, Film, G.I. Wireness, Seal, Brush were not intended for the use in the manufacturing and they have not been used in the manufacturing. They were not required in the manufacturing process directly or indirectly. Vessels is required for filling LPG tank, which is not part of the manufacturing process. Thus, it is also not required for use in the manufacturing. The claim that it is covered under steel plate cannot be accepted by any stretch of imagination.

        Thus, for the reasons stated above, the applicant while making the purchases and issuing Form C made false representation that it was registered in respect of the aforesaid goods under Central Sales Tax Act while fact was otherwise. In fact, the applicant was not entitled for the benefit of concessional rate of tax because goods were not intended for use in the manufacturing under Section 8 (3) (b) of the Act and Rule 13. Tribunal has rightly sustained the penalty under Section 10-A of the Act.

Trade Tax Revision No. 1008 of 2004

M/s Kapoor Fire Works, Narain Nagar, Mainpuri

vs.

Commissioner of Trade Tax

Whether the order passed by the assessing authority under section 7-D of the Act can be reviewed by the Commissioner under section 10-B of the Act?

Held-Yes, that the Division Bench of this Court in the case of M/s Kothari Contract Interiors vs. Trade Tax Officer, 2006 UPTC 74 has examined the scheme of the Trade Tax Act, with particular reference to Section 7-D of the said Act and has come to the conclusion that ample powers have been conferred on the authorities to take appropriate action when the order under Section 7-D is prejudicial to the interest of Revenue. It has observed that “besides power of rectification under Section 22 of the Act the power of revision under Section 10-B of the Act, is there”.

Whether the scheme of composition, announced by the Government for 1994-95 for small dealers whose turnover for 1993-94 did not exceed Rupees 5 lakhs and for the year 1994-95 their turnover did not exceed Rupees 7 lakhs, was not applicable in cases of dealers who were not registered dealers during 1993-94?

Held-No, It is axiomatic that the composition scheme on its fair reading does not stipulate that an applicant who wants to claim the benefit of the aforesaid scheme must necessarily be a registered dealer for the Assessment Year 1993-94. The mandate under the scheme is loud and clear. There is no stipulation that the said scheme would apply only to such dealers who were registered dealers in the year 1993-94. To this, the reply of the learned Standing Counsel is that this Court should on a fair reading of the scheme draw an inference that the applicant should necessarily be a registered dealer in the year 1993-94. It is difficult to agree with the aforesaid submission. The opening part of the scheme (which has been reproduced above) at least does not show any such thing even if one is permitted to read in between the lines. On the controversy, the scheme is meant for the benefit of small traders (Chhotey Vyapari). This word “Chhotey Vyapari” is sufficient indication of exclusion of big dealers. U.P. Trade Tax Act, like other Sales Tax Act, also provide basic exemption limit vide Section-3 of the Act. It was Rs. 1 Lakh in the case of manufacturer and Rs. 1.50 in the case of other dealers in the Assessment Year 1993-94. A dealer whose turnover is less than the minimum taxable limit or in other words within the basic exemption limit is not required to obtain registration under the Act. The argument that only such applicants who were registered dealers in the year 1993-94, if accepted, it would lead to an anomalous position. The dealers whose turnover was even below the basis exemption limit in the year 1993-94 would not be entitled to avail the benefit of the said scheme and such dealers whose turnover was over and above the basic exemption limit but below 5 lakhs inclusive of inter-State sales would be entitled to avail the benefit of the scheme, which does not appear to be the intention of the above scheme. The loud object of the scheme is to extend the benefits of hassle free assessment to small dealers irrespective of facts whether they were registered as dealer in the year 1993-94 or not.

        There is another way to look into the problem. Clause-2 of the scheme excludes certain category of dealers mentioned therein. It does not say so that a dealer who was not a registered dealer in the year 1993-94 would stand excluded. On the plain language and on harmonious constructions of the scheme, it is difficult to construe the scheme in the manner it has been construed by the authorities below and to hold that only registered dealer for the year 1993-94 is entitled to invoke the scheme. Registration as a dealer for year 1993-94 is not precondition, under the scheme. The Deputy Commissioner (Executive) as well as the Tribunal both have swayed away and tried to read condition of registration in the year 1993-94 as a precondition to qualify for entitlement to apply under the aforesaid scheme. There being no such stipulation in the scheme in question, the view taken by the authorities below on this point cannot find approval by this Court.

Whether the Deputy Commissioner (Executive) Trade Tax was legally justified in arriving at the conclusion that for the purpose of determining maximum turnover for assessment year 1994-95, in cases of dealers who had commenced business during 1994-95, provisions of section 18 of the Act were applicable?

Held-No, The title “assessment of reconstituted or new Firms, and change of partnership”, is itself suggestive of the situation embraced in Section 18 of the Act. This Section, as its heading discloses, has only a limited application. The section has been enacted for the purpose of assessment of reconstituted or new firms and change of partnership, during the course of an assessment year. It nowhere provides enhancement of turnover proportionally for the entire assessment year in question. This section should be read in the light of Section 3 of the Act for the purposes of determining the basis exemption limit of reconstituted or new firm for remainder period of the assessment year. Section 3 of the Act provides basic exemption limit for the entire assessment year. This section provides that by change in constitution in the partnership or opening of a new firm or reconstitution of a new firm would not in any way give an advantage to already existing dealers qua the basic exemption limit. If a new firm comes into existence in the course of an assessment year, for the purposes of determination of basic exemption limit, the basic exemption limit shall be proportionately reduced for the period the new firm carried on the business for the part of that assessment year. Section 18 does not provide that the turnover of a new firm which came into existence during the course of assessment year shall be proportionately enhanced and spread over for the entire assessment year. The Deputy Commissioner (Executive) by wrongly interpreting Section 18 (2) of the Act has assumed that the turnover of the applicant exceeds Rs. 7 lakhs as its disclosed turnover for the part of the assessment year if enhanced proportionately would be more than Rs. 7 lakhs. Further under Section 18 (2) of the Act an obligation has been cast on every dealer commencing business during the course of an assessment year to file return within 30 days of the month in which business commenced, if the turnover exceeds the specified limit therein. This section, by no stretch of imagination, can be interpreted to enhance the turnover of a new dealer by taking out the average monthly turnover and multiplying it by 12, as done by the Deputy Commissioner (Executive) in the present case. Reliance on Section 18 (2) placed by the Dy. Commissioner (Executive) to hold that the turnover of the applicant exceeds beyond Rs. 7 lakhs is misplaced one. The Trade Tax Officer, in each case, has found as a fact that the turnover of each applicant is less than Rs. 7 lakhs. The Deputy Commissioner (Executive) has tried to overcome this finding with the help of section 18 (2) of the Act. As demonstrated above, Section 18 (2), in my considered view is not at all applicable and cannot be pressed into service.

        In nutshell this Court is of the view that registration for the Assessment Year 1993-94 was not a precondition to invoke the benefit of the scheme in question and for the purposes of determining the maximum limit of Rs. 7 lakhs, provisions of Section 18 of the Act cannot be pressed into service. The Deputy Commissioner (Executive) as well as the Tribunal both have committed legal error in holding otherwise and their orders being indefensible are hereby set aside.

Trade Tax Revision No. 759 of 1998

Commissioner of Trade Tax, U.P., Lucknow

vs.

S/s Durga Form Product Ltd., Sudhiya – Kunwa, Gorakhpur

Date of Decision : 23rd September, 2005

Whether the Trade Tax Tribunal was legally justified in holding that the balanced cattle feed is exempt in view of the notification No.3714 dated 5.6.1985?

Held-Yes.

        The Hon'ble Court has upheld the decision of the Tribunal with following observations:-

"A learned Single Judge in the case of Ram Chandra Asha Ram vs. Commissioner of Sales Tax 1996 U.P. Tax Cases 1328 interpreted the aforesaid entry and held that the items referred in the entry of cattle fodder are by way of illustration. Any thing that is called cattle fodder in the general or trade sense of the word has to be treated as such unless it comes within the excluded items namely oil cake, rice polish, rice bran or rice husk. The definition is only illustrative and excludes certain specific items and includes certain items by way of illustration. Therefore, a thing which is admitted to be cattle fodder and is not within the excluded item has to be treated as cattle fodder by virtue of the aforesaid notification, no tax can be levied.

        The above judgment has been approved by the Apex Court in Commissioner of Sales Tax, U.P. vs. M/s Ram Chandra Asha Ram 2000 UPTC 636. The Supreme Court has held as follows: -

        “What is exempted under the notification of 5th June, 1985 is cattle fodder. In generic sense the expression “cattle fodder” is inclusive of everything that is fed to cattle including damaged wheat. In the decision relied on by the learned Counsel for the appellant this aspect is noticed but in the particular case fodder was defined as “fodder except cotton seed and oil cakes”. In the present case there is no such exclusion of the damaged wheat that is processed and used as for the cattle. If that is so, we do not think that there is any justification to interfere with the view taken by the High Court.”

        In the present case, as pointed out above it was not disputed even by the Assessing Authority, that the items sold by the dealer are fed to cattles. The ingredients of the product in question do not include the excluded items, specifically excluded in the above notification relating to cattle fodder. In this fact situation there is no illegality in the order of the Tribunal holding the product as cattle fodder and granting exemption under the aforesaid notification dated 5th of June, 1985.

        This view is further fortified by the fact that subsequently above entry relating to the cattle fodder has been amended by the State Government by specifically excluding the balanced cattle feed from the entry of cattle fodder.

        It may be pointed out that the notification dated 5.6.1985 was subsequently amended by the notification No. 1381 dated 6th of June, 1996 and as the result of the aforesaid amendment, the balanced poultry feed, cattle feed or fish feed has been excluded from cattle fodder. The present controversy is being decided on the basis of the notification dated 5th of June, 1985 which was in operation upto 5th of June, 1996."

Trade Tax Revision No. 219 of 2006

Tata Iron & Steel Company Limited, 16/97, The Mall, Kanpur

vs.

Commissioner of Trade Tax, U.P., Lucknow

Date of Decision : 03rd April, 2006

Whether the Trade Tax Tribunal was legally justified in remanding the case to the assessing authority when there was sufficient material on records to decide the case on merits?

Held-No.

        Allowing the revision filed by the assessee, the Hon'ble Court has observed and held as under:-

        “ This Court in the case of Nehru Steel Rolling Mills vs. Commissioner of Sales Tax (supra) has held as follows:

        “In my opinion a remand order should not be readily made, and it should only be made when for very strong reasons the authority cannot itself dispose of the matter on merits. It seems that these remand orders were made by the authorities merely to get rid of the case so that the authority could avoid going into the matter deeply and deciding the issue once and for all. This kind of attitude is to be deprecated. In business it is necessary that a businessman should know where he stands so that he can arrange his financial matters accordingly. Judicial decisions in cases of businessmen must be rendered quickly so that the businessman can know the correct position and act accordingly. A businessman should not be kept on tenterhooks in the matter as has been done in this case, otherwise the time and skill which he would apply for developing his business will have to be diverted to looking after judicial matters. This will be against the interest of the nation which requires encouragement and development of business and industry.”

        Judged on the touchstone of the principle laid down in the aforesaid judgment of this Court and further in view of the Section 3-B of the U.P. Trade Tax Act, this Court is satisfied that the material which was available on record before the Tribunal itself was sufficient to determine the tax liability of the Assessee finally on merit and no purpose would be served by remanding the matter before the Assessing Authority, as has been done in the facts of the present case.”

       In view of the aforesaid, the revision filed by the Assessee is allowed. The order passed by the Tribunal dated 20.1.2006, to the extent it remands the matter, is hereby quashed.

Civil Misc. Writ Petition No. 888/2006

M/s International Hospital Limited, NOIDA

vs.

State of U.P. and Others

Date of Decision : 17th May, 2006

Whether the Assessing Authority, while making the provisional assessments, was legally justified in treating consumption and use of items by the hospitals in various health care packages of lump-sum amounts as sale of those items?

Allowing the writ petition, the Hon'ble Court has observed and held as under:-

        “Reliance has been placed by the petitioner upon para 44 of the decision of the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. and Another vs. Union of India and Others, reported in (2006) 3 SCC, 1. Para 44 reads as follows:

        “Of all the different kinds of composite transactions the drafters of the Forty-sixth Amendment chose three specific situations, a works contract, a hire-purchase contract and a catering contract to bring them within the fiction of a deemed sale. Of these three, the first and third involve a kind of service and sale at the same time. Apart from these two cases where splitting of the service and supply has been constitutionally permitted in sub-clause (b) and (f) of Clause (29-A) of Article 366, there is no other service which has been permitted to be so split. For example, the sub-clauses of Article 366 (29-A) do not cover hospital services. Therefore, if during the treatment of a patient in a hospital, he or she is given a pill, can the Sales Tax Authorities tax the transaction as a sale? Doctors , lawyers and other professionals render service in the course of which cant it be said that there is a sale of goods when a doctor writes out and hands over a prescription or a lawyer drafts a document and delivers it to his/her client? Strictly speaking, with the payment of fees, consideration does pass from the patient or client to the doctor or lawyer for the documents in both cases.”

        The provisional assessment orders do not appear to have taken the aforesaid law laid down by the Apex Court into consideration.

        It has been submitted by learned Counsel for the petitioner that the petitioner has maintained the records of medicines, which have been directly issued from the store to the operation theatre for being administered to the admitted patients. These accounts are not referred in the impugned provisional assessment orders. The Assessing Authority had the power to call for and examine the records and to believe or disbelieve the same for the cogent reasons. It is not possible for this Court to embark upon such enquiry of examining these documents.

        However, considering the fact that these are only provisional assessment orders for the Assessment Year 2005-06 and that 31st March, 2006 has already gone, we consider it appropriate to set aside these provisional assessment orders directing the Assessing Authority to pass final assessment orders after examining the relevant accounts or records.”