Dayalji Industries vs Commissioner, Commercial Tax, U.P., Lucknow

Bharati Sapru, J.—As the controversy involved in these six revisions is identical, the matter is being decided by this Court by a common judgment and order treating the Commercial Tax Revision No. 819 of 2010 as the leading case. This revision has been filed by the assessee u/s 58 of the U. P. Value Added Tax Act against the order of the Commercial Tax Tribunal, Bench I, Agra, dated September 14, 2010 for the assessment year 2005-06. The questions of law sought to be answered are hereunder :

(1) Whether in view of the Notification No. 1307 dated April 28, 2005 since full rebate was allowed by the assessing authority in the assessment order dated October 6, 2007 of trade tax on account of entry tax having been paid at the full rate of five per cent, hence no State development tax can be legally levied in view of clause (iii) of Notification No. 1307 dated April 28, 2005 ?

(2) Whether the assessing authority in the assessment order dated October 6, 2007 having allowed the trade tax rebate to the full extent on the entire sale of kraft paper and no trade tax was levied on the sale of kraft paper hence in view of the Notification No. 1307 dated April 28, 2005 no State development tax was payable and the Tribunal has committed an error of law in upholding the order of the authorities below requiring all the four sub-clauses of the notification to be fulfilled together ?

(3) Whether the assessing authority having held that the kraft paper was sold to the manufacturer holding the recognition certificate u/s 4B of the U. P. Trade Tax Act and the time was also given for furnishing the form III B no State development tax was payable by the applicant in view of sub-clause (i) of Notification No. 1307 dated April 28, 2005 and the Tribunal has committed an error of law in upholding the levy of State development tax on the ground that after each clauses (i) to (iv) the word ''or'' has not been used ?

(4) Whether in view of section 3H(4)(d) of the U. P. Trade Tax Act it is only the goods alone which is required to be specified in the notification in respect of which the State development tax shall not be payable ?

(5) Whether the goods which have been specified in the notification dated April 28, 2005, in respect of which no State development tax is payable having been classified in four clauses which are independent to each other hence the view of the Tribunal to the contrary is erroneous in law ?

(6) Whether in any view of the matter the applicant is not liable for payment of any State development tax hence the view of the Tribunal is erroneous in law ?

The facts of the case are that the assessee is a manufacturer and a seller of kraft paper. For the assessment year 2005-06 an order of assessment was passed by the assessing authority by which he accepted the account books of the assessee as well as the disclosed turnover.

The kraft paper, which is manufactured by the assessee is notified to be taxable at the rate of five per cent, u/s 3A of the U. P. Trade Tax Act. The relevant notification is Notification No. 730 dated March 7, 2005 issued u/s 3A(1) of the U. P. Trade Tax Act. Another notification was issued u/s 4(1) of the U. P. Tax on Entry of Goods Act, 2000 on February 10, 2005 by which it was provided that entry tax shall be payable on the papers meant for packing excluding news print at the rate of five per cent of the value of goods.

Thus, in view of the said notification the assessee kept on depositing tax at the rate of five per cent of kraft paper.

Other than these two notifications the State of U. P. also issued a notification on March 7, 2005 u/s 5 of the U. P. Trade Tax Act providing rebate to the extent of amount of tax paid under the U. P. Tax on Entry of Goods Act, 2000. Thus, the assessing authority also recorded a finding that the assessee had deposited the entire entry tax at the full rate but did not admit any liability for payment of State development tax u/s 3H of the U. P. Trade Tax Act.

Thus, it was the assessee''s case that the assessee was not liable to pay any State development tax u/s 3H of the Act especially in view of the notification dated April 28, 2005 issued by the State Government. The notification dated April 28, 2005 is quoted hereinbelow :

KA. NI.-2-1307/XI-9(81)/91-U.P. Act-15-48-Order-(23)-2005 Lucknow : Dated : April 28, 2005

In exercise of the powers under clause (d) of sub-section (4) of section 3H of the Uttar Pradesh Trade Tax Act, 1948 (U. P. Act No. 15 of 1948), the Governor is pleased to specify that the State development tax shall not be leviable on the goods--

(i) Which are sold to or purchased by manufacturers holding recognition certificate u/s 4B;

(ii) on which general rate of trade tax u/s 3A or section 3D is two per cent or below two per cent;

(iii) on which trade tax rebate is allowed to the full extent;

(iv) on which exemptions are granted u/s 4C.

This claim of the assessee that it is not liable to pay the State development tax in view of section 3H(4) (d) of the notification dated April 28, 2005 issued under it has been rejected by the Tribunal as well as the lower authorities.

I have heard Learned Counsels on both sides and also perused the order of the Tribunal.

The only ground taken by the Tribunal for rejecting the revisionist''s claim is because of four conditions in the notification dated April 28, 2005 have not been satisfied. The Tribunal has come to the conclusion that the words "and" "or" were to be read in between and all the four conditions were satisfied.

Having examined the notification I find that the conclusion drawn by the Tribunal is completely misplaced. Each and every clause of the notification refers to a separate category of commodity and can stand on its own. The Tribunal has wrongly come to the conclusion that one condition is connected to the other, that cannot be the case because every clause refers to specify benefits under specific sections and gives specific relief. The case of the assessee is covered under clause (iii) of the said notification, as his case was a payment of rebate being allowed to the full extent at the rate of five per cent. This was allowed to him for having paid entry tax at the rate of five per cent. Because the assessee had paid entry tax at the rate of five per cent he was given the benefit of not having to pay the State development tax. The other clauses are not connected with the rebate factor at all.

Thus, in view of the above, I am of the opinion that the Tribunal has come to a wrong conclusion with regard to the claim made by the assessee. The claim made by the assessee u/s 3H(4)(d) should have been allowed. The order of the Tribunal is, therefore, set aside. Necessary orders may be passed by the competent authority to allow the claim in favour of the assessee. All these revisions are allowed.