Hindon River Mills Limited vs Commissioner of Trade Tax

Vikram Nath, J.—Heard Sri Shubham Agarwal, learned Counsel for the revisionist and Sri B.K. Pandey, learned Standing Counsel appearing for the department.

The dispute relates to the assessment year 1998-99 (Central). The questions of law sought to be raised in the revisions are as follows:

Whether the Tribunal was justified in redetermining/rectifying the rate of tax on Central sales of cotton yarn u/s 22 of the Act, which is debatable question and involved change of mind?

Whether the Tribunal was justified in not accepting/granting benefit of form C, filed before the first appellate authority along with Section 12B application and denying the concessional rate of tax of two per cent on the sale of cotton yarn covered by C form?

Whether the Tribunal was justified in upholding the order dated June 29, 2002, passed by the assessing authority u/s 22 of the Act, which is outside the purview of the power vested u/s 22 of the Act?

Whether the Tribunal was justified in confirming levy of interest when the applicant was bona fidely disputing the rate of tax and had filed C forms before the first appellate authority?

The applicant is involved in the business of manufacturing of cotton yarn, synthetic yarn and fabrics. It is registered under the U.P. Trade Tax Act, 1948 and the Central Sales Tax Act, 1956.

Sri Shubham Agarwal, the learned Counsel for the applicant, has at the outset stated that he will press only question No. 2 relating to rejection of his application u/s 12B of the U.P. Trade Tax Act, whereby 12 form C submitted by it at the first appellate stage were not accepted. The result of rejection of the said application is that the tax liability on the amount of sales covered by the said form C would be taxable at the rate of four per cent; otherwise if the application was allowed and the 12 form C submitted by it had been accepted, the tax would be charged at the rate of two per cent. All the other questions framed in the memo of the revision are not being pressed.

Apart from other sales the applicant had made inter-State sales amounting to Rs. 58,73,355 which, according to it, were covered by declaration in form C issued by the purchaser. Such declaration under form C could not be received in time before the assessing officer and further as the assessing officer had initially applied tax at the rate of two per cent only, which would otherwise also be the liability in case form C had been submitted. Therefore, the applicant had not been seriously concerned with the filing of the said form C. Subsequently in proceeding u/s 22 of the Act, the rate of tax was sought to be enhanced by the assessing officer from two per cent to four per cent and therefore, the applicant became more active and diligent in getting those forms from the purchasers.

However, as form C could not be received till the time assessment order had been made, they were filed along with application u/s 12B of the Act during the pendency of the appeal.

The appellate authority took a pedantic approach in the matter that the pre-requisite for entertaining/allowing application u/s 12B of the Act was missing and therefore, rejected the same. An appeal was filed before the Tribunal which has also been dismissed by the impugned order.

The learned Counsel for the applicant submitted that the authorities below ought to have allowed the application u/s 12B of the Act and form C submitted by it ought to have been accepted and the benefit available to it with regard to applicability of rate of tax should have been allowed.

On the other hand, the learned Standing Counsel has submitted that from the perusal of the application u/s 12B of the Act, the ingredients had not been made out and therefore the application was rightly rejected.

The learned Counsel for the applicant has sought to rely upon certain decisions in support of his contention that the dealer should not be denied opportunity and secondly, that if the tax liability could be reduced in accordance with law and under law dealer is not required to pay tax at higher rate, a liberal approach should be adopted.

Heaving considered the submissions of the learned Counsel for the parties, in my opinion, where the department had earlier applied the rate of two per cent and subsequently sought to enhance it to four per cent in proceedings u/s 22 of the Act and at the stage of appeal the dealer submitted declaration in form C on the ground that it was not available with it at the time of assessment order and sufficient opportunity had not been given to it, the application u/s 12B of the Act ought to have been accepted, as the law does not permit unnecessary taxation and permits taxation only in accordance with law.

In the facts and circumstances of this case and in view of the discussion made above, the dismissal of the appeal to this limited extent cannot be sustained and is liable to be set aside.

The order dated May 19, 2006 passed by the Tribunal confirming the rejection of application u/s 12B of the Act is set aside and matter is remanded back to the Tribunal for passing appropriate orders taking into consideration the effect of 12 form C subject to verification in accordance with law. Rest of the findings of the Tribunal remain intact.

Revision application is allowed as above. There shall however be no order as to costs.