Hira Singh Sobti Contracts Ltd. vs Commissioner, Commercial Tax

K.M. Joseph, C.J.

These Revisions, two in number, raise common questions. Hence, we are disposing of the same by this common judgment.

Revisionist is a registered dealer under the U.P. Trade Tax Act. He is a work contractor. The Revisions relate to the Assessment Years 2000-2001 and 2001-2002. Earlier, apparently, under Section 7D of the Act, the Circular provided for composition of trade tax if the contractor pays the amount representing one per cent of the total contract receipts. This is, however, subject to the condition that, if, in any year, the inter-state purchase of raw material exceeded five per cent of the total contract amount, then, in respect of the amount in excess of that 5 per cent, the assessee would have to pay tax by filing return on the entire amount. There is no dispute that, during the Assessment Years 2000-2001 and 2001-2002, as it turned out, the inter-state purchase of the revisionist exceeded five per cent of the contract amount. However, it so happened that the Circular was amended by Notification dated 28.10.2003. Therein, it essentially provided that, if the import of raw material goes more than five per cent of the contract amount, then, such contractor will have an option to deposit three per cent composition fee instead of one per cent and, in that situation, the tax assessment provision will not be applicable. The assessment proceedings were completed by the Assessing Officer by giving the benefit of the amended composition fee scheme, by which the revisionist paid a total of three per cent, including one per cent already paid. The revisionist was called upon to deposit the amount at the rate of three per cent, as he had opted for the same. Over and above the same, the Assessing Officer also directed him to deposit interest for the period with retrospective effect on monthly basis.

The revisionist carried the matter in first appeal. In the first appeal, the first appellate authority took the view that the revisionist will be liable to pay interest only after 28.10.2003.

The Revenue filed an appeal before the Tribunal. The Tribunal reversed the order of the first appellate authority and restored the order of the Assessing Officer. It is feeling aggrieved by the same that the revisionist is before us.

The following substantial questions of law have been raised:

"a) Whether the Trade Tax Tribunal and the Assessing Authority can impose interest on remaining tax of 2% out of 3% of tax for the period before 28.10.2003, when the provision of 3% tax came into existence on 28.10.2003 and the revisionist has deposited 1% tax as per the earlier Samadhan Yojna?

b) Whether the revisionist can be directed to pay interest on remaining tax of 2%, when the Circular dated 28.10.2003 bringing the provision of tax of 3% came in existence on 28.10.2003 and mainly when the said Circular does not speaks of charging interest for the period prior to 28.10.2003?

c) Whether the Trade Tax Tribunal and the Assessing Authority can be said to be justified in imposing interest on remaining tax of 2% saying that the same was not deposited, when actually the tax of 3% came into existence on 28.10.2003 and thus could not have been presumed to have come into force by any assessee?

c) Whether interest can be imposed on tax for a period, on which it was not in existence?

d) Whether the assessee can be said to be at fault when the State Government had decided the representation of the companies and the Association after about 2 years, when the Association had told the State Government about the non-availability of the raw materials in the State of Uttarakhand?

We have heard the learned counsel for the revisionist and the learned Brief Holder for the State.

We have already referred to the amendment brought about on 28.10.2003. Initially, the composition fee consisted of one per cent of the total contract amount; the only restriction was that the contractor could not avail of the composition fee of one per cent and had to pay the tax as provided under the Act, if the inter-state purchase of raw material exceeded five per cent of the contract amount. There is no dispute that it exceeded five per cent. If things stood so and there were no further development, the revisionist would become liable under the original Circular to be taxed in terms of the said provision; but, there is a subsequent development in the form of an amendment, which is sought to be traced under Section 7D of the Act, which provided for composition fee being paid and, as per the said provision, which came out on 28.10.2003, with retrospective effect and, as far as these cases are concerned, covering the assessment years in question, if three per cent is paid in place of one per cent, the regular provision of the assessment would not be applicable, if the inter-state purchase exceeded more than five per cent of the contract amount. Therefore, even if the inter-state purchase of the raw material made by the revisionist exceeded five per cent, if the revisionist exercised the option to pay three per cent composition fee, then, that would put an end his tax liability for the period. Without there being tax liability, there cannot be a question of levying interest. Therefore, in place of the tax, which he would have had to pay under the earlier scheme, in view of his inter-state purchase having exceeded five per cent, as he had opted to pay three per cent and which he could possibly do only after 28.10.2003, it cannot be mulcted with interest for the period prior to 28.10.2003.

In such circumstances, we would think that the Tribunal has not correctly appreciated the effect of the order dated 28.10.2003. The Tribunal, in fact, found that the order dated 28.10.2003 is retrospective and, therefore, the terms of the order dated 28.10.2003 must be given full effect. We would think that the first appellate authority has correctly understood the legal position. It is also relevant to mention here that the Circular dated 28.10.2003 does not provide for payment of interest for the period prior to its date.

Accordingly, we answer the substantial questions of law Nos. (a) & (b) in favour of the revisionist. The order of the Tribunal will stand set aside. We restore the order passed by the first appellate authority. Revisionist has a case that he has paid the interest as ordered by the Assessing Officer. If it is so, it is open for the revisionist to file an appropriate application for seeking refund and it will be dealt with in accordance with law.

The Revisions are allowed as above. No order as to costs.