Shyam Biri Works Ltd. vs Commissioner of Trade Tax

Arun Tandon, J.—This trade tax revision filed by the assessee is directed against the order of the Tribunal dated December 8, 2005 passed in Second Appeal No. 221/2003 assessment year 1997-98 in proceedings initiated u/s 3B of the U.P. Trade Tax Act. Heard Sri Bharat Ji Agrawal learned senior advocate assisted by Sri R.R. Agarwal, advocate counsel for the assessee and Sri B.K. Pandey standing counsel on behalf of the Department.

The facts in short giving rise to the present revision are as follows:

The assessee before this court was granted exemption certificate u/s 4B(2) of the Trade Tax Act. Tendu patta subject-matter of controversy is a raw material to be used by the assessee for manufacture of bidi. With reference to the exemption granted u/s 4B(2) read with rule 25B(1) of the U.P. Trade Tax Rules, 1948, the assessee issued a declaration in form IIIB in the prescribed pro forma. On that basis he claimed concessional rate of tax on purchase of tendu patta, i.e., at 2.5 per cent.

The assessing authority initiated proceedings u/s 3B of the Trade Tax Act vide notice dated March 7, 2001, against the assessee on the ground that the declaration in form IIIB had been falsely issued inasmuch as the tendu patta covered by the said declaration had been used for manufacture of bidi at a unit situate outside the State of Uttar Pradesh for which no exemption certificate u/s 4B has been granted in favour of the assessee.

The assessee responded to the notice and in reply submitted that no wrong or false declaration was given in form IIIB. Tendu patta purchased was although used as raw material for manufacture of bidi at a unit outside Uttar Pradesh but the manufactured bidi was sold within the State of Uttar Pradesh. There has been no breach of the provision of section 4B(2) of the Act and therefore the proceedings u/s 3B of the Act were bad.

The assessing authority vide order dated April 10, 2011 did not agree with the explanation furnished by the assessee and held that the assessee had given a wrong declaration in form IIIB. He was not entitled to concessional rate of tax on the raw material. Differential amount of tax to the tune of Rs. 1,09,88,551 was therefore demanded which the assessee deposited under protest.

The assessee filed an appeal against the said order and the first appellate authority vide order dated December 15, 2001 allowed the appeal. It was held that since bidi manufactured from the tendu patta (raw material) has been sold within the State of Uttar Pradesh, the matter did require fresh enquiry in view of the judgment of the apex court in the case of Polestar Electronic (Pvt.) Ltd. Vs. Additional Commissioner, Sales Tax and Another, 6. Accordingly, it remanded the matter to the assessing authority.

Against the order of remand, Second Appeal No. 59 of 2002 was filed, which was dismissed by the Tribunal on July 28, 2003. Trade Tax Revision No. 1300 of 2003 has been filed, which has been dismissed today as infructuous by this court on a statement made by the counsel for the assessee.

However, after remand, fresh notices were issued to the assessee by the assessing authority culminating in an order dated December 12, 2002. The assessee filed First Appeal No. 89 of 2003, which was dismissed vide order dated 2nd August, 2003. Not being satisfied with order so passed, the assessee filed Second Appeal No. 221 of 2003 which has been dismissed under order dated December 8, 2005. Hence, the present trade tax revision.

In order to keep the record straight it may be recorded that the assessee deposited the difference of the tax vis-a-vis the concessional rate under protest during the pendency of the proceedings u/s 3B of the Act.

According to the assessee the proceedings initiated u/s 3B were wholly misconceived. There is no obligation upon the assessee to have disclosed that the raw material qua which declaration in form IIIB was being issued is to be used for a manufacturing unit within the State of Uttar Pradesh itself. He submits that the raw material was in fact used for manufacture of bidi at the unit situate outside the State of Uttar Pradesh. The bidi so manufactured was sold within the Uttar Pradesh. He, therefore, submits that declaration issued in form IIIB was true and correct as the assessee had sold the manufactured bidi from the raw material in terms of form IIIB. He clarifies that it is neither required nor necessary under form IIIB that the raw material should be used for manufacture at a unit within the State of Uttar Pradesh. The only obligation is that manufactured goods should be sold within the State of Uttar Pradesh qua which there is no dispute.

Heavy reliance has been placed upon the honourable apex court decision in Polestar Electronic (Pvt.) Ltd. Vs. Additional Commissioner, Sales Tax and Another, 6, specifically paragraph 18. An effort was made in view of the aforesaid upon the court that the facts of the present case are squarely covered by the decision laid down by the Supreme Court in respect of the transaction which has taken place in the State of Delhi prior to issuance of the amendment of rule 26 of the Delhi Sales Tax Rules with effect from March 29, 1973 and therefore since under the declaration form in form IIIB it was not necessary for the assessee to have disclosed that the raw material will be used for manufacturing at a unit situate outside the State of Uttar Pradesh. The court held through declaration form subject-matter of consideration in Polestar Electronic (Pvt.) Ltd. Vs. Additional Commissioner, Sales Tax and Another, the relevant period and the conclusion by the Supreme Court with reference thereto in paragraph 18 of the judgment.

Sri B.K. Pandey counsel for the Department in support of the order of the Tribunal submits that the provisions of the Delhi Trade Tax Act which were subject-matter of consideration in Polestar Electronic (Pvt.) Ltd. Vs. Additional Commissioner, Sales Tax and Another, , were different from the provisions of the U.P. Trade Tax Act which were applicable in the present case. He submits that the declaration in form IIIB can be issued by a person having a recognition u/s 4B(2) only for claiming benefit of reduced tax on the raw material purchased. Section 4B(2) in itself contemplates that manufacturing activity has to be done within the State of Uttar Pradesh. It is in respect of raw material to be used at a unit covered by certificate u/s 4B situate within the State of Uttar Pradesh that form IIIB could be issued. He clarifies that in the State of Uttar Pradesh the declaration in the prescribed form IIIB contains a specified recital qua manufactured commodities within the State. This necessarily implies that not only the sale of the manufactured goods is to take place within the State the manufacturing activity has also to be carried out in the State itself. He submits that from a reading of the declaration form along with section 4B read with section 3B and rule 25B(1) would lead to only one conclusion in the fact of the case that raw material covered by form IIIB has to be used for manufacture in a unit situate in the State of Uttar Pradesh and thereafter to be sold within State. If the assessee at the time of purchase of the raw material was aware that he was not going to use the same at a unit in Uttar Pradesh qua which had the certificate u/s 4B he did not have a right to issue a declaration in form IIIB as such declaration can be given by a manufacturer having a certificate u/s 4B qua that situate in State of Uttar Pradesh. He further submits that the judgment of the Supreme Court in the case of Polestar Electronic (Pvt.) Ltd. Vs. Additional Commissioner, Sales Tax and Another, is clearly distinguishable having regard to the provisions and declaration contemplated by form IIIB.

I have heard counsel for the parties and have examined the records.

It would be worthwhile to reproduce section 4B(2) of the U.P. Trade Tax Act, 1948, which reads as follows:

(2) Where a dealer requires any goods, referred to in sub-section (1) for use in the manufacture by him, in the State of any notified goods, or in the packing of such notified goods manufactured or processed by him, and such notified goods are intended to be sold by him in the State or in the course of inter-State trade or commerce or in the course of export out of India, he may apply to the assessing authority in such form and manner and within such period as may be prescribed, for the grant of a recognition certificate in respect thereof, and if the applicant satisfies such requirements including requirement of depositing late fee and conditions as may be prescribed, the assessing authority shall grant to him in respect of such goods a recognition certificate in such form and subject to such conditions, as may be prescribed.

Explanation.--For the purposes of this sub-section--

(a) goods required for use in the manufacture shall mean raw materials, processing materials, machinery, plant, equipment, consumable stores, spare parts, accessories, components, sub-assemblies, fuels or lubricants; and

(b) ''notified goods'' means such goods as may, from time to time, be notified by the State Government in that behalf.

Form IIIB relevant for the purpose is to be issued as per rule 25B of the Trade Tax Rules and reads as follows:

25B. Authority from which declaration forms may be obtained; use, custody and maintenance of records of such forms and matters incidental thereto.--(1) Where a dealer holding a recognition certificate purchases any goods referred to in clause (b) of sub-section (1) of section 4B, for use as raw material for the purpose of manufacture of any notified goods, he shall, if he wishes to avail of the concession referred to therein, furnish to the selling dealer a certificate inform IIIB (hereinafter called a "Declaration Form").

For ready reference form IIIB, i.e., the declaration form to be issued for availing of the benefits of concessional rate of tax is also being reproduced hereinunder:

Form IIIB

To be given by the purchasing dealer holding a certificate of recognition to the selling dealer who may claim exemption from the tax or the concessional rate of tax as the case may be, under sub-section (1) of section 4B of the U.P. Trade Tax Act, 1948.

Office of issue..............

Date of issue..............

Name of purchasing dealer to whom issued along with his recognition certificate

No...............

date from which recognition certificate is valid..............

Seal of Issuing Authority

To

(Seller)...........

Certified that the goods specified below ordered for in my/our purchase order No......dated........purchased from you as per bill/cash memo No.........dated.......supplied under challan/invoice No...........dated...........are for use as raw material in the manufacture of goods notified under Notification No..........dated..........and that the said manufactured goods would be sold in the manner contemplated in sub-section (2) of section 4B.

Certified that I hold the recognition certificate No...........issued to me/us by the Trade Tax Officer..........circle No..........dated..........and which is effective from...........Certified that I/we carry on business at..........(full address) under the name and style of...........

Details of goods purchased....................

Name Quantity/Weight Value (Rs.)

Date and Signature and Status...................

Place of the person signing the certificate..........

(Note.--To be retained by the purchasing dealer).

On harmonious reading of the aforesaid provisions this court has no hesitation to hold that a person holding a certification u/s 4B of the Act alone is entitled to apply for a declaration form IIIB under rule 25B(1) of the U.P. Trade Tax Rules, What follows from the aforesaid provisions is that a manufacturer having exemption certificate u/s 4B in respect of the manufacturing unit situate within the State of Uttar Pradesh alone can avail of the concessional rate of tax by availing of the declaration form under rule 25B in form IIIB. Use of raw material so purchased under declaration form IIIB for manufacturing at the unit covered by exemption certificate u/s 4B is therefore a condition precedent for declaration to be issued in form IIIB. If the assessee at the time of purchase of raw material is aware that such raw material is not to be used in a unit covered by 4B situate within the State of Uttar Pradesh he has no right to use and issue declaration in form IIIB.

Reference may also be made to section 3B of the Act which provides for the liability for issuing false or wrong certificates. The same is quoted below:

3B. Liability on issuing false certificates, etc.--Notwithstanding anything to the contrary contained elsewhere in this Act and without prejudice to the provisions of sections 14 and 15A, a person, who issues a false or wrong certificate or declaration, prescribed under any provision of this Act or the Rules framed thereunder, to another persons by reason of which a tax leviable under this Act on the transaction of purchase or sale made with or by such other person ceases to be leviable or becomes leviable at the concessional rate, shall be liable to pay on such transaction an amount which would have been payable as tax on such transaction, had such certificate or declaration not been issued:

Provided that before taking any action under this section the person concerned shall be given an opportunity of being heard.

Explanation.--Where a person issuing a certificate or declaration discloses therein his intention to use the goods purchased by him for such purposes as will make the tax not leviable or leviable at a concessional rate but uses the same for the purpose other than such purpose, the certificate or declaration shall, for the purpose of this section, be deemed to be wrong.

In the facts of the case it is admitted position that the assessee at the time of issuing declaration in form IIIB for purchase of the raw material was aware that the tendu patta subject-matter of purchase was to be used for manufacture of bidi in a unit situate outside the State of Uttar Pradesh qua which he had no certificate u/s 4B of the Act. The assessee had purchased the raw material for a unit situate outside the State of Uttar Pradesh qua which he had no certificate u/s 4B(2) and consequently could not avail of the facility of concessional rate of tax. Therefore declaration issued by him was false.

On behalf of the assessee reliance was placed upon the law as laid down in the case of Polestar Electronic (Pvt.) Ltd. Vs. Additional Commissioner, Sales Tax and Another, , with reference to the statutory provisions which were applicable in the Delhi prior to March 29, 1973. It is contended before this court that the case of the assessee was squarely covered by the law as explained by the apex court in respect of period prior to March 29, 1973 in the case of Polestar Electronic (Pvt.) Ltd. Vs. Additional Commissioner, Sales Tax and Another, .

The declaration which was subject-matter before the Supreme Court in the case of Polestar Electronic (Pvt.) Ltd. Vs. Additional Commissioner, Sales Tax and Another, , for the relevant period reads as follows (page 431 in 41 STC):

. . . But the form of the declaration to be given by the purchasing dealer to the selling dealer, as prescribed in rule 26, was not amended until March 29, 1973 with a view to bringing it in conformity with the amended section 5(2)(a)(ii). The result was that from May 28, 1972 to March 29, 1973 the form of the declaration continued to be the same as before and carried the statement that the goods were purchased by the purchasing dealer ''for use by him as raw material in the manufacture of goods for sale'' without any restriction as to place of manufacture or sale and this was the form in which declarations were given by the assessees to the selling dealers when they purchased the goods. The declaration given by the assessees did not state that the goods were purchased for use by them as raw materials in the manufacture in the territory of Delhi of goods for sale inside Delhi, since that was not the prescribed form and the first proviso required that the declaration should be given only on the prescribed form. Now, if the declaration given by the assessees stated the purpose of purchase of goods to be used as raw materials in the manufacture of goods for sale and did not specify that the manufacture and sale will be inside the territory of Delhi. . .

On a simple reading of the said declaration it will be seen that the same is distinguishable vis-a-vis the provisions applicable within the State of Uttar Pradesh. A declaration form IIIB as applicable in Uttar Pradesh specifically refers to sale of the manufactured goods in the manner contemplated by section 4B(2) of the Act.

In the opinion of the court the words "that the manufactured goods would be sold in the manner contemplated in sub-section (2) of section 4B" used in 1st paras of form IIIB necessarily, in the background of the statutory provisions of section 4B(2) read with rule 25B, leads to a conclusion that manufacture and sale both should be in accordance with section 4B(2), i.e., raw material qua which concessional rate of tax has been availed of in the State of U.P. must also be used for manufacture of goods at a unit within the State of U.P. for which certificate u/s 4B has been issued.

This court may record that in view of the distinction between statutory provisions and the form of declaration applicable in the State of Uttar Pradesh vis-a-vis the declaration forms which are applicable in the Delhi State subject-matter of consideration in the case of Polestar Electronic (Pvt.) Ltd. Vs. Additional Commissioner, Sales Tax and Another, , are clearly distinguishable.

Reference may be made to the decision of the Supreme Court in the case of Bhavnagar University Vs. Palitana Sugar Mill Pvt. Ltd. and Others, wherein the Supreme Court has clarified that a decision, as is well known, is an authority for which it is decided and not what can logically be deduced therefrom. It is also well settled that a little difference in facts or additional facts may make a lot of difference in the precedential value of a decision.

Paragraph 59 of the judgment is quoted below:

A decision, as is well known, is an authority for which it is decided and not what can logically be deduced therefrom. It is also well settled that a little difference in facts or additional facts may make a lot of difference in the precedential value of a decision.

The law so explained has been followed in the case of Dr. Rajbir Singh Dalal Vs. Chaudhari Devi Lal University, Sirsa and Another, . In view of the above discussion this court finds legally no error in the order of the Tribunal which has rightly held that a false declaration has been made in form IIIB which was issued by the petitioner in respect of the raw material, namely, tendu patta. This court finds no good ground for quashing the order impugned. The present writ petition is dismissed.