1970 (5) TMI 65 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Competency of exemption application with deficit fee.
2. Jurisdiction of assessing authority to demand deficiency.
3. Authority to finalize exemption case and demand deficiency after assessment year.
4. Conditions for default assessment under rule 23.

Comprehensive, Issue-Wise Detailed Analysis:

1. Competency of Exemption Application with Deficit Fee:
The court examined whether an exemption application in form V, accompanied by a deficit fee, must be rejected as incompetent. The essential question was whether the applications were rightly rejected due to the failure to deposit the required fee under rule 20-13(a). The court held that the requirement to deposit one-fourth of the exemption fee within thirty days of the commencement of the year is a mandatory condition for exemption. The dealers failed to comply with this essential requirement, and hence their applications were rightly rejected. The court emphasized that the conditions for exemption must be strictly fulfilled, citing precedents from the Supreme Court regarding the strict adherence to conditions for tax benefits.

2. Jurisdiction of Assessing Authority to Demand Deficiency:
The court addressed whether the assessing authority has the jurisdiction to demand the deficiency in the initial deposit of the fee and if such a demand must be made during the assessment year. The court concluded that there is no provision in the U.P. Sales Tax Act or the Rules authorizing the assessing authority to demand the deficiency in the deposit of the first instalment. Therefore, the first part of the question was answered in the negative, and no answer was returned to the second part.

3. Authority to Finalize Exemption Case and Demand Deficiency After Assessment Year:
The court considered whether the assessing authority could finalize the exemption case under sub-clauses (h) and (i) of rule 20-B after the expiry of the assessment year and then demand the total deficiency. The court found it difficult to hold that the benefit of exemption could be granted by following the procedure in clauses (h) and (i) if only the first instalment, and that too not in full, was deposited. The third question was answered in the negative.

4. Conditions for Default Assessment Under Rule 23:
The court examined whether a default assessment under rule 23 could be made only upon the failure of the assessee to deposit the deficiency on demand. The court opined that the dealers were not entitled to the benefit of exemption from sales tax as they did not comply with the requirements of rule 20-B, including the deposit of the first instalment of the exemption fee. Therefore, they were liable to tax under rule 23 without the need for a prior demand to make good the deficiency. The fourth question was answered in the negative.

Conclusion:
The court answered the four questions as follows:
- Question No. (1): In the affirmative.
- Question No. (2): The first part in the negative; no answer to the second part.
- Question No. (3): In the negative.
- Question No. (4): In the negative.

Costs were awarded to the Commissioner of Sales Tax against two dealers, M/s. Girdhari Mal Jai Dayal and M/s. Ram Nath Ram Dularey, while no order as to costs was made against the remaining dealers. The reference was answered accordingly.