2010 (12) TMI 1075 - HC - VAT and Sales Tax

Validity of Rules 12A(5) 12B(4) 12C(3) and 25B(3) of the U.P. Trade Tax Rules as amended by the U.P. Trade Tax (Amendment) Rules 2001 challenged and further seeking a direction in the nature of mandamus reading down the aforesaid Rules insofar as it provides that the forms issued in particular financial year shall be valid for the transactions of purchase and sale made during two financial years immediately preceding to that year as not applicable to the transactions of sale or purchase which are not disputed by the Department Held that - Following the reasoning given in the cases of M/s. K.B. Hides (2003 (12) TMI 585 - ALLAHABAD HIGH COURT) the validity of Rules 12-A 12-B 12-C and 25-B of the Rules are upheld. Now coming to the question of submissions of learned counsel for the petitioner that the Rule may be read down in the manner suggested by him. We do not find any substance. The question of reading down any provision arises only in a situation to save the provision. Once the provision is held to be valid there is no question of reading down the provision in the manner suggested by him. It has to be read as such and nothing can be added and nothing can be substracted from it. Appeal dismissed.

Issues Involved:
1. Validity of Rules 12A(5), 12B(4), 12C(3), and 25B(3) of the U.P. Trade Tax Rules as amended by the U.P. Trade Tax (Amendment) Rules, 2001.
2. Direction for reading down the aforesaid Rules concerning the validity of forms for transactions of purchase and sale.
3. Procedural requirements for filing forms and their impact on the vested right to avail the benefit of the concessional rate of tax.
4. Allegations of arbitrariness and unreasonableness in the amended Rule 25-B(3).

Detailed Analysis:

1. Validity of Rules 12A(5), 12B(4), 12C(3), and 25B(3):
The petitioners challenged the validity of the amended Rules on the grounds that they were arbitrary and unreasonable. The court referred to the case of M/s. K.B. Hides v. State of U.P., where the validity of similar rules was upheld. The court noted that the Supreme Court had dismissed the special leave petition against this judgment. The court emphasized that the amended rules were designed to prevent tax evasion and misuse of forms, which are reasonable restrictions within the framework of the law. The judgment highlighted that the rules did not impose a specific date for submitting forms but limited their validity to transactions within a specified period to ensure proper verification and prevent misuse.

2. Direction for Reading Down the Rules:
The petitioners sought a direction to read down the rules to allow forms issued beyond the specified period if the dealer could show a reasonable cause for the delay and the forms were genuine. The court rejected this argument, stating that once the provision is held valid, there is no need to read it down. The court emphasized that the rules must be read as they are, without adding or subtracting anything.

3. Procedural Requirements for Filing Forms:
The petitioners argued that filing forms under the rules is a procedural requirement and failure to meet this requirement should not deny the substantive right to a concessional tax rate. The court referred to the Supreme Court's decision in Commissioner of Sales Tax Delhi v. M/s. Shri Krishna Engg. Co., which held that the exemption from tax is contingent upon the submission of the requisite forms. The court noted that the petitioners had not applied for the forms, and the purchasing dealer's failure to obtain the forms did not absolve the selling dealer from the liability to pay tax. The court emphasized that the state is entitled to its tax unless the required forms are submitted.

4. Allegations of Arbitrariness and Unreasonableness:
The petitioners claimed that the amended Rule 25-B(3) was arbitrary and did not account for unavoidable situations. The court reiterated that the rules were designed to prevent tax evasion and misuse of forms, which are legitimate objectives. The court noted that the rules provided sufficient time for obtaining and submitting the forms and were not arbitrary or unreasonable. The court referred to the principle that equity plays a minimal role in fiscal matters and that the law must be interpreted strictly according to its letter.

Conclusion:
The court upheld the validity of the amended Rules 12A(5), 12B(4), 12C(3), and 25B(3) and dismissed the petitions. The court emphasized that the rules were reasonable measures to prevent tax evasion and misuse of forms and that the procedural requirements for filing forms were essential to avail the benefit of a concessional tax rate. The court rejected the petitioners' arguments for reading down the rules and highlighted that the state is entitled to its tax unless the requisite forms are submitted. The judgment affirmed that the rules were within the legislative framework and did not violate constitutional provisions.

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