1980 (2) TMI 244 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of proceedings for recovery of provisionally assessed sales tax.
2. Interpretation of Rule 41(3) and Rule 41(5) of the U.P. Sales Tax Act.
3. Impact of provisional assessment on final assessment and recovery proceedings.
4. Applicability of Madras High Court decision.

Detailed Analysis:

1. Validity of Proceedings for Recovery of Provisionally Assessed Sales Tax:
The petitioner challenged the recovery proceedings for a sum of Rs. 2,26,500, which was provisionally assessed as sales tax for the first quarter of the assessment year 1970-71. The petitioner argued that a provisional assessment order made under Rule 41(3) of the U.P. Sales Tax Act ceases to be operative at the close of the assessment year or when proceedings for regular assessment under Rule 41(5) are initiated. The court rejected this argument, stating that the U.P. Sales Tax Act and the Rules framed thereunder clearly contemplate determination of the turnover of a particular year and computation of tax due on such turnover in stages. The court held that the obligation of the Sales Tax Officer to determine the turnover of a dealer for a particular period does not come to an end at the close of the assessment year.

2. Interpretation of Rule 41(3) and Rule 41(5) of the U.P. Sales Tax Act:
The petitioner contended that the liability for sales tax must be assessed and satisfied in the manner laid down in Rule 41(5), which pertains to the final assessment of the entire assessment year. The court, however, clarified that Rule 41(3) allows for provisional assessment of tax for each quarter or month, and this provisional assessment is not rendered ineffective by the initiation of proceedings under Rule 41(5). The court emphasized that the turnover for each quarter or month needs to be determined under Rule 41(3) before the final assessment for the entire year under Rule 41(5).

3. Impact of Provisional Assessment on Final Assessment and Recovery Proceedings:
The court explained that the provisional assessment under Rule 41(3) is not provisional in the sense that it is temporary or ineffective; rather, it is provisional because it is not the final determination of the tax payable for the entire assessment year. The court held that the Sales Tax Officer is empowered to recover the tax assessed on the periodical turnovers if the dealer fails to pay the same on demand. The provisional assessment does not become ineffective upon the close of the assessment year or the initiation of proceedings for final assessment under Rule 41(5).

4. Applicability of Madras High Court Decision:
The petitioner cited a decision of the Madras High Court in Mahendrakumar Ishwarlal and Co. v. Deputy Commercial Tax Officer, arguing that provisional assessment should not be made after the assessing authority has called for a revised return. The court found this case inapplicable, noting that the statutory provisions in force in Madras were not detailed in the judgment and were not shown to be similar to those in the U.P. Sales Tax Act. Therefore, the petitioner could not derive any assistance from the Madras High Court decision.

Conclusion:
The petition was dismissed with costs, and the court upheld the validity of the proceedings for recovery of the provisionally assessed sales tax. The court clarified that the U.P. Sales Tax Act allows for provisional assessments and recovery of tax on a periodical basis, and such assessments remain effective even after the close of the assessment year or the initiation of final assessment proceedings.