1985 (3) TMI 240 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of proceedings under section 21 of the U.P. Sales Tax Act, 1948.
2. Correct classification of goods manufactured by the assessee.
3. Jurisdiction of the assessing authority in initiating proceedings under section 21.

Analysis:
The judgment by the High Court of Allahabad pertains to two revisions filed by the assessee under section 11(1) of the U.P. Sales Tax Act, 1948 against the Sales Tax Tribunal's judgment for the assessment years 1978-79 and 1979-80. The assessee, engaged in manufacturing wooden products, was initially taxed at 6% as timber products by the Sales Tax Officer. However, a subsequent notice under section 21 of the Act reclassified the goods as electrical goods, leading to an appeal by the assessee against the assessing authority's decision. The Assistant Commissioner (Judicial) allowed the assessee's appeals, but the revenue appealed to the Tribunal, which overturned the Assistant Commissioner's orders, prompting the assessee to approach the High Court through revisions.

The main contention raised by the assessee was that the proceedings under section 21 were illegal and lacked jurisdiction as they were initiated based on a change of opinion. The assessing authority had treated the goods as timber products initially, and the revenue argued that the notice under section 21 was valid since the goods were taxed at a lower rate than what was applicable. However, the High Court rejected this argument, emphasizing that the rate of tax applied during the original assessment was indeed 6%, the prescribed rate for timber products. The Court highlighted that even if the goods were wrongly classified initially, the revenue could have challenged that decision through appeal rather than invoking section 21 based on a mere change of opinion.

The Assistant Commissioner had found that there was no jurisdiction for issuing a notice under section 21 as the goods were consistently treated as timber products by the assessing authority. The Tribunal, however, did not delve into the jurisdictional aspect and decided the case on its merits without addressing the key issue of whether section 21 proceedings were warranted. The High Court reiterated that proceedings under section 21 cannot be initiated solely on a change of opinion, and in the absence of any new material supporting the reclassification as electrical goods, the revisions were allowed, and the Tribunal's orders were quashed. No costs were awarded in the matter.