1991 (7) TMI 349 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to validity of recovery certificate for interest under U.P. Sales Tax Act, 1948.
Interpretation of circular granting remission of sales tax, penalty, etc., in respect of dealers who exported footwears through State Trading Corporation.
Imposition of interest on purchase tax under U.P. Sales Tax Act.
Exemption under the circular for dealers on transactions where purchase tax is leviable under section 3-D.
Quashing of assessment order for imposition of interest and recovery proceedings.

Analysis:
The petitioner challenged the validity of a recovery certificate dated 19th September, 1980, for interest under the U.P. Sales Tax Act, 1948. The petitioner contended that a circular issued by the Commissioner of Sales Tax granted remission of sales tax, penalty, etc., for dealers exporting footwears through State Trading Corporation. The circular was interpreted to include exemption for dealers on transactions where purchase tax is leviable under section 3-D. The petitioner had paid the purchase tax but contested the imposition of interest under section 8(1) and recovery proceedings under section 8(8. The Court quashed the assessment order for interest and recovery proceedings based on the interpretation of the circular, allowing the writ petition with no costs.

In detail, the Court examined the background of the case where the petitioner was assessed purchase tax for supplying footwears for export to U.S.S.R. under a contract with State Trading Corporation. The petitioner believed the transaction was exempt from tax based on the law as understood at the time. Despite depositing the assessed tax amount, interest was imposed under section 8(1) of the U.P. Sales Tax Act, leading to the challenge. The Court analyzed the circular issued by the Commissioner, which granted relief to dealers exporting footwears through State Trading Corporation. The circular was found to extend exemption to dealers on transactions where purchase tax was leviable under section 3-D, contrary to the respondent's interpretation.

Further, the Court noted that the circular encompassed exemption under both the U.P. Sales Tax Act and the Central Sales Tax Act for relevant transactions. The petitioner's compliance with the assessed tax under the Central Sales Tax Act highlighted the inconsistency in imposing interest under the U.P. Sales Tax Act. The Court emphasized that the circular's scope included exemption for purchase tax leviable under section 3-D, leading to the quashing of the assessment order for interest and recovery proceedings. The judgment clarified the interpretation of the circular and its applicability to the petitioner's case, resulting in the allowance of the writ petition without costs.