1997 (1) TMI 501 - HC - VAT and Sales Tax

Summary

Issues:
Notice issued under section 21 of the U.P. Trade Tax Act for the assessment year 1980-81 challenged.

Analysis:
The petitioner, a manufacturer of steel wires, sold goods to dealers holding eligibility certificates under section 4-B of the U.P. Trade Tax Act, granting total exemption or concessional rates. The assessing authority initially exempted a turnover of Rs. 64,47,374.80 based on the certificates. However, a notice under section 21 was issued to reopen the assessment, alleging the purchasing dealers were not entitled to total exemption. The State contended that the authority should verify the eligibility of the purchasing dealers and not extend concessions beyond what is permissible by law. The petitioner argued that it was not their duty to question the validity of the certificates, and the authority should proceed to cancel the certificates or recover tax from the dealers if necessary, rather than reopening the assessment.

The petitioner relied on legal precedents to support their stance that once the purchasing dealer furnishes the required forms, the selling dealer is entitled to the concessional rate without further inquiry. The court emphasized that the responsibility of the selling dealer ends once the necessary documents are provided by the purchasing dealer. The court highlighted that while corrective actions can be taken against the holder of the eligibility certificate or the issuing officer for any discrepancies, section 21 of the Act should not be invoked for reassessment. The assessing authority should act in accordance with the certificate issued by the relevant departmental authority to the dealers.

The court rejected the State's argument that the assessing authority should have verified the correctness of the exemptions granted to the purchasing dealers, emphasizing the distinction between the authority issuing the certificates and the assessing authority. Referring to a relevant case, the court held that the assessing authority should not interfere with the decisions of the authority issuing the recognition certificate. The court reiterated that different authorities have distinct powers and duties assigned by the law, and each should perform their designated roles without overstepping into the functions of others.

The court also emphasized that a change in opinion on the same facts does not justify reopening an assessment, citing a legal precedent. Ultimately, the court allowed the writ petition, quashing the notice issued under section 21 of the U.P. Trade Tax Act for the assessment year in question.