1999 (12) TMI 835 - HC - VAT and Sales Tax

Issues Involved:

1. Interpretation of "otherwise disposed of" in Section 4-B(6) of the U.P. Sales Tax Act, 1948.
2. Applicability of penalty provisions under Section 4-B(6) for stock transfers.
3. Impact of eligibility certificate on the imposition of penalty for the assessment years 1982-83 and 1983-84.
4. Determination of the quantum of penalty under Section 4-B(6) in relation to the eligibility certificate.

Issue-wise Detailed Analysis:

1. Interpretation of "otherwise disposed of" in Section 4-B(6) of the U.P. Sales Tax Act, 1948:

The court examined the term "otherwise disposed of" in Section 4-B(6) as amended effective from November 1, 1978. The revisionist argued that this term does not include stock transfers, which was previously covered under "has dispatched such goods to a place outside the State." The court referred to the Supreme Court decision in Deputy Commissioner of Sales Tax (Law) v. Thomas Stephen & Co. Ltd., which interpreted "disposes of" as transferring title in goods to another person. The court concluded that mere dispatch of goods to the revisionist's own depots outside the state does not amount to "otherwise disposed of."

2. Applicability of penalty provisions under Section 4-B(6) for stock transfers:

The court held that for penalty under Section 4-B(6) to apply, there must be a contravention of the terms and conditions of the recognition certificate by selling or otherwise disposing of the notified goods. The Tribunal's interpretation that stock transfer amounts to "otherwise disposal" was found incorrect. The court emphasized that penal provisions are attracted only when the goods are actually sold or their title is transferred, not merely on stock transfer.

3. Impact of eligibility certificate on the imposition of penalty for the assessment years 1982-83 and 1983-84:

For the assessment year 1982-83, the eligibility certificate was effective from December 2, 1982, but its benefits were deferred until April 1, 1983. Therefore, any violation of the recognition certificate before April 1, 1983, attracts penalty. For the assessment year 1983-84, the revisionist argued that no penalty could be imposed as they were exempt from sales tax under the eligibility certificate. The court agreed, stating that the penalty is relatable to the tax that would have been payable, and since the revisionist was exempt, no penalty could be imposed.

4. Determination of the quantum of penalty under Section 4-B(6) in relation to the eligibility certificate:

The court clarified that the quantum of penalty under Section 4-B(6) is linked to the amount of tax that would have been payable on the sale of notified goods. Since the revisionist was exempt from paying sales tax due to the eligibility certificate, no penalty could be imposed for the assessment year 1983-84. For the assessment year 1982-83, the Tribunal must determine if the penal event (actual sale of goods) occurred before April 1, 1983.

Judgment Summary:

The court allowed Sales Tax Revision No. 1476 of 1992 for the assessment year 1982-83, quashed the Tribunal's order, and remanded the matter to the Tribunal to determine if the penal event occurred within the assessment year. For Sales Tax Revision No. 1511 of 1992 for the assessment year 1983-84, the court allowed the revision, set aside the Tribunal's order, and directed the refund of any penalty paid by the revisionist. The parties were directed to bear their own costs.

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