2003 (1) TMI 670 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to composition scheme under U.P. Trade Tax Act, 1948.

Analysis:
The petitioner, a company registered under the Indian Companies Act, 1956, filed a writ petition to challenge clause (3) of the Composition Scheme dated August 10, 2000, under section 7-D of the U.P. Trade Tax Act, 1948, and the circular issued by the Commissioner, Trade Tax, U.P. The petitioner had been awarded three civil works contracts involving various construction activities. The scheme provided for a composition amount payable in lieu of tax, with deductions for determining the contract value. The impugned circular restricted the benefit of composition to 1% of the contract value, subject to certain conditions.

The petitioner contended that the restriction on the value of material received from outside U.P. to 5% of the contract value under clause (3) of the composition scheme was contrary to the law and the object of section 7-D. The petitioner had received goods from outside U.P. for the works contract, and the scheme's conditions were deemed unfavorable. The State Government argued that the composition scheme was optional, and the petitioner was not bound to accept it. The scheme allowed for either opting for composition or regular assessment under the U.P. Trade Tax Act.

The Court examined section 7-D of the U.P. Trade Tax Act, which provides for an alternate scheme for payment of trade tax, aiming to simplify assessment procedures and save dealers from administrative burdens. The Supreme Court's precedents emphasized the optional nature of such schemes, where contractors could choose the method of taxation beneficial to them. The State Government's direction limiting composition to 5% of the contract value for goods from outside U.P. was held valid under section 7-D, as the provision allowed for government directions and agreements on certain classes of goods.

The Court rejected the petitioner's argument that both composition and regular assessment could not coexist for the same assessment year, citing section 7-D's provision for partial composition. It emphasized that section 7-D was a concession to dealers to avoid harassment, and if dissatisfied with the composition scheme, they were not obligated to accept it. Ultimately, the Court found no illegality in the impugned clause of the composition scheme or the Commissioner's circular and dismissed the petition.