2005 (7) TMI 633 - HC - VAT and Sales Tax

Summary

Issues:
Violation of provisions of section 4B of the U. P. Trade Tax Act, 1948 due to transfer of tin containers between units of a company.

Analysis:
The case involved a public limited company registered under the name of M/s. Sadi Ram Ganga Prasad Ltd., which had obtained a recognition certificate under section 4B(2) of the U. P. Trade Tax Act, 1948 for purchasing raw materials at concessional rates. The company was authorized to purchase tin plates for manufacturing tin containers. The dispute arose when the department alleged that the company had transferred tin containers to its other units, which led to penalty proceedings under section 4B(6) of the Act.

The company argued that the transfer of tin containers to its other units, namely Ganges Oil Mill, for packaging and selling oil did not violate section 4B of the Act. The Deputy Commissioner (Appeal) and the Tribunal under revision agreed with the company's stance, stating that such internal transfers did not constitute a breach of the Act.

During the proceedings, the department contended that the transfer of tin containers between units amounted to a violation of section 4B of the Act. The argument was made that the containers should have been sold within the state, through Central sales, or exported outside India. However, the company's counsel argued that since the recognition certificate was granted to M/s. Sadi Ram Ganga Prasad as a whole, the internal transfer of goods did not breach the Act.

The court carefully considered the submissions from both parties and noted that the recognition certificate was issued to M/s. Sadi Ram Ganga Prasad as a dealer with three units in the state. The transfer of goods between these units was deemed an internal arrangement and not a violation of the Act. The court also highlighted that it was unclear whether the tin containers were sold within the state, in inter-state trade, or for export. The assessing officer's failure to properly assess the turnover of tin containers was noted, and the penalty was found to be levied solely on the basis of the alleged violation of section 4B(6) of the Act.

Ultimately, the court dismissed the revision, emphasizing that the internal transfer of tin containers between the company's units did not contravene the provisions of section 4B of the U. P. Trade Tax Act, 1948. No costs were awarded in the judgment.