2008 (3) TMI 625 - HC - VAT and Sales Tax

Whether on the facts and in the circumstances of the case the Tribunal is legally justified in validating the initiation of proceeding under section 21? Whether there was any material to justify the initiation of proceeding under section 21 on March 4 1991? Whether the initiation of proceeding under section 21 was based on any material and inasmuch as in any case on account of change of opinion? Whether the levy of tax under section 21 on spent earth as unclassified items is based on any relevant material on account of change of opinion? Whether the spent earth is liable to tax as a mineral or as an unclassified items? Held that - In the present case as has been held above spent bleaching earth does not remain a mineral as it has lost its originality as excavated and also its physical properties have changed and therefore the view taken by the Tribunal appears to be correct. No question of law as such arises warranting interference in revisional jurisdiction. Revision lacks merit and it is according dismissed.

Issues Involved:
1. Validity of the initiation of proceedings under section 21 of the U.P. Sales Tax Act, 1948.
2. Justification for the initiation of proceedings under section 21 on March 4, 1991.
3. Whether the initiation of proceedings under section 21 was based on a change of opinion.
4. Classification of "spent bleaching earth" for tax purposes: as a mineral or as an unclassified item.
5. Appropriate tax rate for "spent bleaching earth."

Detailed Analysis:

1. Validity of the initiation of proceedings under section 21 of the U.P. Sales Tax Act, 1948:
The dealer argued that there was no material on record to justify the action of the assessing authority in issuing the notice under section 21. They contended that reasons must be recorded before issuing such a notice. The court held that the assessing authority had reasons to believe that the turnover had been assessed at a lower rate. These reasons were based on previous proceedings under section 22 of the Act, which had been dropped. The court clarified that the law does not require reasons to be recorded in writing before issuing a notice under section 21, only that the assessing authority should have a reason to believe that conditions for reassessment exist. Thus, the court found the initiation of proceedings under section 21 valid.

2. Justification for the initiation of proceedings under section 21 on March 4, 1991:
The court observed that the proceedings under section 21 were initiated only after the proceedings under section 22 were dropped. The dealer was aware of the reasons for the notice under section 21, which were the same as those under section 22. The court concluded that the assessing authority had sufficient material to justify the initiation of proceedings under section 21.

3. Whether the initiation of proceedings under section 21 was based on a change of opinion:
The dealer argued that the reassessment was based on a change of opinion, which is not permissible under section 21. The court found that there was no discussion or application of mind by the assessing authority regarding the rate of tax on "spent bleaching earth" in the original assessment order. Therefore, the reassessment did not constitute a change of opinion but was based on new information that the tax rate applied was incorrect.

4. Classification of "spent bleaching earth" for tax purposes: as a mineral or as an unclassified item:
The dealer claimed that "spent bleaching earth" should be taxed as a mineral at four percent under Notification No. 6075, dated October 1, 1983. They argued that "spent bleaching earth" retains its composition as "bleaching earth" and, therefore, should be treated as a mineral. The court, however, found that "spent bleaching earth" loses its absorptive properties and undergoes a change in composition after being used by vegetable oil manufacturers. The court concluded that "spent bleaching earth" does not remain a mineral and should be treated as an unclassified item.

5. Appropriate tax rate for "spent bleaching earth":
The court held that "spent bleaching earth" should be taxed as an unclassified item at eight percent, as it no longer retains the properties of a mineral after its use in the vegetable oil industry. The court supported this conclusion by referring to the definition of "mineral" and the changes in the physical properties of "spent bleaching earth."

Conclusion:
The court dismissed the revision, upholding the decision of the Tribunal that "spent bleaching earth" should be taxed as an unclassified item at eight percent. The court found no merit in the dealer's arguments regarding the validity of the proceedings under section 21 or the classification of "spent bleaching earth" as a mineral. The revision was dismissed with no order as to costs.

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