2005 (1) TMI 665 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the copper wire rod and nickel strips sold by the dealer were in primary form and thus liable to tax at 2.2%.
2. Whether the initiation of proceedings under section 22 of the U.P. Trade Tax Act was justified.
3. Whether the Tribunal's decision to classify nickel strips as an unclassified item was correct.

Issue-wise Detailed Analysis:

1. Copper Wire Rod and Nickel Strips in Primary Form:
The dealer, a Government of India Corporation, argued that the copper wire rod and nickel strips sold during the assessment years 1987-88, 1988-89, and 1989-90 were metals in primary form and should be taxed at 2.2%. The assessing authority initially accepted this classification but later revised the tax rates to 4.4% for copper wire rods and 8.8% for nickel strips, citing the Supreme Court decision in *Hindustan Aluminium Corporation Ltd. v. State of Uttar Pradesh* and the High Court decision in *Commissioner of Sales Tax v. Gulati and Co.*

The Tribunal, after reviewing samples and photographs, concluded that the copper wire rod was in primary form and should be taxed at 2.2%. However, it found insufficient evidence to classify nickel strips as metal in primary form. The High Court upheld the Tribunal's view on copper wire rods, noting that the Division Bench had previously included wire rods under the entry of "metal" in primary form. The court also noted that the Supreme Court had not disputed this classification in its ruling.

2. Justification of Proceedings Under Section 22:
The dealer contended that the initiation of proceedings under section 22 was unjustified as the original assessment had considered relevant judicial decisions. The High Court agreed, stating that section 22 allows for rectification of mistakes apparent on the face of the record, not those requiring investigation or debate. The court cited the Supreme Court's ruling in *T.S. Balaram, Income-tax Officer v. Volkart Brothers*, which held that a mistake must be obvious and not subject to prolonged reasoning or debate.

The High Court found that the assessing authority's view that copper wire rods were not in primary form was incorrect, as the Division Bench had already classified wire rods as primary metal. Consequently, the initiation of proceedings under section 22 was deemed unjustified.

3. Classification of Nickel Strips:
The High Court noted that the burden of proof lay with the Revenue to establish that nickel strips were not in primary form. The Tribunal and the assessment records showed that the dealer had imported nickel in the form of strips, squares, and bars, described as "20000 MT primary nickel in the form of Cathdes 4x4". The court found that the Revenue failed to provide evidence that nickel strips were not in primary form. The decisions in *Hindustan Aluminium Corporation Ltd. v. State of Uttar Pradesh* and *Commissioner of Sales Tax v. Gulati and Co.* did not address nickel strips, making their relevance to the case questionable.

The High Court concluded that the issue of whether nickel strips were in primary form was debatable and outside the purview of section 22, which only addresses apparent mistakes.

Conclusion:
The High Court allowed the dealer's revisions (Nos. 666, 667, and 668 of 1996) and dismissed the Commissioner of Trade Tax's revisions (Nos. 915, 916, and 917 of 1996), affirming that the copper wire rods were in primary form and that the initiation of proceedings under section 22 was unjustified. The court also found that the Revenue failed to prove that nickel strips were not in primary form.

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