2008 (11) TMI 625 - HC - VAT and Sales Tax

Whether in the event of a situation where an industry has been granted exemption under section 4A of the U.P. Trade Tax Act, 1948 notice can be issued under section 15A(1)(qq) of the Act for imposition of the penalty relying upon the provisions contained in section 8A(2)(a) of the Act and in case it is permissible, then under what circumstances? Held that - Merely because the price indicated in the invoice of the product is same in spite of non-payment of trade tax in the State of U.P. and because of payment of tax for the goods in question produced from other States shall not make out a case to take action for imposition of penalty under section 15A(1)(qq) of the Act. On account of exemption from trade tax, it is natural that the industrialists may earn more profit for their goods produced from exempted area than the one where no exemption has been granted but that is not a relevant ground for the State or its authorities to take action in the manner taken in the present case. Thus if there is no some statutory provision regulating the production, cost or price of the goods for sales and purchase, it shall not be lawful for the Government to interfere under the garb of section 15A(1)(qq) read with section 8A(2) of the Act. Appeal allowed.

Issues Involved:
1. Jurisdiction of authorities to issue notices under section 15A(1)(qq) of the U.P. Trade Tax Act.
2. Validity of notices issued for penalty under section 15A(1)(qq) in light of exemption under section 4A of the Act.
3. Legality of charging composite price and its implications on trade tax.

Issue-Wise Detailed Analysis:

1. Jurisdiction of Authorities to Issue Notices under Section 15A(1)(qq):
The petitioner challenged the jurisdiction of the authorities to issue notices under section 15A(1)(qq) of the U.P. Trade Tax Act, arguing that the action was ex facie without jurisdiction and should be quashed to avoid multiplicity of litigation. The court noted that the Supreme Court has consistently held that alternative remedy is not a bar to exercising writ jurisdiction when the action of the authorities is arbitrary or without jurisdiction. The court cited several judgments, including *S.N. Sharma v. Bipen Kumar Tewari* and *Whirlpool Corporation v. Registrar of Trade Marks*, to support the view that the rule of alternative remedy is a rule of discretion and not compulsion. The court concluded that the writ petition was maintainable despite the availability of alternative remedies.

2. Validity of Notices Issued for Penalty under Section 15A(1)(qq) in Light of Exemption under Section 4A:
The court examined whether the issuance of notices under section 15A(1)(qq) was valid when the petitioner had been granted an exemption under section 4A of the Act. The court noted that the exemption certificate issued to the petitioner had not been modified or canceled, and therefore, the respondents were not entitled to take any proceedings for assessing the petitioner to tax. The court referred to the case of *Maxims Delicacies (Private) Limited v. State of U.P.*, which held that during the currency of a certificate under section 4A, it is not competent for the Sales Tax Officer to make any assessment. The court also emphasized that the Commissioner of Trade Tax should have decided the controversy on merits as directed by the previous judgment, which the Commissioner failed to do.

3. Legality of Charging Composite Price and Its Implications on Trade Tax:
The court addressed the issue of whether the petitioner could charge a composite price for its products and whether this could be construed as charging trade tax indirectly. The court noted that section 2(i) of the Act defines "turnover" and includes various components such as the price of packing material and sums charged for anything done by the dealer. The court held that the petitioner was within its rights to charge a composite price, and the mere fact that the prices of tea bags produced at different branches were the same did not imply that trade tax was being charged indirectly. The court cited several judgments, including *Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax* and *Bata India Limited v. State of Maharashtra*, to support the view that charging a composite price does not amount to evasion of trade tax.

Conclusion:
The court concluded that the issuance of notices under section 15A(1)(qq) was without jurisdiction and an abuse of process of law. The court quashed the impugned order and notices, restraining the respondents from imposing any penalty. The court emphasized that the exemption granted under section 4A should be respected and that the petitioner was entitled to charge a composite price without it being construed as an evasion of trade tax.

← Previous Next →