2007 (9) TMI 590 - HC - VAT and Sales Tax

Penalty under section 8D(6) of the U.P. Trade Tax Act, 1948 deleted - Held that - The order of the Deputy Commissioner (Executive) operates retrospectively. Therefore, the deduction at the rate of one per cent was in consonance with the order passed by the Deputy Commissioner (Executive). In any view of the matter, the finding of the Tribunal that the opposite party was under the bona fide belief and there is no deliberate default is the finding of fact. Penalty correctly deleted. Revision dismissed.

Summary

Issues:
1. Penalty under section 8D(6) of the U.P. Trade Tax Act, 1948.
2. Applicability of section 8D(1) in case of advance payment.
3. Interpretation of the order passed by the Deputy Commissioner (Executive) under section 8D.

Analysis:
1. The case involved a revision under section 11(1) of the U.P. Trade Tax Act, 1948 challenging the penalty imposed under section 8D(6) of the Act. The Tribunal confirmed the order of the first appellate authority that deleted the penalty. The assessing authority levied the penalty on the grounds that the dealer should have deducted four percent instead of one percent from the advance payment made to a contractor for construction. The Tribunal upheld the deletion of the penalty based on the nature of the payment being an advance and the retrospective order obtained from the Deputy Commissioner (Executive) for deduction at one percent.

2. The Tribunal held that section 8D(1) of the Act, which mandates a deduction of four percent at the time of payment to a contractor, does not apply to advance payments made before the transfer of goods. Citing a similar case precedent, the Tribunal emphasized that the provision is only applicable to payments made for the discharge of liability on account of valuable consideration for the transfer of goods. Since the goods had not been transferred during the relevant period, the Tribunal concluded that the provisions of section 8D(1) did not apply to the advance payment made by the dealer.

3. The order passed by the Deputy Commissioner (Executive) under section 8D for deduction at one percent was found to operate retrospectively. The Tribunal considered this order as the basis for the dealer's deduction rate and noted that the dealer acted in accordance with the law based on this order. Additionally, the Tribunal found that the dealer and the contractor were foreign companies, and their ignorance of the Act's provisions was taken into account. The Tribunal concluded that there was no deliberate default on the part of the dealer, leading to the upholding of the first appellate authority's decision to delete the penalty.

In conclusion, the High Court dismissed the revision, finding no merit in challenging the Tribunal's decision. The Court upheld the Tribunal's reasoning regarding the non-applicability of section 8D(1) to advance payments and the retrospective operation of the Deputy Commissioner's order, ultimately affirming the deletion of the penalty under section 8D(6) of the Act.