2008 (8) TMI 843 - HC - VAT and Sales Tax

Whether, on the facts and in the circumstances of the case, the Trade Tax Tribunal was legally justified to quash the tax without considering the agreement of compounding scheme? Whether, on the facts and in the circumstances of the case, the Trade Tax Tribunal was legally justified to quash the tax which was imposed on the basis of the mutually agreed upon by the State and the assessee as indicated by the order of the first appellate authority? Held that - If, the Tribunal was of the view that the assessment order relates to 18 months, it should have been sustained at least for 12 months. The setting aside of the assessment order as a whole cannot be justified. If there was any confusion or doubt, the matter either should have been remanded to the first appellate authority or a remand report should have been called for from the authority concerned. So far as the second ground taken by the Tribunal is concerned, the Tribunal has overlooked the conditions for allowing the composition application. The benefit of the compounding scheme was extended to the dealer-opposite party on the terms mentioned in the scheme. One of the terms of the scheme provides that the maximum quantity of coal which could be imported by a brick-kiln owner. Obviously if a brick-kiln owner has imported coal over and above the agreed quantity of coal his liability to pay tax is there. Thus the order of the Tribunal setting aside the assessment order cannot be justified.The Tribunal will re-examine the matter afresh after giving an opportunity to the dealer and Department as a whole.The revision succeeds and is allowed in part. The order of the Tribunal is set aside and the matter is remanded back to the assessing authority.

Summary

Issues:
1. Interpretation of the assessment order duration.
2. Tax liability on imported coal under the compounding scheme.

Interpretation of the assessment order duration:
The revision challenged the Trade Tax Tribunal's order regarding the assessment year 1989-90. The dealer, engaged in brick manufacturing, applied for composition of trade tax liability under section 7D of the U.P. Trade Tax Act, 1948. The assessing authority found the dealer imported more coal than authorized. The first appellate authority reduced the coal turnover based on mutual agreement. However, the Tribunal quashed the tax, citing the assessment order duration issue of 18 months, contrary to law. The High Court found the Tribunal's decision unjustified, suggesting either sustaining the order for 12 months or remanding the matter for clarification.

Tax liability on imported coal under the compounding scheme:
The Tribunal also ruled that no tax could be levied on the imported coal as it was consumed for manufacturing bricks, not sold. The High Court disagreed, emphasizing the conditions of the compounding scheme, which limited the quantity of coal a brick-kiln owner could import. Any excess coal imported would incur tax liability. The Court found the Tribunal overlooked the scheme's terms and remanded the matter back to the assessing authority for a fresh examination, ensuring both the dealer and the Department have an opportunity to present their case.

In conclusion, the High Court allowed the revision in part, setting aside the Tribunal's order and remanding the matter to the assessing authority for further review in light of the Court's observations.