2009 (8) TMI 1088 - HC - VAT and Sales Tax

Impugned circular dated January 20, 2006 issued by the Commissioner of Trade Tax, U.P., Lucknow challenged Held that - Rates and security fixed in the circular are not arbitrary. The plea that it is not a general order, is devoid of any substance in as much as no particular form of issuing an order has been prescribed under the Act or the Rules framed thereunder. The general order relates/applicable to the goods notified and there is no prohibition that valid classification cannot be made with respect to class of dealers engaged in the said business provided that the classification is valid, reasonable and has nexus with the object sought to be achieved. In view of the aforesaid discussions, it cannot be said that there is no nexus between the object sought to be achieved and the provisions fixing the rate of the notified goods and security as well as the fixing the cut off date, i.e., April 1, 2001. So even testing it on the principles of delegated legislation, the impugned circular cannot be adjudged to be ultra vires. Appeal dismissed.

Issues Involved:
1. Validity of the impugned circular dated January 20, 2006.
2. Alleged arbitrariness and discrimination in fixing security rates.
3. Reasonableness of the cut-off date (April 1, 2001).
4. Adjustment of excess security amounts.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Circular:
The writ petitions sought to quash the circular dated January 20, 2006, issued by the Commissioner of Trade Tax, U.P., and to direct the respondent to issue requisite form XXXI without demanding security. The circular mandated traders of iron and steel to furnish security when applying for forms, affecting those registered after April 1, 2001. The court upheld the circular, noting that it was issued under section 8C(3A) of the U.P. Trade Tax Act, 1948, which empowers the Commissioner to require security for notified goods.

2. Alleged Arbitrariness and Discrimination in Fixing Security Rates:
Petitioners argued that the security rates were arbitrary and higher than the actual market value. The court found that the rates were determined based on market data collected by a committee of senior officers from reputed manufacturers like M/s. TISCO and M/s. Steel Authority of India. The court concluded that the rates and security amounts were not arbitrary as they were based on a rational and reasonable method.

3. Reasonableness of the Cut-off Date (April 1, 2001):
Petitioners claimed the cut-off date was arbitrary and discriminatory, violating Article 14 of the Constitution. The court noted that the cut-off date was chosen based on data indicating higher tax evasion by traders registered after April 1, 2001. The court cited the Supreme Court's decision in University Grant Commission v. Sadhana Chaudhari, emphasizing that the choice of a date for classification is not arbitrary if it is not capricious or whimsical. The court held that the cut-off date was reasonable and had a rational basis.

4. Adjustment of Excess Security Amounts:
Petitioners alleged that excess security amounts were not being adjusted. The respondents countered that adjustments were made towards monthly liabilities and excess amounts were used for issuing new declaration forms. The court found no merit in the petitioners' claims, noting that the respondents provided evidence of adjustments and refunds in accordance with the law.

Conclusion:
The court dismissed the writ petitions, affirming the validity of the impugned circular and the reasonableness of the security rates and cut-off date. The court found no arbitrariness or discrimination in the circular and confirmed that excess security amounts were being properly adjusted.

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