2010 (1) TMI 1122 - HC - VAT and Sales Tax

Inclusion of freight in assessee s turnover and avers that the freight was being born by the railways Whether the Tribunal has wrongly rejected the evidence produced by the assessee and should have accepted its evidence towards 3D evidence as additional evidence under section 12B? Whether the Tribunal has wrongly assessed the assessee as a manufacturer as the assessee is not a manufacturer within the meaning of section 2(e) of the U.P. Trade Tax Act? Held that - In so far as the first issue is concerned with regard to cartage, the issue is conclusively established against the assessee. In view of clause 18 of the contract, which is on the record of the paper book, which records clearly that the fare and freight charges shall be born by the contractor. Thus, in view of this clause the Tribunal has rightly included freight in the turnover of the assessee. In so far as the second issue is concerned with regard to the evidence under section 3D, the Tribunal was not correct in rejecting the four forms dated March 22, 1994. The assessee has produced these four forms before the first appellate authority, but these four forms had contained cuttings. The cuttings were thereafter rectified by the assessee by producing a certificate of the railways to show the correct position. In so far as the third issue is concerned the assessee has not violated the provisions of section 12(2) of the Act and he is not a manufacturer, he is only a contractor, who is carrying the stone ballast to the railways. He is not involved in any manufacturing activity, therefore, the Tribunal is not correct in holding that the assessee was guilty of violation of the provisions of section 12(2) of the Act.

Summary

Issues:
1. Inclusion of freight in turnover.
2. Rejection of evidence under section 3D.
3. Assessment of the assessee as a manufacturer.

Analysis:

Issue 1: Inclusion of freight in turnover
The Tribunal included freight in the turnover of the assessee based on clause 18 of the contract, which stated that fare and freight charges shall be borne by the contractor. The High Court upheld this decision, ruling against the assessee on this issue.

Issue 2: Rejection of evidence under section 3D
The High Court found that the Tribunal was incorrect in rejecting the four forms dated March 22, 1994, submitted by the assessee under section 3D. Although the forms initially contained cuttings, the assessee rectified them by providing a certificate from the railways to authenticate the information. The Court opined that the Tribunal should have verified the genuineness of the forms and directed a remand to the assessing authority for further examination of the evidence.

Issue 3: Assessment of the assessee as a manufacturer
The Tribunal had held that the assessee was not maintaining account books in accordance with section 12(2) of the Act, which applies to manufacturers. However, the High Court disagreed with this assessment, stating that the assessee, a contractor involved in supplying stone ballast to railways, was not engaged in manufacturing activities. Therefore, the Tribunal's finding that the assessee violated section 12(2) was deemed incorrect.

In conclusion, the High Court ruled against the assessee on the issue of freight inclusion in turnover, directed a remand for further examination of evidence under section 3D, and held that the assessee was not a manufacturer as per the provisions of the Act. The assessing authority was instructed to pass a fresh order within three months specifically focusing on the issue of the rectified forms.