2009 (5) TMI 885 - HC - VAT and Sales Tax

Whether, the Commercial Tax Tribunal has erred in law in dismissing the second appeal, filed under section 10 of the U.P. Trade Tax Act, 1948, on the ground that the Joint Commissioner, Commercial Tax, has no authority to sign the memorandum of appeal on behalf of Commissioner, Commercial Tax?, and whether an appeal filed only by the State is maintainable on behalf of Revenue, against order of the Joint Commissioner (Appeals)? Whether, the Commercial Tax Tribunal and the Joint Commissioner (Appeals), Commercial Tax, have erred in law in holding that the assessee, a works contractor, is not liable to pay the tax in respect of amount mentioned in the certificate of tax deduction at source, which was not verified nor the deducted amount paid in the account of the State Government? Held that - The Tribunal has committed grave error of law in rejecting the memorandum of appeals filed before it by the Commissioner of Commercial Tax on the ground that neither Commissioner could maintain appeal in respect of order passed by Joint Commissioner, Commercial Tax, nor the memorandum was signed by the authorised person. The finding and order recorded by the Commercial Tax Tribunal, Dehradun, in this regard is liable to be set aside. We hold that the three second appeals filed by the Commissioner, Commercial Tax, before the Tribunal were maintainable against order of the Joint Commissioner, and were duly signed by the person authorized. Question of law No. 1 stands answered in favour of the Revenue/appellant. Where under a statute contractee has been made an agency to collect the tax in the form of deductions in the payment, if the amount of tax is deducted by such agency, the assessee (dealer) cannot be made liable to pay the same tax again. But if such deduction is found false or the T.D.S. certificate is found not genuine, it cannot be said that the dealer (assessee) is not liable to pay the tax demanded by the A.O. Accordingly, question of law No. 2 stands also answered in favour of the Revenue/appellant.

Issues Involved:
1. Competence to maintain and sign the appeal by the Commissioner of Commercial Tax.
2. Liability of the works contractor to pay tax in respect of unverified amounts mentioned in T.D.S. certificates.

Detailed Analysis:

Issue 1: Competence to Maintain and Sign the Appeal
The first issue concerns whether the Commercial Tax Tribunal erred in law by dismissing the second appeal filed under section 10 of the U.P. Trade Tax Act, 1948, on the grounds that the Joint Commissioner, Commercial Tax, lacked the authority to sign the memorandum of appeal on behalf of the Commissioner, Commercial Tax, and whether an appeal filed only by the "State" is maintainable on behalf of Revenue against the order of the Joint Commissioner (Appeals).

The court examined sub-section (2) of section 10 of the U.P. Trade Tax Act, 1948, which allows any person aggrieved by an order to prefer an appeal to the Tribunal. The Explanation to this sub-section clarifies that "any person" includes the Commissioner for orders passed by any authority other than the Commissioner. The court found that the Commissioner was indeed authorized to file the second appeal and that the Joint Commissioner was authorized to sign the memorandum of appeal on behalf of the Commissioner, as per the relevant notifications and orders.

The Tribunal's decision to reject the memorandum of appeals on these grounds was deemed a grave error of law. The court held that the second appeals filed by the Commissioner were maintainable and duly signed by the authorized person.

Issue 2: Liability of the Works Contractor to Pay Tax
The second issue addresses whether the Commercial Tax Tribunal and the Joint Commissioner (Appeals) erred in law in holding that the assessee, a works contractor, is not liable to pay tax in respect of amounts mentioned in T.D.S. certificates, which were not verified nor deposited in the State Government's account.

The court noted that under section 8D of the U.P. Trade Tax Act, 1948, the contractee is required to deduct tax at source for payments to the works contractor. The court found that the amounts in question were not deposited in the State Government's account, and thus, the Government had no liability to refund any amount. The court disagreed with the view that once T.D.S. certificates are issued, the dealer has no liability to pay the tax, especially if the amounts were not deposited in the Government treasury.

The court clarified that sub-section (5) of section 8D treats deductions credited into the Government treasury as payment of tax on behalf of the person from whose bills the deductions were made. If the amount was neither deducted nor deposited, merely issuing a T.D.S. certificate does not constitute payment of tax. The court emphasized that the tax authorities should proceed against the contractee under sub-sections (6) and (7) of section 8D if the deducted amount is not deposited.

The court concluded that if T.D.S. certificates are found false, the assessing authority can recover the tax from the assessee. However, if the T.D.S. is genuine and the contractee failed to deposit the amount, the authorities should proceed against the contractee.

Conclusion:
Both questions of law were answered in favor of the Revenue/appellant. The revisions were allowed, and the impugned orders of the Commercial Tax Tribunal were set aside, while the orders of the first appellate authority, Joint Commissioner (Appeals), were not interfered with.

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