2010 (11) TMI 890 - HC - VAT and Sales Tax

Whether the compounding amount has to be paid on the basis of the installed capacity (with respect to six roller bodies in the instant case) or on the basis of the probable/actual manufacturing as against the installed capacity? Held that - Taking notice of the fact that the assessing officer was not competent to make assessment of his own as against the agreement/the application moved by the petitioner under the compounding scheme floated by the State Government under section 7D of the Act. In case the assessing officer was of the view, that too, after making an inspection in such a manner, which might be necessary, that there was some dispute with respect to the installed unit/capacity of the petitioners-industry or the capacity entered into in terms of the Scheme itself, he was to refer the matter itself to the Commissioner, who would have taken necessary steps for adjudicating upon the aforesaid limited issue but he could not have power to assess the amount under the Scheme on a different capacity. Thus we are of the view that the assessment orders passed in both the writ petitions as well as the appellate order cannot be sustained, which are hereby set aside.The matter is remitted to the assessing officer, who shall forward it to the Joint Commissioner (Executive), who will make an enquiry in the matter and shall submit his report to the Commissioner within a maximum period of one month from the date of receipt of a certified of this order.

Summary

Issues:
- Interpretation of terms and conditions of Compounding Scheme under section 7D of the U.P. Trade Tax Act, 1948.
- Jurisdiction of authorities under the Scheme.
- Dispute regarding capacity determination for tax calculation.
- Competency of assessing officer in making assessments under the Scheme.

Interpretation of Compounding Scheme:
The judgment dealt with the interpretation of the Compounding Scheme floated by the State Government under section 7D of the U.P. Trade Tax Act, 1948. The scheme provided specific terms for dealers engaged in manufacturing atta, maida, and sooji to benefit from compounding tax payment. It outlined the criteria based on the length of roller bodies and their installed capacity, specifying the tax amount per roller body. The application process, including the declaration of production against installed capacity, was crucial under the scheme.

Jurisdiction of Authorities:
The judgment highlighted the jurisdiction of authorities under the Compounding Scheme. It emphasized that the Commissioner of Trade Tax held the final authority in determining eligibility and resolving disputes related to the scheme. The assessing officer's role was limited to inspection, with the Joint Commissioner (Executive) having the final say in capacity disputes. Any hindrance to inspection could lead to rejection of the application by the Commissioner.

Capacity Dispute and Tax Calculation:
A significant issue addressed was the dispute regarding capacity determination for tax calculation. The petitioner's contention on actual production versus installed capacity for tax payment was a focal point. The assessing officer's interpretation favored tax calculation based on installed capacity, leading to discrepancies in the tax amount deposited. The disagreement on this matter necessitated intervention by the Joint Commissioner and the Commissioner for resolution.

Assessing Officer's Competency:
The judgment clarified the assessing officer's competency in making assessments under the Compounding Scheme. It emphasized that the assessing officer could not unilaterally assess tax amounts based on different capacity determinations than those provided in the application under the scheme. Any capacity disputes or discrepancies required referral to the Commissioner for adjudication, ensuring adherence to the scheme's terms.

In conclusion, the judgment set aside the assessment orders and directed a reevaluation by the assessing officer, followed by an inquiry by the Joint Commissioner and final decision by the Commissioner. This process was specified for the financial years 2005-06, 2006-07, and 2007-2008 under the Compounding Scheme. The judgment underscored the importance of adherence to the scheme's terms, jurisdictional clarity, and proper dispute resolution mechanisms for tax assessments under section 7D of the U.P. Trade Tax Act, 1948.