2010 (4) TMI 1025 - HC - VAT and Sales Tax

Entry No. 6 of the Notification No. 1626, dated May 21, 1994 challenged Held that - Entry 6(b) of Notification No. 1626, dated May 21, 1994 referred hereinabove is declared violative of articles 301 to 304 in so far it imposes higher rate of tax on the iron and steel than the iron and steel manufactured out of raw material purchased, on which tax has been paid within the State of U. P., it is declared that iron and steel imported by the petitioner from outside the State of U. P. and sold inside the State of U. P. cannot be taxed at the rate higher than the rate prescribed in clause (a) of entry 6 of the above notification. The assessment order for the assessment year 1998-99 is liable to be set aside to this extent. So far as the claim of refund of the excess amount deposited is concerned, the assessing authority may examine the claim of the refund in accordance to the provisions of sections 29 and 29A of the Act. In the result, the writ petition is allowed as stated above.

Issues Involved:
1. Validity of higher tax rate imposition under entry 6(b) of Notification No. 1626 dated May 21, 1994.
2. Refund of excess tax realized from the petitioner.
3. Declaration of entry 6(b) and 6(a) of Notification No. 1626 as invalid and void.
4. Prohibition against realizing higher tax on imported iron and steel sold within the State of U.P.
5. Awarding costs of the petition to the petitioners.

Issue-wise Detailed Analysis:

1. Validity of Higher Tax Rate Imposition:
The petitioners challenged the imposition of a higher tax rate of four percent under entry 6(b) of Notification No. 1626, dated May 21, 1994, arguing it was violative of Articles 301 and 304 of the Constitution of India. They contended that iron and steel imported from outside the State of U.P. should be taxed at the same rate (two percent) as those manufactured from raw materials taxed within the State, as per entry 6(a) of the same notification. The court referred to the Supreme Court's decision in Anand Commercial Agencies v. Commercial Tax Officer, Hyderabad, where a similar tax differentiation was deemed unconstitutional. The court concluded that entry 6(b) was discriminatory and violative of Articles 301 to 304, declaring that iron and steel imported into U.P. cannot be taxed at a higher rate than those manufactured from locally taxed raw materials.

2. Refund of Excess Tax Realized:
The petitioners sought a refund of the excess tax paid under the higher rate imposed by entry 6(b). The court directed the assessing authority to examine the claim for a refund in accordance with sections 29 and 29A of the U.P. Trade Tax Act, 1948. The court acknowledged the petitioners' grievance but emphasized the need for the claim to be processed through the appropriate statutory provisions.

3. Declaration of Entry 6(b) and 6(a) as Invalid and Void:
The petitioners sought a declaration that both entries 6(b) and 6(a) of Notification No. 1626 were invalid and void. The court specifically declared entry 6(b) invalid to the extent that it imposed a higher tax rate on imported iron and steel. However, the court did not find entry 6(a) to be invalid, as it aligned with the constitutional provisions and did not impose discriminatory tax rates.

4. Prohibition Against Realizing Higher Tax:
The petitioners requested a writ of mandamus or prohibition to restrain the respondents from realizing any tax on imported iron and steel at a higher rate. The court's declaration of entry 6(b) as unconstitutional effectively addressed this issue, ensuring that imported iron and steel would not be taxed at a higher rate than locally produced iron and steel.

5. Awarding Costs of the Petition:
The petitioners sought the costs of the petition to be awarded against the respondents. The court allowed the writ petition but did not issue any order regarding the costs, implying that each party would bear its own costs.

Conclusion:
The court allowed the writ petition, declaring entry 6(b) of Notification No. 1626, dated May 21, 1994, as violative of Articles 301 to 304 of the Constitution of India. The court directed that iron and steel imported from outside U.P. and sold within the State cannot be taxed at a rate higher than the rate prescribed in clause (a) of entry 6. The assessment order for the year 1998-99 was set aside to this extent, and the claim for a refund was directed to be examined by the assessing authority in accordance with the relevant statutory provisions. No order was made regarding the costs of the petition.

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