2013 (1) TMI 715 - HC - VAT and Sales Tax

Fixation of cash security at the rate of ₹ 120 per metric ton for the issue of declaration form for the import of coal by railways - order/circular dated September 26, 2002 challenged - Held that - Do not find any illegality in the order passed by the Commissioner of Trade Tax demanding cash security of ₹ 120 per metric ton for issue of declaration form in respect of coal to be imported by railways. The same has a reasonable nexus and cannot be said to be arbitrary. In view of the foregoing discussions, we do not find any merit in this writ petition which is hereby dismissed.

Summary

Issues:
Challenge to circular fixing cash security for import of coal by railways under the U.P. Trade Tax Act, 1948.

Analysis:
The petitioner, a coal agent importing coal from outside Uttar Pradesh, challenged the circular dated September 26, 2002, issued by the Commissioner of Trade Tax fixing cash security at Rs. 120 per metric ton for the issuance of declaration form for coal import by railways. The petitioner argued that the security amount was arbitrary, confiscatory, and lacked a reasonable nexus with the actual tax liability. The petitioner contended that the security amount of Rs. 120 per metric ton was excessive and would significantly impact its capital as a small trader.

The respondents justified the security demand stating it was issued under section 8C(3A) of the U.P. Trade Tax Act. They argued that the increase in security was reasonable due to the rise in coal rates and freight charges. A comparative study showed an increase in coal rates by Rs. 300 per metric ton, leading to a 20% increase in the security amount to Rs. 120 per metric ton.

The court noted that under section 8C(3A) of the Act, the Commissioner had the authority to issue orders for cash security for obtaining prescribed forms. Coal was a notified good, allowing the Commissioner to demand cash security for obtaining declaration forms. The court observed that the security amount for coal import by road was Rs. 125 per metric ton, while for railways, it was fixed at Rs. 120 per metric ton. Referring to a previous case, the court upheld the validity of a similar circular demanding Rs. 150 per metric ton for coal import.

Based on the comparative increase in coal rates, freight charges, and selling prices, the court found the security amount of Rs. 120 per metric ton for coal import by railways to be reasonable and not arbitrary. Citing precedents and the nexus between the security amount and market conditions, the court dismissed the writ petition, concluding that the security demand was valid and proportionate.

In conclusion, the court upheld the circular fixing cash security at Rs. 120 per metric ton for the import of coal by railways, finding it reasonable and not arbitrary, based on market conditions and previous judgments.