2005 (5) TMI 635 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity and reasonableness of the circular dated 26.9.2002 issued by the Commissioner of Trade Tax, U.P., Lucknow, fixing cash security at Rs. 150/- per metric ton for issuance of declaration form for import of coal.

Detailed Analysis:

1. Validity and Reasonableness of the Circular Dated 26.9.2002:
The petitioners, various coal dealers, challenged the circular issued by the Commissioner of Trade Tax, U.P., Lucknow, which mandated a cash security deposit of Rs. 150/- per metric ton for the issuance of Form 31 for coal import. The petitioners argued that this amount was arbitrary, excessive, and beyond the scope of Section 8C(3-A) of the U.P. Trade Tax Act, 1948, as the tax payable on the coal import was only Rs. 70/- per metric ton.

The respondents defended the circular, stating that the increase from Rs. 125/- to Rs. 150/- per metric ton was justified to cover the escalation in coal prices and safeguard revenue interests. They highlighted that the Commissioner had the authority under Section 8C(3-A) to issue such general orders for cash security deposits.

The court examined the provision of Section 8C(3-A) of the Act, which allows the Commissioner to direct cash security deposits for issuing declaration forms for certain notified goods, including coal. The court referred to several precedents, including the cases of M/s West Coal Handling Agent and M/s Giriraj Stone Crusher Pvt. Ltd., which upheld the Commissioner's power to demand cash security, provided it had a reasonable nexus to the tax payable.

The court found that the circular dated 26.9.2002 was a general order in writing, as required by Section 8C(3-A), and that coal was a notified good. The court noted that the Commissioner had based the cash security amount on the rates provided by Bharat Coking Coal Ltd., Dhanbad, and that the increase in security was justified by the rise in coal prices and inflation.

The court also addressed the petitioners' argument of hostile discrimination, noting that the slight difference in freight charges by railways and private transport operators did not constitute significant discrimination. The court emphasized that the primary purpose of the cash security was to protect revenue interests, and any surplus after assessment would be refunded.

Conclusion:
The court concluded that the circular dated 26.9.2002 was neither arbitrary nor unreasonable. The fixation of Rs. 150/- per metric ton for the issuance of Form 31 was upheld as it had a reasonable nexus to the tax payable and was within the Commissioner's authority under Section 8C(3-A) of the Act. The petitions were dismissed with costs assessed at Rs. 5,000/- payable by each petitioner individually.