2013 (11) TMI 770 - HC - VAT and Sales Tax

Tax on the turnover upto the level of base production, in which stock transfer and consignment would not be included - Exemption with reference to the turnover of sales - Held that - if the interpretation suggested by the petitioner is accepted in that event the unit will be entitled to exemption on branch transfer as well as on consignment sale without paying any trade tax either in the State of U.P., or Central, and would also at the same time be entitled to the exemption from, or reduction in trade tax on the production, over and above the base production, which was not the intention of the notification. The exemption on the stock transfer, or transfer of goods for consignment sale, is by the operation of law inasmuch as they do not fall within the purview of sale. This benefit is available even to the existing Units. Under Section 4-A of the Act and the notifications issued thereunder the benefit of exemption to the existing units, which have undergone expansion, diversification or modernisation is contemplated on the quantity of the goods in excess of the base production. The quantity of base production is determined only once on the consideration of the capacity of the production and maximum production of any one year of preceding five consecutive years. Such determined quantity of base production is the basis for the exemption for the period, for which the unit is entitled for exemption. The unit which has undergone expansion is thus entitled for the exemption on the turnover of the quantity in excess of the quantity of base production plus stock of the base production of the previous years - Decided partly in favour of assessee.

Summary

Issues:
Challenge to Government Order/Circular dated 25.1.2003 amending earlier decisions, denial of stock transfer for calculation of base production, issuance of impugned notices, and restraining respondent from proceedings.

Analysis:
1. The petitioner challenged a Government Order/Circular dated 25.1.2003, amending previous decisions regarding tax payment by Industrial Units under Section 4-A of the U.P. Trade Tax Act. The petitioner sought to quash an assessment order for the year 2006-07, which denied stock transfer for calculating base production. Additionally, the petitioner requested the quashing of impugned notices and a writ of prohibition against further proceedings.

2. Following the circular dated 25.1.2003, tax authorities initiated various proceedings under the U.P. Trade Tax and Central Sales Tax. A Division Bench, considering conflicting decisions, referred the matter to a Larger Bench for reconsideration.

3. A Full Bench concluded that units undergoing expansion are entitled to exemption on turnover exceeding base production quantity, including stock transfers. The Full Bench overruled previous decisions, emphasizing that the exemption on stock transfers is by law and not intended to allow tax avoidance.

4. The State Government filed a Special Leave to Appeal against the Full Bench's decision. The petitioner complied with an interim order by furnishing security, subject to further directions.

5. Given the Full Bench's decision, the assessment order denying stock transfer for base production calculation was modified. Assessing Authorities were directed to adjust demands accordingly, leading to the disposal of the writ petition.