2014 (4) TMI 642 - HC - VAT and Sales Tax

Validity of the orders u/s 9(4) and 29(3) of the U.P. Trade Tax Act Forfeiture of amount of tax deposited - Exemption under Entry Tax Act - Imported photographic papers Held that - Counter affidavit has been filed by the respondent no. 3 mechanically treating the petition as challenging the validity of the entry tax and without applying mind that the petition does not raise the question of validity of the entry tax - The averments made in the writ petition have not been replied - Matter requires fresh consideration by the assessing authority - While invoking Section 29(3) assessing authority may examine whether the petitioner has realized any entry tax and passed on the same to the customers with reference to the fact that the petitioner has not admitted any liability of tax under the U.P. Trade Tax Act and has claimed exemption therein and not realized any trade tax and may also examine other evidences, which the petitioner may produce during the course of proceeding - Therefore, order dated 30.3.2009 passed u/s 29(3) for the assessment years 2005-06 and 2006-07 are set aside - Further it is observed that any observation made in the assessment order passed u/s 9(4) in respect of forfeiture of amount of tax deposited shall not prejudice the proceeding - Writ petition is allowed in part Matter remitted back to Assessing Authority for fresh consideration - Decided in favour of assessee.

Summary

Issues involved:
Assessment of entry tax on imported photographic color papers, validity of orders under Sections 9(4) and 29(3) of the Act, forfeiture of tax amount deposited, examination of whether the tax was realized and passed on to customers, fresh consideration by assessing authority.

Assessment of Entry Tax:
The petitioner, engaged in the business of photographic color papers imported from outside Uttar Pradesh, contended that these papers fall under the category of 'all kinds of papers' and are subject to entry tax. The assessing authority directed the petitioner to pay entry tax for the assessment years 2005-06 and 2006-07, which was duly paid by the petitioner. However, the authority exempted the turnover from entry tax, stating that photographic paper does not fall under 'all kinds of papers' and hence not liable to entry tax. The authority proceeded to forfeit the tax amount deposited under Section 29(3) of the U.P. Trade Tax Act.

Validity of Orders and Forfeiture:
The petitioner argued that they did not charge entry tax separately from their customers but paid it from their own funds, including other charges. They emphasized that no evidence showed passing on the entry tax to customers, making the forfeiture under Section 29(3) unjustified. The respondent's counsel acknowledged the lack of a counter affidavit addressing these specific claims, suggesting a fresh examination by the assessing authority.

Fresh Consideration and Setting Aside Orders:
The High Court noted the mechanical filing of the counter affidavit without addressing the specific contentions raised in the petition. It directed a fresh examination by the assessing authority to determine if the petitioner had passed on the entry tax to customers and to consider any additional evidence provided. Consequently, the Court set aside the orders passed under Section 29(3) of the Act for the relevant assessment years, clarifying that any observations in the assessment order regarding tax forfeiture should not prejudice future proceedings.

Conclusion:
The writ petition was partially allowed, emphasizing the need for a thorough reevaluation by the assessing authority regarding the assessment of entry tax, realization of tax from customers, and the forfeiture of the tax amount deposited. The judgment highlighted the importance of proper consideration of facts and evidence in tax assessments to ensure fairness and compliance with the law.