2015 (9) TMI 256 - HC - VAT and Sales Tax

Validity of Compounding Scheme Petitioners applied for compounding scheme for session 2007-08 & 2008-09, which was rejected by assessing authority on ground that regular assessment orders had already been passed for session 2007-08 Whether petitions challenging constitutionality validity of compounding scheme dated 9.6.2009 for season 1.1.2008 to 30.9.2008 are maintainable Held that - impugned compounding scheme neither violates any fundamental or constitutional rights of petitioners nor it lacks legislative competence nor it is violative of any of provisions of Act Under said circumstances, no unconstitutionality in compounding scheme is found Relief to declare compounding scheme to be ultra vires, is not entertainable inasmuch as on one hand petitioners have prayed for declaring scheme to be ultra vires and on other hand they prayed that benefit of scheme be provided to them for part of period Well settled that Courts, in exercise of their power of judicial review did not ordinarily interfere with policy decisions of executive unless policy can be faulted on account of malafide, unreasonableness, arbitrariness or unfairness etc Therefore relief sought by petitioners to declare aforesaid compounding scheme as ultra vires, hereby rejected. Compounding Scheme Applicability for part of session Whether compounding applications for part of season from 1.4.2008 to 30.9.2008 may be accepted despite fact that compounding under Section 6 of UP VAT Act was offered for fixed period and for fixed lump sum amount Held that - scheme does not provide for computation of lump sum amount for part of season which may be accepted by assessing authority Settled law that in interpreting taxing statute, equitable consideration are entirely out of place nor can taxing statute be interpreted on any assumptions or presumptions Thus it is not open for assessing authority either to bifurcate period of season or lump sum amount under scheme unless assessing authority is permitted to do so under scheme itself In absence of any such direction or power, assessing authority committed no error in rejecting compounding application Therefore compounding scheme is valid and petitioners were not entitled to apply for compounding Decided against Petitioners.

Summary

Issues Involved:
1. Constitutionality and validity of the compounding scheme dated 9.6.2009.
2. Applicability of the compounding scheme for part of the season (1.1.2008 to 31.3.2008) where regular assessment orders were already passed.
3. Acceptance of compounding applications for part of the season (1.4.2008 to 30.9.2008) under the compounding scheme.

Issue-wise Analysis:

Issue No. I: Constitutionality and Validity of the Compounding Scheme
The court examined whether the compounding scheme dated 9.6.2009 was unconstitutional. It was noted that the validity of a provision can only be challenged if it infringes fundamental rights, lacks legislative competence, or violates any provision of the Act. The compounding scheme was framed under Section 6 of the U.P. Value Added Tax Act, 2008, which provides the assessing authority the discretion to accept composition money. The petitioners failed to demonstrate that the scheme violated any constitutional provisions or Section 6 of the Act. The court also emphasized that policy decisions of the executive are generally not subject to judicial review unless they are unreasonable, arbitrary, or unfair. Citing precedents, the court upheld the scheme's constitutionality, stating that the petitioners cannot simultaneously challenge the scheme's validity and seek its benefits.

Issue No. II: Applicability of the Compounding Scheme for Part of the Season
The court addressed whether the compounding scheme could be applied for the period 1.1.2008 to 31.3.2008, for which regular assessment orders were already passed. It was undisputed that regular assessment orders were completed under Section 28 of the Act, and tax was assessed. The scheme provided for compounding for the entire season from 1.1.2008 to 30.9.2008, and did not allow for partial application. Therefore, once the assessment orders were passed, the scheme could not be applied retrospectively for the same period.

Issue No. III: Acceptance of Compounding Applications for Part of the Season
The court examined whether compounding applications for the period 1.4.2008 to 30.9.2008 could be accepted under the scheme. The scheme directed the assessing authorities to accept lump sum amounts for the entire season, and did not provide for part-season compounding. The court emphasized that tax statutes must be interpreted strictly and literally. The assessing authority could not bifurcate the period or the lump sum amount unless explicitly allowed by the scheme or Section 6 of the Act. The court cited precedents to support that compounding schemes are based on agreements between the dealer and the state, and cannot be imposed or altered unilaterally.

Conclusion:
The court held that the compounding scheme dated 9.6.2009 was constitutionally valid. The petitioners were not entitled to apply for compounding for the period 1.1.2008 to 31.3.2008 as regular assessment orders were already completed. Additionally, the petitioners could not opt for compounding for the period 1.4.2008 to 30.9.2008 under the scheme. The writ petitions were dismissed, and the court found no merit in the arguments presented by the petitioners.