2015 (10) TMI 1923 - HC - VAT and Sales Tax

Demand of interest - Samadhan Yojna - Composition Fee / Scheme under UPTT - Held that - Initially, the composition fee consisted of one per cent of the total contract amount; the only restriction was that the contractor could not avail of the composition fee of one per cent and had to pay the tax as provided under the Act, if the inter-state purchase of raw material exceeded five per cent of the contract amount. There is no dispute that it exceeded five per cent. If things stood so and there were no further development, the revisionist would become liable under the original Circular to be taxed in terms of the said provision; but, there is a subsequent development in the form of an amendment, which is sought to be traced under Section 7D of the Act, which provided for composition fee being paid and, as per the said provision, which came out on 28.10.2003, with retrospective effect and, as far as these cases are concerned, covering the assessment years in question, if three per cent is paid in place of one per cent, the regular provision of the assessment would not be applicable, if the inter-state purchase exceeded more than five per cent of the contract amount. Therefore, even if the inter-state purchase of the raw material made by the revisionist exceeded five per cent, if the revisionist exercised the option to pay three per cent composition fee, then, that would put an end his tax liability for the period. - Therefore, in place of the tax, which he would have had to pay under the earlier scheme, in view of his inter-state purchase having exceeded five per cent, as he had opted to pay three per cent and which he could possibly do only after 28.10.2003, it cannot be mulcted with interest for the period prior to 28.10.2003. Tribunal has not correctly appreciated the effect of the order dated 28.10.2003. The Tribunal, in fact, found that the order dated 28.10.2003 is retrospective and, therefore, the terms of the order dated 28.10.2003 must be given full effect. We would think that the first appellate authority has correctly understood the legal position. It is also relevant to mention here that the Circular dated 28.10.2003 does not provide for payment of interest for the period prior to its date. - Decided in favour of assessee.

Summary

Issues:
Assessment of trade tax liability based on inter-state purchase exceeding contract amount, imposition of interest, interpretation of Circular dated 28.10.2003, legality of interest imposition pre and post Circular, applicability of retrospective effect, correctness of Tribunal's decision.

Analysis:
The case involved a registered dealer under the U.P. Trade Tax Act, working as a contractor, for Assessment Years 2000-2001 and 2001-2002. Initially, under Section 7D of the Act, a Circular allowed for composition of trade tax at one per cent of total contract receipts, subject to conditions. If inter-state purchase of raw material exceeded five per cent of the contract amount, the assessee had to pay tax on the excess amount. However, a subsequent amendment through a Notification on 28.10.2003 provided an option to deposit three per cent composition fee instead of one per cent, exempting from tax assessment. The Assessing Officer completed assessment under the amended scheme, directing the revisionist to pay three per cent and interest retrospectively.

The revisionist appealed, with the first appellate authority ruling interest liability only post 28.10.2003. The Revenue appealed to the Tribunal, which upheld the Assessing Officer's decision, leading to the revisionist's challenge. The substantial questions of law raised focused on interest imposition pre and post Circular, the legality of interest on non-existent tax, fault attribution, and retrospective effect of the Circular.

The High Court analyzed the impact of the Circular dated 28.10.2003, emphasizing that if the revisionist opted for three per cent composition fee post-amendment, no tax liability existed, hence no interest could be imposed pre-amendment. The Court disagreed with the Tribunal, asserting the retrospective nature of the Circular and the absence of interest provision pre-28.10.2003 in the Circular. Consequently, the substantial questions of law were answered in favor of the revisionist, setting aside the Tribunal's order and reinstating the first appellate authority's decision. The revisionist was advised to seek refund if interest was paid, with the Revisions allowed, and no costs imposed.