2018 (8) TMI 3 - HC - VAT and Sales Tax

Concessional Rate of Tax - sales of molasses - taxable at 2.5% or 8%? - claim of the revisionist was that since the sales are covered against Form 3-B the revisionist, therefore, is liable to pay the tax at the concessional rate of 2.5% - Principles of natural justice - Held that - Admittedly, the purchase of molasses is being used in the chemical unit of M/s Dhampur Sugar Mills Ltd. and there is no illegality committed by the revisionist while affecting the sale to M/s Dhampur Sugar Mills Ltd. against Form 3-B which are issued by the assessing authority of the purchaser M/s Dhampur Sugar Mills Ltd. and since the sales are affected against Form 3-B, there is no wrong at the hands of the present revisionist to charge the tax at the concessional rate. Also, before proceeding and completing the assessment proceedings/order, no adequate opportunity of hearing was provided to the revisionist in this regard nor even any show cause notice was issued. Revision allowed.

Issues:
1. Dispute over the tax rate on transactions covered against Form 3-B for the assessment year 2002-03.
2. Whether the revisionist is liable to pay tax at a concessional rate of 2.5% instead of 8% on sales of molasses to another entity.
3. Allegation of unjust imposition of higher tax rate without proper inquiry or opportunity for explanation.
4. Interpretation of Form 3-B issuance and validity in relation to tax liability.
5. Assessment of sales against Form 3-B and applicability of concessional tax rate.
6. Lack of natural justice in assessment proceedings and order.
7. Appeal against the first appellate authority's decision in favor of the revisionist.
8. Legal validity of the tax liability imposition at 8% instead of 2.5% on the revisionist.

Analysis:
The judgment by the High Court of Allahabad pertains to a revision petition challenging the Trade Tax Tribunal's order regarding the tax rate applicable to transactions against Form 3-B for the assessment year 2002-03. The revisionist, a limited company engaged in sugar production, contested the imposition of an 8% tax rate instead of the claimed 2.5% on sales of molasses to another entity. The assessing authority had concluded that the revisionist's sales were subject to the higher tax rate due to the nature of the purchasing entity's operations. However, the first appellate authority overturned this decision, citing lack of natural justice and justification for the higher tax rate.

The first appellate authority found in favor of the revisionist, emphasizing that the assessing authority had not conducted a proper inquiry or provided an opportunity to explain the discrepancy in tax rates. It was noted that the revisionist's claim of liability at 2.5% appeared prima facie correct, and the assessing authority had failed to verify crucial details with the purchasing unit. The appellate authority quashed the assessment order, confirming the tax liability at 2.5% for the revisionist.

Subsequently, the Tribunal reversed the appellate authority's decision, reinstating the 8% tax liability. The revisionist argued that the Form 3-B issued by the purchasing entity acknowledged the 2.5% tax rate and that the sales were legitimate. The High Court, after considering the submissions, found merit in the revisionist's arguments. It highlighted the validity of Form 3-B issuance by the purchasing entity and the absence of illegality in the revisionist's sales against the form. The Court also criticized the lack of adequate hearing and show cause notice in the assessment proceedings.

Ultimately, the High Court set aside the Tribunal's order, affirming the first appellate authority's decision in favor of the revisionist. The judgment concluded by allowing the revision, thereby confirming the tax liability at the concessional rate of 2.5% for the revisionist.

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