2021 (2) TMI 152 - HC - VAT and Sales Tax

Rebate of tax - sale of cement @ 9% which is not a sale of any manufacturer of cement within the State of U.P. but the same was purchased from Satna outside the State of U.P. - case of Revenue is that assessee had not maintained the specified accounts and had thus not fulfilled one of the conditions for grant of rebate of tax - N/N. 592 dated 27.02.1998 - HELD THAT - Though the notification does not make any separate consideration of the manner in which claim for rebate may be made by traders yet it cannot be forgotten that the rebate granted is not to a person but to the goods. In the instant case, State Government has notified that goods containing more than 10% fly ash contents by weight, would be entitled to a rebate of tax @ 25%. Any goods that would have been thus manufactured containing more than fly ash content would attract the rebate of tax. Merely because the goods may exchange hands from the manufacturer to the trader in a retail chain, before they reach the consumer, the same would be of no material consequence to the rate of tax applicable to such goods. Once goods are found eligible to rebate of tax owing to fly ash content of more than 10%, and that fact gets established at the hands of the manufacturer then subject to the goods remaining the same, they would continue to remain taxable at the reduced rate (upon rebate being given effect to), though they may change hands many times, before they come to be consumed - the observations of the Tribunal that the goods were certified by the manufacturer to be containing fly ash more than 10% by weight, has remained unrebutted, is material. It also does not appear that the goods had been taxed at the full rate when they came to be sold to the assessee. In fact, it appears that the goods were brought by the assessee at the reduced rate of tax. The enquiry to be made in the assessment of a trader would be only two fold. First, whether upon sale by the manufacture the goods were entitled to rebate. Once the claim of rebate was established at the hands of the manufacture, the only thing remaining relevant to be examined would be whether the identity of the goods sold by the trader was the same - the revenue authorities rejected the claim of the assessee only on account of absence of accounts required to be maintained - Revision dismissed.

Summary

Issues:
Challenge to Commercial Tax Tribunal's order modifying tax rate on portland cement purchased from outside State of U.P. based on notification no.592 dated 27.02.1998.

Analysis:
The revision was filed against the Commercial Tax Tribunal's decision modifying the tax rate on portland cement from 12% to 9% based on notification no.592 dated 27.02.1998. The primary issue raised was whether the Tribunal was legally justified in levying tax at 9% on cement purchased from outside the State of U.P. The State Government had issued the notification granting a rebate of tax on goods manufactured using fly ash, subject to specific conditions. One condition was that the goods should be manufactured in a unit located within U.P., which was challenged and deemed discriminatory by the Supreme Court in a previous case.

The revenue's objection was that the assessee did not maintain specified accounts required for the rebate of tax. However, the Tribunal found that the petitioner was a trader who purchased portland cement containing fly ash, and the condition to maintain documents applied to manufacturers, not traders. The Tribunal noted that the revenue did not provide any adverse material against the declaration by the assessee regarding the fly ash content in the goods.

The Tribunal emphasized that the rebate was granted to goods containing more than 10% fly ash content by weight, regardless of the chain of distribution. Once the eligibility for rebate was established by the manufacturer, the goods would continue to be taxed at the reduced rate, even if they changed hands multiple times. The Tribunal observed that the goods were certified by the manufacturer to contain more than 10% fly ash, and there was no evidence that the goods were taxed at the full rate when sold to the assessee.

It was deemed impractical to require traders in the retail chain to maintain the documents specified for manufacturers. The assessment of a trader should focus on whether the goods were entitled to rebate upon sale by the manufacturer and whether the identity of the goods remained the same. In this case, the revenue rejected the assessee's claim solely due to the absence of required accounts, without any doubt on the fly ash content in the cement.

Conclusively, the Tribunal's decision to allow the assessee's appeal was upheld, stating that the order was free from any infirmity. The revision lacked merit and was dismissed accordingly.