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2025 (4) TMI 440 - HC - VAT / Sales TaxImposition of Tax above 26% as contemplated under Section 3-A(1)(c) of U.P. Trade Tax Act - HELD THAT - The liability to tax under the U.P. Trade Tax Act as then was for the respective financial years arose from Section 3 of the Act. The rate of tax were prescribed under Section 3-A and for the revisionist the tax prescribed was pegged at a rate not exceeding 26%. That apart from the tax as could be levied and collected the State Government in its legislative wisdom prescribed for levy of additional tax on certain dealers however the limit for levy and collection of the additional tax was pegged at not exceeding 25% on the tax paid. The said two taxes prescribed under the Act are separate and distinct. The vires of Section 3-E is not under challenge and thus the issue is to be decided only on the basis of the statutory prescriptions as existed at the time of passing of the assessment order. Merely because in the subsequent year the State Government in its legislative wisdom had decided to omit the provisions of Section 3-E the same itself cannot be a binding factor to form a view that the State Government even for the relevant years (relevant for the present cases) could not impose the different taxes which in the present case are trade tax as well as additional tax. The reliance placed upon the judgment in the case of Pappu Sweets and Biscuits 1998 (10) TMI 452 - SUPREME COURT would have no applicability to the facts of the present case as on a plain reading of Sections 3 3-A and 3-E are separate and distinct - Thus finding that the tax and the additional tax are two separate taxes which are leviable by virtue of the statutory enactments the contention of the revisionist cannot be accepted. The revisions are dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Justification for Imposing Tax Above 26% Relevant Legal Framework and Precedents: The primary legal framework involves Section 3-A and Section 3-E of the U.P. Trade Tax Act. Section 3-A outlines the rates of tax, with a maximum rate of 26% for specific goods. Section 3-E allows for additional tax on certain dealers whose turnover exceeds ten lakh rupees. Court's Interpretation and Reasoning: The Court interpreted Sections 3-A and 3-E as distinct provisions. Section 3-A prescribes the maximum rate for the basic tax, while Section 3-E allows for an additional tax, not exceeding 25% of the tax payable under other provisions of the Act. Key Evidence and Findings: The Court found that the legislative framework allows for both a basic tax and an additional tax. The imposition of tax beyond 26% was justified under the combined application of Sections 3-A and 3-E. Application of Law to Facts: The Court applied the provisions of Sections 3-A and 3-E to determine that the total tax liability could exceed 26% when considering both the basic and additional taxes. Treatment of Competing Arguments: The revisionist argued that the total tax should not exceed 26% as per Section 3-A. The State contended that additional tax under Section 3-E is separate and does not violate the 26% cap. The Court sided with the State, emphasizing the distinct nature of the two tax provisions. Conclusions: The Court concluded that the Trade Tax Tribunal was justified in confirming the imposition of tax above 26% due to the separate imposition of additional tax under Section 3-E. Issue 2: Justification for Imposing Tax at 32.5% Relevant Legal Framework and Precedents: The same legal framework applies, focusing on the interpretation of Sections 3-A and 3-E of the U.P. Trade Tax Act. Court's Interpretation and Reasoning: The Court reiterated its interpretation that the provisions for basic and additional tax are distinct and can collectively result in a tax rate exceeding 26%. Key Evidence and Findings: Evidence included statutory provisions and legislative amendments. The Court noted that subsequent legislative amendments increased the maximum tax rate and removed Section 3-E, but these changes did not apply retroactively. Application of Law to Facts: The Court applied the statutory provisions as they existed during the relevant assessment years, affirming the legality of the imposed tax rate of 32.5%. Treatment of Competing Arguments: The revisionist's argument relied on the perceived cap under Section 3-A, while the State argued for the validity of additional tax under Section 3-E. The Court upheld the State's interpretation. Conclusions: The Court concluded that the imposition of a 32.5% tax was justified under the legislative framework applicable during the relevant years. 3. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: "The said two taxes prescribed under the Act are separate and distinct. The vires of Section 3-E is not under challenge and thus, the issue is to be decided only on the basis of the statutory prescriptions as existed at the time of passing of the assessment order." Core Principles Established:
Final Determinations on Each Issue:
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