2013 (6) TMI 469 - HC - VAT and Sales Tax

Re opening of assessment under the Trade Tax Act as well as under the Entry Tax Act - suppressed sale of raw material for manufacture of Gutkha - survey conducted upon unregistered dealers by the Central Excise Department from whom, it is said that petitioner used to purchase raw material for manufacturing Gutka and on the basis of the report so submitted by the Central Excise Department, proceedings for reopening and reassessment under Section 21 (2) of the Trade Tax Act have been initiated on the ground that certain turn over has escaped from the assessment - Held that - Regarding writ petition No.4287 (MB) of 2013 the assessee has not cooperated as mentioned in the report submitted by the Central Excise Department. At the time of survey, and thereafter, opportunity was given to the petitioner to submit his reply. Prima-facie, there is suppressed sale of raw material for manufacture of Gutkha though which is not taxable but its raw material is taxable, which was purchased by the petitioner from unregistered dealers. When it is so, then we are of the view that matter needs further inquiry by the A.O. The petitioner is at liberty to put its defence before the A.O. We hope that petitioner will cooperate with the A.O. at least this time. Thus no reason to interfere with the impugned order passed by the competent authority to grant the permission under section 21 (2) of the Trade Tax Act for reopening the assessment for the assessment year 2006-07. In its defence, the assessee will get another chance at the time of reassessment proceedings. So, the writ petition dismissed. As regards writ petition No. 4300 (MB) of 2013 it may be noted that there is no dispute in the fact that the petitioner is manufacturer of Gutka. The final product in the form of Gutka has been manufactured for the first time and the same was sold within the local area. Therefore, in view of provisions of Section 2 (C), there is no liability for payment of Entry Tax by the manufacturer, who by no stretch of imagination can be said to be a dealer in terms of Section 2 (b) of the Entry Tax Act, 2007. In the instant case, the assessment order for Entry Tax was already passed. Further, the order was also passed by the first appellate authority. Thus, the assessment order has already merged in the first appellate order, as agreed by both the parties. When it is so, then no reassessment can be made pertaining to Entry Tax and no proceedings under Section-21 can be legally initiated. Hence, set aside the impugned order pertaining to the Entry Tax Act only. The petitioner will get the relief accordingly.

Summary

Issues Involved:
1. Validity of the reassessment order under Section 21(2) of the U.P. Trade Tax Act for the assessment year 2006-07.
2. Liability of the petitioner for Entry Tax under the Entry Tax Act.

Detailed Analysis:

1. Validity of the Reassessment Order under Section 21(2) of the U.P. Trade Tax Act:

The petitioner, a Private Limited Company manufacturing and selling Gutkha Pan Masala, challenged the orders dated 25.03.2013 by the Additional Commissioner, allowing reassessment under the Trade Tax Act and Entry Tax Act for the year 2006-07. The original assessment was completed on 11.03.2008, and a survey by the Central Excise Department on 30.06.2009 revealed unaccounted sales of Gutkha Pouches. Consequently, the Deputy Commissioner sought reassessment permission, which was granted, leading to the present petitions.

The petitioner argued that the reassessment was based on assumptions without concrete evidence of raw material purchases from unregistered dealers. They contended that the limitation for reassessment had expired on 31.03.2008, and the proceedings were unjustified. The petitioner cited several cases, including M/s. M. L. Shukla and Co. Vs. Sales Tax Officer and Mohd. Yakub and Sons vs. Trade Tax Officer, to argue that information from the Central Excise Department could not be used for reassessment.

The court noted that the original assessments were completed, and the normal reassessment period had expired. The Commissioner's permission was sought after recording reasons, but the petitioner was not given an opportunity for a hearing or show cause notice, violating principles of natural justice. The court referred to the case of Mohan Steel Limited vs. CTT and Additional Commissioner vs. Jyoti Traders, emphasizing the need for opportunity before reassessment.

Despite the petitioner's non-cooperation during the survey, the court found the reassessment justified due to the prima facie evidence of suppressed sales and taxable raw material purchases from unregistered dealers. The court dismissed the writ petition No.4287 (MB) of 2013, allowing the reassessment proceedings to continue.

2. Liability for Entry Tax under the Entry Tax Act:

The petitioner also challenged the reassessment under the Entry Tax Act, arguing that as a manufacturer of Gutkha, they were not liable for Entry Tax. They contended that Entry Tax is payable by dealers bringing goods into a local area, not by manufacturers. The petitioner cited Section 4 (1) of the Entry Tax Act and argued that the reassessment was unjustified as the original assessment order had already merged with the first appellate order.

The court agreed with the petitioner, noting that the manufacturer is only required to collect Entry Tax from dealers and deposit it with the exchequer. The court found no evidence of Entry Tax evasion and ruled that the petitioner, as a manufacturer, was not liable for Entry Tax. Consequently, the court set aside the impugned order dated 25.03.2013 pertaining to the Entry Tax Act, allowing writ petition No. 4300 (MB) of 2013.

Conclusion:

The court dismissed writ petition No.4287 (MB) of 2013, allowing reassessment under the Trade Tax Act, while writ petition No. 4300 (MB) of 2013 was allowed, exempting the petitioner from liability under the Entry Tax Act.