2013 (6) TMI 504 - HC - VAT and Sales Tax

Levy of tax on opium - according to the assessee, cultivators are handing over the opium exclusively to the assessee i.e. Narcotic Department. So, there is no question of sale or levy of the tax, but the trade tax department has levied the tax as well as charged the interest. - held that - Hon ble Supreme Court has observed that the opium grown by the cultivators is taxable item to trade tax. - Decided against the assessee. The opium is taxable item under the U.P. Trade Tax Act. Therefore, the impugned orders passed by the Tribunal are hereby set aside and the orders passed by the A.O. are hereby restored in the revisions in the question. Thus, the revisions filed by the department are allowed. - Decided in favor of assessee.

Summary

Issues involved:
1. Dispute regarding the tax levied on opium cultivation by farmers for the Narcotic Department.
2. Interest imposed under Section 8(1) of the U.P. Trade Tax Act, 1948.
3. Tax liability on opium grown by farmers on behalf of the Narcotic Department.

Analysis:
I. The first issue revolves around the tax levied on opium cultivation by farmers for the Narcotic Department. The Narcotic Department argued that they are the exclusive owners of the opium crop grown by cultivators under contract, and thus, no sale of opium occurs. However, the Additional Chief Standing Counsel contended that the Supreme Court has held that the sale of opium to the Narcotic Department is a taxable item. Citing various legal precedents, it was established that the opium grown by cultivators is indeed subject to trade tax. Consequently, the revisions filed by the Narcotic Department against the tax levied were dismissed.

II. The second issue pertains to the interest imposed under Section 8(1) of the U.P. Trade Tax Act, 1948. The provision mandates the payment of interest on unpaid tax amounts, with the charging of interest being deemed mandatory. Legal authorities were cited to emphasize that courts do not have the power to waive or restrict the charging of interest. Referring to past judgments, it was reiterated that the charging of interest is obligatory. Thus, the revisions seeking waiver of interest were dismissed, upholding the Tribunal's orders.

III. The final issue addresses the tax liability on opium grown by farmers for the Narcotic Department. The Tribunal had initially ruled that tax was not leviable on opium cultivated by farmers on behalf of the Narcotic Department. However, the Supreme Court's decision in a related case established that opium is indeed a taxable item under the U.P. Trade Tax Act. Consequently, the Tribunal's orders were set aside, and the department's appeals were allowed. In conclusion, the revisions filed by the assessee were dismissed, while those filed by the department were upheld.