2014 (1) TMI 1465 - HC - VAT and Sales Tax

Levy of entry tax and penalty on the sale of sugar manufactured in the petitioner s sugar mill through its selling agents - Whether a manufacturer who has sold the goods to a dealer failed to receive the amount then he is liable to pay penalty, tax and interest in terms of Section 12(3) of the U.P. Tax on Entry of Goods Act, 2008 - Held that - petitioner company could not be compelled to make deduction of entry tax at source for sales made to persons/ dealers within the same local area. For the respondents, it is stated that transaction in question has not been examined, as the petitioner has not filed his reply. The question whether sale is made at factory gate, or the petitioner s agents are selling the sugar into different local areas where on the entry of non-levy sugar in that local area, entry tax is payable, which the petitioner is required to collect from its selling agents and deposit, failing which penalty is leviable, is question of fact - authorities, however, are still required to decide the petitioner s objections that the situs of sale is at factory gate and not in any other local area. The matter requires investigation of facts by the competent authority after considering the petitioner s objections - Following decision of Mawana Sugars Ltd. v. Deputy Commissioner, Commercial Tax & Ors. 2013 (6) TMI 28 - ALLAHABAD HIGH COURT - Decided in favour of assessee.

Issues:
1. Jurisdiction of imposing entry tax and penalty on sale of sugar under U.P. Entry of Goods into Local Areas Act, 2007.
2. Liability of manufacturer for penalty, tax, and interest under Section 12(3) of U.P. Tax on Entry of Goods Act, 2008.
3. Provisional assessment under Section 10 of U.P. Tax on Entry of Goods Act, 2008.
4. Examination of nature of transaction and liability of manufacturer to realize tax.
5. Validity of impugned notice and jurisdiction of authorities.
6. Interpretation of findings in Mawana Sugars Ltd. case regarding deduction of entry tax at source.

Detailed Analysis:

1. The petitioner challenged a notice under Section 12(3) of the U.P. Entry of Goods into Local Areas Act, 2007 for levy of entry tax and penalty on the sale of sugar manufactured in the petitioner's sugar mill through its selling agents. The petitioner contended that since the sugar is sold to selling agents at the factory gate, there is no entry of non-levy sugar into any local area for tax imposition, thus questioning the jurisdiction of the notice.

2. The petitioner raised concerns about liability for penalty, tax, and interest under Section 12(3) of the U.P. Tax on Entry of Goods Act, 2008. The court directed the respondents to file a reply to these contentions, emphasizing the need for a detailed examination of the nature of the transaction to determine the manufacturer's obligations regarding tax realization.

3. The issue of provisional assessment under Section 10 of the U.P. Tax on Entry of Goods Act, 2008 was also raised. The respondents clarified that the impugned notice primarily related to penalty under Section 12(3) of the Entry Tax Act, with the mention of provisional assessment serving as a cautionary measure rather than immediate action.

4. The court noted the importance of investigating the transaction's specifics, particularly the situs of sale, to ascertain whether the entry tax liability arises due to the sale of sugar in different local areas. The authorities were tasked with examining the petitioner's objections and determining the factual aspects of the sale to resolve the jurisdictional and tax-related issues.

5. The court addressed the validity of the impugned notice and the jurisdiction of authorities to initiate penalty proceedings. It was emphasized that the matter required a thorough investigation of facts by the competent authority after considering the petitioner's objections, highlighting the need for a reasoned decision on the imposition of penalty under Section 12(3) of the Act.

6. The judgment referred to the findings in Mawana Sugars Ltd. case regarding the deduction of entry tax at source for sales made to dealers within the same local area. While the legal questions were settled in that case, the current case required a factual examination to determine the applicability of entry tax based on the location of sale, emphasizing the need for authorities to consider the petitioner's objections in their decision-making process.

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