2016 (8) TMI 923 - SC - VAT and Sales Tax

Validity of the judgement dated 16.01.2007 - Trade Tax, Saharanpur under Rule 41(6) of the U.P. Trade Tax Rules imposition of purchase tax along with interest - benefit of exemption Notification dated 29.08.2003 issued under Section 4B(1)(a-1) of the Uttar Pradesh Trade Tax Act, 1948 - Section 3D(1) of the Act purchase of wheat supply to flour mills for grinding process Held that - in order to avail the benefit of the Notification and evade payment of purchase tax, a particular supplier may set up a middle man or an agent who will be the first purchaser and who will claim exemption under the said Notification and will supply wheat to flour mill beyond its assessed grinding capacity and the excess quantity of wheat which the flour mill will receive is only by way of supply and not by way of purchase. If a dealer sets up any middle man or an agent who purchases the goods,then such middle man or agent becomes the first purchaser and in that event he would not be in a position to get the benefit of the special relief provided under Section 4B of the Act. Therefore, Notification dated 29.08.2003 should have been read as it is and on that basis the High Court was supposed to examine as to whether the appellant satisfied the conditions of Section 4B of the Act read with the aforesaid Notification dated 29.08.2003 or not. The benefit is extended to a dealer and for availing this benefit it is not necessary that he has to be a manufacturer. Here, the appellant satisfies all the conditions and is also the first purchaser - appellant entitled to the benefit of Section 4B(1)(a-1) as well as Notification dated 29.08.2003 appeal disposed off - decided in favor of appellant.

Summary

Issues:
Validity and propriety of the judgment dated 16.01.2007 passed by the High Court of Judicature at Allahabad dismissing writ petitions challenging the order imposing purchase tax on wheat under Rule 41(6) of U.P. Trade Tax Rules.

Detailed Analysis:

Issue 1: Benefit of Exemption under Section 4B(1)(a-1) of the Uttar Pradesh Trade Tax Act, 1948
The appellant, a first purchaser of wheat supplying to Roller Flour Mills, sought exemption under Section 4B(1)(a-1) and Notification dated 29.08.2003. The Deputy Commissioner denied the exemption, leading to writ petitions dismissed by the High Court. The conditions for claiming exemption under Section 4B(1)(a-1) were examined, focusing on the requirement of goods being "sold or supplied" by the first purchaser to another dealer with a valid recognition certificate.

Issue 2: Interpretation of Notification dated 29.08.2003
The High Court dismissed the writ petitions, arguing that the words "or supplied" in the Notification were redundant and should not have been included. However, the Supreme Court disagreed, emphasizing that the Notification was issued under Section 4B(1)(a-1) and should be read as it is, including the provision for goods being supplied. The Court rejected the High Court's concerns about potential misuse of the Notification, clarifying that the conditions and restrictions in the Notification were to be applied as per the statutory provisions.

Issue 3: Relationship between Section 3D and Section 4B of the Act
The State Government contended that Section 3D governs Section 4B, but the Supreme Court rejected this argument, highlighting that Section 4B provides special relief notwithstanding the provisions of Section 3D. The Court clarified that the benefit under Section 4B is not limited to manufacturers, extending to dealers who are first purchasers of goods. The conditions and restrictions in the Notification were analyzed in the context of the dealer selling or supplying goods to another dealer, ensuring compliance with the statutory requirements.

Conclusion:
The Supreme Court held that the appellant was entitled to the benefit of Section 4B(1)(a-1) and the Notification dated 29.08.2003. The judgment of the High Court and the order imposing purchase tax were set aside, allowing the appeals with consequential relief. The Court's detailed analysis emphasized the statutory provisions, conditions for exemption, and the correct interpretation of the Notification in line with the legislative intent.