2018 (5) TMI 274 - HC - GST

Levy of Administrative Charges - post GST situation - sale and supply of molasses under the provision of the U.P. Sheera Niyantran Adhiniyam, 1964 - the contention is that once the realization of tax has been subject to maintenance of separate accounts, the demand by the respondents of GST, as also Administrative Charges, would again amount to double taxation - Held that - A Division Bench of this Court in the case of M/S SAF Yeast Company Private Ltd. Vs. State of U.P. & Anr. 2010 (3) TMI 933 - SUPREME COURT held that the demand of Trade Tax on purchase of molasses was arbitrary illegal and unjust and accordingly allowed the Writ Petition to that extent. The petitioners have prayed for stay on the demand of Administrative Charges, as they are ready and willing to pay the GST at the rate of 28% (14% Central GST and 14% UPGST). However, they agree to maintain separate accounts and even the State would make an endeavour to keep a separate account for sale/purchase/supply of molasses. - stay granted. The matter requires consideration.

Summary

Issues involved:
Challenge to the demand of Administrative Charges on sale and supply of molasses under the U.P. Sheera Niyantran Adhiniyam, 1964. Interpretation of the judgment in the case of M/S SAF Yeast Company Private Ltd. Vs. State of U.P. & Anr. regarding the demand of Trade Tax on purchase of molasses. Impact of the Supreme Court order in Special Leave to Appeal (Civil) No. 16261 of 2009. Implementation of Goods and Service Tax (GST) and its implications on the demand of Administrative Charges.

Analysis:
The petitioner, an Association of Distillers in Uttar Pradesh, sought to restrain the respondents from levying Administrative Charges on the sale and supply of molasses under the U.P. Sheera Niyantran Adhiniyam, 1964, considering molasses as a crucial raw material for distillers in the state. The State had been charging Administrative Charges along with Trade Tax, which led to challenges in court regarding double taxation. A previous judgment in the case of M/S SAF Yeast Company Private Ltd. held the demand of Trade Tax on molasses as arbitrary and illegal, directing the State to refund the tax amount realized post a certain date. The matter was appealed to the Supreme Court, which granted interim relief staying the refund but allowing for interest in case of appeal success.

During the pendency of the Special Leave to Appeal (Civil) before the Supreme Court, various petitions were disposed of by the High Court, providing similar protection as granted by the Supreme Court. The court directed the parties to maintain separate accounts for molasses transactions to avoid prejudice to either party based on the appeal outcome. The implementation of Goods and Service Tax (GST) post the 101st Constitutional Amendment raised concerns about the demand of Administrative Charges amounting to double taxation, especially after the Trade Tax demand was quashed by the High Court in the previous case.

The petitioners requested a stay on the demand of Administrative Charges, expressing willingness to pay GST at the applicable rate and agreeing to maintain separate accounts. The court granted time for filing counter affidavits and issued notice to the Advocate General due to the challenge to the State enactment. As an interim measure, the court ruled that the respondents should not demand Administrative Charges if GST is paid as required, with a mandate to maintain separate accounts for molasses transactions until the final resolution of the Writ Petition.