2019 (4) TMI 1060 - HC - VAT and Sales Tax

Levy of Interest - bonafide dispute on levy of tax - purchase of unriped Imli - Section 22 of the U.P. Trade Tax Act - HELD THAT - The claim of the revisionist appears to be bonafide as from very beginning the revisionist has disputed the liability of payment of tax and that the revisionist never admitted the liability to pay any tax on the sale of unriped Imali and further that the revisionist has purchased the unriped Imli from vegetable market only from the vegetable vendors therefore it was presumed that there was no tax on the item in question. The revisionist in fact has contested the issue by means of filing the appeals and instant revision petition. Since the matter relates to assessment year 1992-93 and was finalised after the judgment delivered by this Court in 2005 the liability of interest on the turn over of unriped Imli is not justified. There is no liability of payment of interest under Section 8(1) of the Act - revision petition disposed off.

Summary

Issues involved:
1. Legality of Trade Tax Tribunal's decision to affirm levy of interest.
2. Acceptance of applicant's contention regarding bonafide dispute.
3. Imposition of interest based on High Court's judgment regarding unriped Imli.
4. Determination of turnover of 'kachhi imli' as admitted turnover.

Analysis:
1. The case involves a revisionist, a proprietorship concern registered under U.P. Trade Tax Act, challenging the imposition of tax liability on the sale of 'unriped Imli' by the assessing authority. The first appellate authority upheld the tax liability, along with interest for late payment. The revisionist appealed to the Trade Tax Tribunal, which set aside the first appellate authority's order. However, the Commissioner of Trade Tax Act filed a revision petition before the High Court, which was allowed in 2005, stating that 'unriped Imli' is not considered a green vegetable and is taxable. Subsequently, proceedings were initiated under Section 8(1) of the Trade Tax Act.

2. The revisionist contended that all purchases were from the vegetable market and presumed 'unriped Imli' to be tax-exempt as vegetables are. The revisionist claimed that tax was neither collected nor deposited in good faith, as 'unriped Imli' was not listed in the tax schedule. After the High Court's judgment, the tax amount was paid, but interest was disputed due to the belief that 'unriped Imli' was not taxable. The revisionist's argument was that there was a bonafide dispute regarding the tax liability on 'unriped Imli.'

3. The High Court analyzed the facts and arguments presented. It noted that the revisionist consistently disputed the tax liability on 'unriped Imli' and never admitted to owing tax on it. The revisionist purchased 'unriped Imli' from vegetable vendors, assuming it was tax-exempt. The Court found the revisionist's claim to be bonafide, especially considering the absence of 'unriped Imli' in the tax schedule. The Court held that since the revisionist contested the tax liability through appeals and the revision petition, and the tax was paid post the High Court's judgment, the interest on the turnover of 'unriped Imli' was deemed unjustified.

4. Ultimately, the Court concluded that there was a genuine dispute raised by the revisionist regarding the tax liability on 'unriped Imli,' making it non-admitted taxable turnover. Consequently, the Court ruled that there was no obligation to pay interest under Section 8(1) of the Act. The revision petition was disposed of in favor of the revisionist based on the bonafide dispute over the tax liability on 'unriped Imli.'