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TMI Blog2008 (11) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... anged and now it is termed as "Hindustan Unilever Limited ", situate at Mumbai. The State Government in pursuance of the power conferred by section 4A of the Act is empowered to issue notification for grant of exemption from payment of trade tax to the industrialists for installation of their units in the backward areas of the State of U. P. as an incentive measure. In pursuance of power conferred by section 4A of the Act, a notification was issued on January 29, 1985 followed by the amended notification dated April 26, 1995. According to the amended notification, the Government has got power to grant exemption from payment of trade tax for the period of six years from the date of the start of the production. By an order dated September 16, 1991, exemption was granted to the petitioner with regard to payment of trade tax from March 8, 1990 for a period of six years. The certificate dated September 16, 1991 has been filed as annexure No. 1 to the writ petition, which has been given effect from March 8, 1990. The Sales Tax Officer of Special Investigation Branch, Agra on October 22, 1992 seized a consignment of tea which was being carried from Mainpuri to Chehisar, manufactured at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any act which may amount to charging of trade tax. The relevant portion from the order of the learned Tribunal is reproduced as under: "On perusal of the material available on record, it appears that the Department has not disputed the fact that the appellant is a bona fide dealer and the transaction was duly and properly accounted for by the appellant in his account books maintained in the regular course of business. The seizure of goods and demand of security for the release of the same on the grounds mentioned above cannot be supported because no material has been produced to indicate that the appellant has charged sales tax in any form in respect of the goods covered by bill No. NVO55 pertaining to new unit of Etah. On the other hand, on perusal of the copy of the bill No. NVO55 it is manifest that the appellant has not charged any amount of sales tax in any form or colour. Presumption contrary to it taken by the Department cannot be supported. For the reasons given above, we come to the conclusion that the grounds on which the goods have been seized are not tenable and therefore, the seizure of goods and the demand of security for the release of the same cannot be supporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are also of the same date in respect of different assessment years. In this regard it is indicated that an application under rule 4 of the U.P. Sales Tax Rules has been moved before the Commissioner, Sales Tax, U.P., Lucknow on July 14, 1993 but it is still pending and no orders have been passed so far thereon. The assessing authority has fixed August 7, 1993 as the date in the assessment proceedings. The learned counsel for the petitioner has placed reliance on a case Vivek Automobiles Ltd. v. Commissioner of Sales Tax reported in [1992] UPTC 928. It has been prayed that in an application under rule 4, the Commissioner, Sales Tax had full power to issue necessary direction for giving effect to the judgment and decisions of the Tribunals." In pursuance of the direction issued by this court, the Trade Tax Commissioner had decided the petitioner's representation by the impugned order dated December 29, 1993, assailed in the present writ petition. The learned Commissioner instead of going into the merits of the controversy and to find out whether trade tax is payable or not over the tea bags produced of Etah branch or whether the Department has got right to issue notice under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Commercial Taxes (Vigilance) v. Hindustan Lever Limited (Lipton Division) [2007] 10 VST 330 (Karn), M.P. State Agro Industries Development Corpn. Ltd. v. Jahan Khan [2007] 10 SCC 88, Union of India v. Vicco Laboratories [2007] 218 ELT 647 (SC), Dhampur Sugar Mills Ltd. v. Union of India [2000] 122 ELT 333 (SC), Assistant Secretary, Board of Revenue (Taxes), Ernakulam v. P. Krishnaswamy Reddiar [2003] 131 STC 467 (Ker), Anil Kumar Ramesh Chandra Glass Works v. State of Uttar Pradesh [2000] 119 STC 305 (All), Pan Tyres v. State of U.P. [1997] 105 STC 111 (All), Wipro Infotech Limited v. Additional Deputy Commissioner of Commercial Taxes (Assessment-II) [2000] 117 STC 244 (Karn), Commissioner of Sales Tax v. Madhya Bharat Papers Ltd. [1996] 103 STC 142 (MP) and Maurya Timbers v. State of Haryana [1997] 104 STC 243 (P&H). On the other hand Sri H.P. Srivastava, learned Additional Chief Standing Counsel, submitted that since sufficient material has been found against the petitioner, when the depot was raided in the year 1992, that should be looked into by the authorities concerned and the petitioner should approach the authorities as he has got alternative remedy to pref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o exercise writ jurisdiction. In the case of S.N. Sharma v. Bipen Kumar Tewari AIR 1970 SC 786, honourable Supreme Court held that alternative remedy is the rule of discretion and not an exclusion of jurisdiction under article 226 of the Constitution of India. Their Lordships in the case Rashid Ahmed v. Municipal Board, Kairana reported in AIR 1950 SC 163, Baburam Prakash Chandra Maheswari v. Antarim Zila Parishad AIR 1969 SC 556 and Himmatlal Harilal Mehta v. State of Madhya Pradesh [1954] 5 STC 115 (SC); AIR 1954 SC 403 further held that it is self-imposed limitation and does not oust the jurisdiction of this court to exercise power conferred by article 226 of the Constitution of India even if an alternative remedy is available to an aggrieved person. It has also been held by the honourable Supreme Court in the cases Salonah Tea Company Ltd. v. Superintendent of Taxes reported in [1988] 69 STC 290; AIR 1990 SC 772, T.N. State Transport Corporation v. Neethivilangan [2001] 9 SCC 99, Shiv Shankar Dal Mills v. State of Haryana [1980] 2 SCC 437 that where public authority is acting contrary to provision of law or taking undue advantage of its own then case should not be throw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , State of H.P. v. Gujarat Ambuja Cement Ltd. [2005] 6 SCC 499 and Sanjana M. Wig v. Hindustan Petroleum Corpn. Ltd. [2005] 8 SCC 242)." In the case of Vicco Laboratories [2007] 218 ELT 647 (SC) again the honourable Supreme Court reiterated the earlier propositions that alternative remedy is no bar for exercising writ jurisdiction by the courts. Their Lordships held that where a show-cause notice is issued either without jurisdiction or in an abuse of process of law, certainly in that case, the writ court would not hesitate to interfere even at the stage of issuance of show-cause notice. The relevant portion is reproduced as under: "Normally, the writ court should not interfere at the stage of issuance of show-cause notice by the authorities. In such a case, the parties get ample opportunity to put forth their contentions before the concerned authorities and to satisfy the concerned authorities about the absence of case for proceeding against the person against whom the show-cause notices have been issued. Abstinence from interference at the stage of issuance of show-cause notice in order to relegate the parties to the proceedings before the concerned authorities is the normal r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is fit case where alternative remedy should be by-passed and case be decided on merit keeping in view the arguments advanced by the learned counsel for the parties. It was submitted by the learned counsel for the petitioner that issuance of notice under section 15A(1)(qq) of the Act is per se illegal and without jurisdiction. The company can charge composite price over their products and merely because different units are situated in different States of the country and some of the units are charging trade tax, there cannot be any presumption against statutory provision. Where in a State, exemption has been granted, trade tax may be presumed to be charged because of composite price in spite of the fact that charging of trade tax is specifically denied with an indication in invoices. Under the Trade Tax Act power of exemption vested in the State Government has been provided under section 4A of the Act. Section 4A of the Act provides that where the State Government is of the opinion that it is necessary so to do for increasing the production of any goods or for promoting the development of any industry in the State generally or in any districts or parts of the districts in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also relevant which provides that the cost of installation or the amount realised as trade tax on sale or purchase or goods may be treated as trade tax when such cost or amount is separately charged. The amount for which goods are sold or purchased shall include the price of the packing material in which they are packed and any sums charged for anything done by the dealer in respect of the goods sold, at the time of or before the delivery thereof, other than cost of freight or delivery or cost of installation or the amount realized as trade tax on sale or purchase of goods when such cost or amount is separately charged. So the aggregate amount which the producers charge may include various items as defined under section 2(i) of the Act. Rule 4 of the U.P. Trade Tax Rules, 1948 defines the power of Commissioner of Trade Tax. According to rule 4 the Commissioner shall have jurisdiction over the whole of the State and shall exercise the powers conferred, and performed duties imposed, by or under the Act or these Rules. The Commissioner has got right to issue instructions regulating the procedure to be followed in carrying out the provisions of the Act and Rules. It further provides t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to such conditions as may be specified, be exempt from trade tax on sale of goods whether wholly or partly or be liable to tax at such reduced rate as it may fix: Provided that in respect of goods manufactured in a new unit having a fixed capital investment of five crore rupees or more or in an existing unit which may make fixed capital investment of five crore rupees or more in expansion, diversification, modernisation and backward integration or in any one of them, within such period not exceeding five years as may be specified in the notification, the exemption from or reduction in the rate of tax may be granted. "Section 8A. Registration of dealers and realization of tax by dealers.- (1)... (2)(a). No person who is not a dealer registered under this Act, shall in respect of any sale or purchase made by or through him, realise from any person any amount by way of trade tax on sale or purchase of goods or any amount in lieu of trade tax on sale or purchase of goods by giving it a different name or colour; and no dealer registered under this Act, shall, in respect of any sale or purchase made by or through him, realize from any person, other than a person to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioners shall also exercise the powers conferred, and perform the duties imposed, by or under the Act or these Rules or as may, consistent with the Act or these Rules, be conferred on or assigned to them." It is settled law that while interpreting the statutory provisions contained in an Act or statute, any one should not be read in isolation but it should be read in reference to context. According to Maxwell, a construction which would leave without effect any part of the language of a statute will normally be rejected. The honourable Supreme Court by catena of judgment held that while interpreting any section of a statute, every word and provision should be looked into in context to which it is used and not in isolation vide Grasim Industries Limited v. Collector of Customs [2002] 4 SCC 297, Easland Combines v. Collector of Central Excise [2003] 3 SCC 410, A.N. Roy v. Suresh Sham Singh [2006] 5 SCC 745 and Deewan Singh v. Rajendra Pd. Ardevi [2007] 10 SCC 528. The honourable Supreme Court while considering the principles regarding the construction of exemption provisions in Union of India v. Wood Papers Ltd. [1991] 83 STC 251 (SC); AIR 1991 SC 2049 held as under: (page 254 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation in consonance with the purposes of the statute and what logically follows from the terms used. Apart from above, while reading the provision contained in section 15A(1)(qq) of the Act, the provision contained in section 15A(r)(viii) should also be looked into which provides that while imposing penalty after holding an inquiry, the defaulter/dealer or the person concerned shall pay, by way of penalty, in addition to the tax, if any, payable by him, a sum not less than the amount of tax realized or, as the case may be, realized in excess, but not more than three times of the said amount. In the present case, no steps have been taken by the respondents for cancellation of exemption in pursuance of power conferred by section 4A of the Act. Admittedly, as per averments, contained in the counter-affidavit, the respondents are not proceeding ahead to make assessment for the tax on account of exemption. Therefore, it appears that the opposite parties have acted on unfounded ground in violation of the various provisions, while issuing the impugned notice for imposition of penalty, having close eye over the finding of fact recorded by the Tribunal. In the Municipal law of England, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' may sometimes connote agreed liquidated damages (Fletcher v. Dyche 2 TR 32) 'Penalty' (in Criminal Law) A penalty is a punishment inflicted by a law for its violation. A penalty is defined as a temporary punishment or sum of money imposed by statute, to be paid as a punishment for the commission of a certain offence. A penalty is a punishment imposed by law or contract for doing or failing to do something that it was the duty of a party to do. A penalty is in the nature of a punishment for the non-performance of an act, or the performance of an unlawful act, and in the former case stands in lieu of the act to be performed. The words 'penal' and 'penalty' strictly and primarily denote punishment, whether corporal or pecuniary, imposed and enforced by the State for a crime or offence against its laws. The term 'penalty' is used very loosely in statutes in some cases, and might, without being much strained from its ordinary meaning, be held to embrace all the consequences visited by law on the heads of those who violate police requirements. A punishment imposed for any breach of law, rule or contract; a sum named in a bond as the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5A(1)(qq) of the Act. In view of the settled prepositions of law while interpreting the provision contained in section 15A(1)(qq) or section 8A(2)(a) or other provisions referred hereinabove, they should not be read in isolation but the entire Act should be taken into consideration in view of the law settled by the honourable Supreme Court. In the present case the statutory provision referred by the parties counsel does not seem to suffer from any ambiguity or requires any external aid. Accordingly, they should be given natural meaning. A plain reading of section 15A(1)(qq) of the Act at the face of record shows that for issuance of notice for the purpose of imposition of penalty prima facie it must be proved that the trade tax has been evaded by giving different name or colour in contravention of provision given in section 8A of the Act. Section 8A(2)(a) of the Act specifically provides that the evasion of trade tax must be done in such a manner which amount to give it different name or colour. There appears to be no evidence on record which may indicate that the petitioner was charging trade tax or sales tax, which was not quoted on the tea bags. A presumption has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, the trade tax is not being charged. Neither any material on record nor any pleading has been made which may indicate that the petitioner has been charging trade tax with different name and colour. Accordingly notice issued under section 15A(1)(qq) of the Act seems to be an act of abuse of process of law. Their Lordships of the honourable Supreme Court in the case of Calcutta Discount Co. [1961] 41 ITR 191, while interpreting the words "reason to believe " observed that for existence of reasons for that belief, the belief must be held in good faith and it cannot be merely a pretence. The expression does not mean a purely subjective satisfaction of the Income-tax Officer; the form of decision as to the existence of reasons and the belief is not in the mind of the Income-tax Officer. If it be asserted that the Income-tax Officer had reason to believe that income had been underassessed by reason of failure to disclose fully and truly the facts material for assessment, the existence of the belief and the reasons for the belief, but not the sufficiency of the reasons, will be justifiable. The relevant portion from the case of Calcutta Discount Co. [1961] 41 ITR 191 (SC) is rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated, but in view of the argument advanced by the petitioner's counsel that penalty is the part and parcel of the assessment proceedings, we are deciding the issue in brief. A Division Bench of this court in the case of Maxims Delicacies (Private) Limited [1988] UPTC 100 had observed that during the continuance of a certificate under section 4A of the U.P. Trade Tax Act, it is not competent for the Tax Officer to make any assessment as far as the unit in whose favour the certificate has been granted. The relevant portion from the judgment of the Maxims Delicacies (Private) Limited [1988] UPTC 100 is reproduced as under: "This court is committed to the view that during the currency of a certificate issued under section 4A of the U.P. Sales Tax Act, it is not competent for the Sales Tax Officer to make any assessment, as far as the unit in whose favour this certificate has been granted, is concerned. It is common ground that the aforesaid certificate dated December 12, 1983 has not yet been modified or cancelled by the respondents. If that be so, it is clear that the respondents are not entitled to take any proceedings for assessing the petitioner to tax either under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the settled proposition of law, there appears to be no ambiguity to record a finding that because of exemption granted by the State Government, the respondents should not have proceeded to initiate action in pursuance of impugned notice. There is one more reason which is liable to be considered. The Division Bench of this court while allowing the writ petition had directed the Commissioner of Trade Tax to decide the controversy in pursuance of power conferred by rule 4 of the Rules in question. The learned Commissioner seems to have not given due weight to the judgment of this court; rather escaped from his responsibility to decide the petitioner's representation keeping in view the letter and spirit of the judgment. It was incumbent upon the Commissioner to decide the controversy keeping in view the material facts and circumstances on record as well as Tribunal's judgment. Once the Tribunal had recorded a finding that the petitioner is not liable to pay any penalty and the judgment and order of the Tribunal has not been challenged by the State authorities, then the Commissioner should have applied his/her mind while deciding the petitioner's representation keeping i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded tea produced from the industry situate at Etah. Section 4A of the Act permits the State Government to exempt trade tax on the turnover of sales in respect of goods manufactured by industrialists during specified period. Section 2(i) of the Act defines the word "turnover". Turnover means the aggregate amount for which the goods are supplied or distributed by way of sale. The Explanation of section 2(i) further clarified the position with regard to word turnover and provides that the amount for which the goods are sold or purchased shall include the price of packing material in which they are packed and the sums charged for anything done by the dealer in respect of the goods sold at the time of or before the delivery thereof other than cost of freight or delivery or cost of installation or trade tax realized thereon. The exclusion clause of Explanation II specifically provides that the aggregate amount for which the goods are supplied or distributed by way of sale shall not include the cost of freight or delivery or cost of installation or the amount realized as trade tax on sale or purchase of goods when such cost or amount is separately charged. The Explanation indicates that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of Hindustan Lever Limited [2007] 10 VST 330, a Division Bench of the Karnataka High Court held that inclusion in the price, the tax payable by the dealer to the Government could not be said to be collection of tax payable by him from the buyers. In view of the above, whatever the collection made by the dealer unless specified in the book or relevant document, can only be considered as a valuable consideration for the goods sold. A composite price fixed by the dealer or the industrialist for its goods like in the present case of the blended tea bags cannot be treated as an act of evasion of trade tax in violation of the statutory provisions. It was permissible for the petitioner to display the composite price over the tea bags or in the invoices indicating therein that no trade tax has been charged. The purpose of section 4A of the Act is to give full freedom to the industrialists from the liability of tax or duty. It is an incentive or promotional steps taken by the State to encourage the industrialists to establish their industries in the backward area of the State without payment of sales tax for a limited period. That is why the provision with regard to exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X
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