2008 (7) TMI 563 - SC - VAT and Sales Tax

Dealer cannot unilaterally adjust tax amounts based on excess deposits. Authority determines refunds.

The Supreme Court held that a dealer cannot unilaterally adjust tax amounts based on excess deposits made in previous assessment years under Section 29 of ... Whether a dealer can make adjustment while depositing tax on the basis of tax, admitted to be payable, out of certain amounts which according to him had been deposited in excess for some other assessment periods? Held that:- Appeal allowed. The High Court was not justified in its view in holding that the dealer could itself make adjustment of amount. Issues Involved:- Interpretation of Section 29 of the U.P. Trade Tax Act, 1948 regarding adjustment of tax amounts.- Whether a dealer can make adjustments while depositing tax based on amounts deposited in excess for other assessment periods.Analysis:The judgment of the Supreme Court dealt with the interpretation of Section 29 of the U.P. Trade Tax Act, 1948, specifically focusing on the issue of whether a dealer can adjust tax amounts based on excess deposits made for other assessment periods. The background facts of the case involved a dealer who sought to adjust certain amounts against tax payable for specific months, claiming those amounts were to be refunded due to excess payments made in previous assessment years. The assessing officer, however, denied the adjustment, leading to the imposition of interest for late payment. The Tribunal and the first appellate authority upheld the assessing officer's decision, prompting the dealer to file a trade tax revision.The key contention revolved around the interpretation of Section 29 of the Act, which outlines the procedure for refunding excess tax amounts paid by a dealer. The High Court had allowed the dealer to make adjustments based on the proviso to subsection (1) of Section 29, which states that refundable amounts should be adjusted against outstanding tax or dues before being refunded. However, the Supreme Court found this approach erroneous, emphasizing that the amount must be 'found to be refundable' through adjudication, which was lacking in this case. The power of adjustment lies with the authority under the statute, and the dealer cannot unilaterally make adjustments, as clarified by Explanation II of Section 29.The Court concluded that the High Court's decision allowing the dealer to make adjustments was unjustified, as the power of adjustment rests with the statutory authority. Therefore, the appeal filed by the appellant was allowed, directing that the dealer cannot independently adjust amounts and that there would be no order as to costs. This judgment clarifies the procedural requirements for refunding excess tax amounts and underscores the authority's role in determining the refundable amounts and making necessary adjustments in accordance with the law.