Recognition certificate declarations and section 3B liability were not sustained; assessment orders were also time-barred.

Declarations in form III-B were not false or wrong where the dealer held a valid recognition certificate and the goods were notified for the stated manufacturing use; a later view that the certificate should not have been issued did not retrospectively make the declaration invalid, so liability under section 3B could not be imposed on that basis. The determination under section 3B, which quantifies the amount payable as the equivalent of sales tax avoided, was treated as an assessment. As the orders were made beyond the four-year limit prescribed for assessment or reassessment under section 21(2), they were time-barred and could not stand.

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Issues: (i) Whether declarations in form III-B issued by the dealer were false or wrong so as to attract liability under section 3B of the U.P. Sales Tax Act, 1948; (ii) Whether the orders passed under section 3B were barred by limitation under section 21(2) of the U.P. Sales Tax Act, 1948.

Issue (i): Whether declarations in form III-B issued by the dealer were false or wrong so as to attract liability under section 3B of the U.P. Sales Tax Act, 1948.

Analysis: The declarations in form III-B required only a statement that the goods were to be used as raw material in the manufacture of notified goods and that the purchaser held a recognition certificate. The dealer possessed a recognition certificate issued by the department and the commodity involved was a notified one. No authority recorded which statement in the declaration was incorrect. A later view that the certificate ought not to have been issued could not convert a declaration, true when made and in conformity with the certificate then held, into a false or wrong declaration. A liability-imposing provision in a taxing statute must be strictly satisfied.

Conclusion: The declarations were neither false nor wrong, and liability could not be fastened under section 3B on that basis.

Issue (ii): Whether the orders passed under section 3B were barred by limitation under section 21(2) of the U.P. Sales Tax Act, 1948.

Analysis: The determination under section 3B requires the assessing authority to quantify the amount payable by the dealer as the equivalent of the sales tax avoided by the impugned declaration. That determination is in substance an assessment. The Act contemplates assessment followed by demand notice, and the scheme of sections 7 and 8, including the reference to assessed tax and other dues, shows that even such dues must be assessed. Since section 21(2) prescribes a four-year limit for assessment or reassessment, the orders made more than four years after the close of the relevant assessment years were beyond time.

Conclusion: The orders were barred by limitation and could not be sustained.

Final Conclusion: The revisions succeeded, the levy under section 3B failed on merits and on limitation, and the impugned demand orders were quashed.

Ratio Decidendi: A declaration made in conformity with a valid recognition certificate cannot be treated as false or wrong merely because the certificate is later thought to have been wrongly granted, and a determination under section 3B that quantifies liability as the equivalent of sales tax is an assessment subject to the statutory limitation for assessment.

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