2002 (3) TMI 896 - HC - VAT and Sales Tax

Court quashes cancellation notice on recognition certificate, citing lack of jurisdiction & post-certificate circulars

PNC. Construction Company Limited Versus State of UP. and others

PNC. Construction Company Limited Versus State of UP. and others - [2002] 128 STC 476 (All) Issues Involved:1. Validity of the notice issued by the Trade Tax Officer for cancellation of the recognition certificate.2. Applicability of Section 4-B of the U.P. Trade Tax Act, 1948 to the petitioner.3. Binding nature of the Trade Tax Tribunal's order on the Revenue authorities.4. Jurisdiction of the Court to entertain the writ petition against the notice.Detailed Analysis:1. Validity of the Notice Issued by the Trade Tax Officer:The notice dated May 9, 2001, issued by the Trade Tax Officer, Sector 14, Agra, called upon the petitioner to appear and file a written reply regarding the cancellation of the recognition certificate issued under Section 4-B of the U.P. Trade Tax Act, 1948. The petitioner contended that the goods used in the execution of works contracts amount to the sale of goods, thus qualifying for the recognition certificate. The respondent argued that the notice was merely a show cause and that the petitioner should raise all contentions before the assessing authority.2. Applicability of Section 4-B of the U.P. Trade Tax Act, 1948:The petitioner, a public limited company, was engaged in the construction and maintenance of roads and had been granted a recognition certificate under Section 4-B for purchasing raw materials at a concessional rate. The Trade Tax Tribunal had earlier allowed the petitioner's appeal, directing the issuance of the recognition certificate. The petitioner argued that the revenue did not challenge this order, making it final. The Commissioner of Trade Tax later issued circulars stating that materials used in road construction could not be purchased against form 3-B, prompting the notice for cancellation.3. Binding Nature of the Trade Tax Tribunal's Order:The Court emphasized that the Trade Tax Tribunal's order, which was not challenged by the Revenue, became final and binding. The Tribunal had found that the petitioner manufactured hot mix material used in road construction, which amounted to a sale under the Act. The Court cited precedents affirming that appellate authorities' decisions are binding on subordinate authorities and that unchallenged orders, even if potentially incorrect, remain binding.4. Jurisdiction of the Court to Entertain the Writ Petition:The Court held that it could entertain the writ petition under Articles 226/227 of the Constitution if the order or proceeding was wholly without jurisdiction. The impugned notice was based on circulars issued after the recognition certificate was granted and did not allege any misuse or violation of the certificate's terms. The Court found the notice to be without jurisdiction and an empty formality, as the assessing authority was bound by the Commissioner's circulars.Conclusion:The writ petition was allowed, and the impugned notice dated May 9, 2001, along with the proceedings initiated pursuant to it, were quashed. The Court reiterated that the recognition certificate granted pursuant to the Trade Tax Tribunal's order remained valid and binding, and the Revenue could not retrospectively enforce the circulars to cancel it. The Court also emphasized the principle of judicial discipline, requiring subordinate authorities to follow appellate decisions unreservedly.