2005 (5) TMI 619 - HC - VAT and Sales Tax

Court clarifies tax exemption timing, overturns Tribunal, restores Deputy Commissioner's order

Modipon Fibres Co. Versus Commissioner of Trade Tax & Commissioner of Trade Tax Versus Surya Roshini Ltd.

The court concluded that the extent of the tax exemption could only be determined at the end of the assessment year. It set aside the Tribunal's order and ... - Issues Involved:1. Eligibility for tax exemption under Section 4-A of the U.P. Trade Tax Act, 1948.2. Calculation of base production and turnover for tax exemption.3. Applicability and timing of tax exemption.4. Levy of interest under Section 8(1) of the U.P. Trade Tax Act.5. Acceptance of tax liability and mandatory declaration forms.Issue-wise Detailed Analysis:1. Eligibility for Tax Exemption Under Section 4-A of the U.P. Trade Tax Act, 1948:The revisionist-company was granted an eligibility certificate under Section 4-A of the U.P. Trade Tax Act, 1948, which allowed for tax exemption on the turnover of sales of goods produced in excess of the base production. The purpose of the notification dated July 27, 1991, was to promote the development of certain industries in the State by granting tax exemptions or reductions to new units and those undertaking expansion, diversification, or modernization.2. Calculation of Base Production and Turnover for Tax Exemption:The base production for the revisionist was 9,460 metric tonnes. The revisionist claimed exemption for the turnover of sales of goods weighing 23,22,945 metric tonnes, but the assessing authority granted exemption only for 13,21,756 metric tonnes. The assessing authority's stance was that exemption could only be granted after the base production was achieved, which was obtained till January 4, 1993.3. Applicability and Timing of Tax Exemption:The Tribunal and the Deputy Commissioner had differing views on whether the exemption should be calculated from the date the base production was achieved or at the end of the assessment year. The Tribunal restored the assessment orders, whereas the Deputy Commissioner allowed the appeals, accepting the declared tax liability. The court held that the extent of exemption could only be worked out at the end of the assessment year, as the turnover in excess of the base production had to be seen at the end of the year. The dealer could estimate the turnover for the whole year and file returns on a month-to-month basis, but this would involve the risk of interest and penalty if the actual turnover did not meet the estimates.4. Levy of Interest Under Section 8(1) of the U.P. Trade Tax Act:The Tribunal upheld the levy of interest under Section 8(1) of the U.P. Trade Tax Act. The court referred to the decision in Annapurna Biscuit Factory v. State of U.P., which supported the levy of interest on admitted tax liability.5. Acceptance of Tax Liability and Mandatory Declaration Forms:In the case of the dealer-opposite party, the Tribunal accepted the tax liability as disclosed by the dealer, which was calculated in contravention of the provisions of Notification No. 1093. The Tribunal also granted exemption on turnover without the mandatory declaration forms. The court found that the Tribunal's reliance on a circular letter and the correction made by the State Government was justified, allowing the dealer to benefit from sales against form C.Conclusion:The court concluded that the extent of the exemption could only be determined at the end of the assessment year. It allowed T.T.R. Nos. 1071 and 1072 of 1997, setting aside the Tribunal's order and restoring the Deputy Commissioner (Appeals)'s order. T.T.R. Nos. 682, 702, 703, and 704 of 1999 were dismissed. No order as to costs was made.