Alternative remedy and false declaration principles governed the challenge to section 3-B trade tax levy

Availability of an appellate remedy under section 9 of the U.P. Trade Tax Act did not bar writ jurisdiction where the dispute raised a recurring question of law and earlier decisions were conflicting; the writ petition was therefore maintainable. Liability under section 3-B arose only if the form III-B declaration was false or wrong. As the furnace oil and RFO were purchased for manufacture under the recognition certificate and were actually so used, the later sale or stock transfer of finished goods did not by itself justify levy. The assessment to that extent was quashed and the section 3-B demand was held unsustainable.

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Issues: (i) Whether the writ petition should be entertained despite the availability of an appellate remedy under section 9 of the U.P. Trade Tax Act, 1948; (ii) Whether tax could be levied under section 3-B of the U.P. Trade Tax Act, 1948 on furnace oil and RFO purchased against form III-B and used in the manufacture of camphor and allied products, merely because some finished goods were sold or transferred by way of stock transfer.

Issue (i): Whether the writ petition should be entertained despite the availability of an appellate remedy under section 9 of the U.P. Trade Tax Act, 1948.

Analysis: The availability of an alternative remedy ordinarily weighs against writ jurisdiction, but that rule is not absolute. Where the controversy turns on a recurring question of law and existing judicial decisions are in conflict, relegation to appeal is not efficacious. The dispute here involved a pure question of law arising from the use of form III-B and the scope of section 3-B, and the Court found that the conflict in earlier decisions justified direct interference under Article 226.

Conclusion: The writ petition was maintainable and was not to be rejected on the ground of alternative remedy.

Issue (ii): Whether tax could be levied under section 3-B of the U.P. Trade Tax Act, 1948 on furnace oil and RFO purchased against form III-B and used in the manufacture of camphor and allied products, merely because some finished goods were sold or transferred by way of stock transfer.

Analysis: Section 3-B fastens liability only where a false or wrong certificate or declaration is issued, and the relevant enquiry is the use made of the goods purchased against form III-B. The goods here were admittedly purchased for use in manufacture under the recognition certificate granted under section 4-B(2), and they were in fact so used. The Court held that the subsequent manner in which the finished product was sold or partly transferred by stock transfer does not attract section 3-B. Since the declaration in form III-B was not false or wrong, the differential tax could not be levied under section 3-B.

Conclusion: The levy under section 3-B was illegal and was unsustainable against the assessee.

Final Conclusion: The impugned assessment orders were quashed to the extent they imposed tax under section 3-B, and the assessee obtained relief on the central controversy.

Ratio Decidendi: Liability under section 3-B arises only when the certificate or declaration issued for concessional purchase is false or wrong; where goods purchased against form III-B are actually used for the intended manufacturing purpose under the recognition certificate, the later sale or stock transfer of the finished goods does not by itself justify levy under section 3-B.

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