2008 (8) TMI 844 - HC - VAT and Sales Tax

Appellate Authority Empowered to Modify Tax Liability & Interpret Notifications

The High Court held that the first appellate authority has the power to enhance, reduce, or annul tax liability while hearing an appeal. It overturned the ... Whether the learned Tribunal was legally justified to exempt the purchase of wheat for a flour mill, which was not a roller flour mill, whereas the Notification No. ST-II-4519/x dated August 29, 1987 provides exemption only for the purchase of wheat to roller flour mill? Whether the learned Tribunal was legally justified in exempting the purchase of wheat made from general sellers other than F.C.I., whereas Notification No. STII-4519/x dated August 29, 1987 provides exemption on the purchase of wheat from F.C.I? Whether the learned Tribunal was legally justified to hold that the first appellate authority, viz., Deputy Commissioner (Appeal) has no jurisdiction to consider and adjudicate upon the matters not raised before him by the dealer? Held that:- The order of the Tribunal is undefensible. The Tribunal was not justified in setting aside the order of the first appellate authority and holding that the first appellate authority had no power to travel beyond the subject-matter of the appeal before it. Revision allowed. Issues:1. Interpretation of Notification No. 4519 dated August 29, 1987 regarding exemption on wheat purchase for a flour mill.2. Legality of exempting wheat purchase from sellers other than F.C.I.3. Jurisdiction of the first appellate authority to enhance tax liability.Interpretation of Notification No. 4519 dated August 29, 1987:The dealer challenged the assessment order for the year 1991-92, claiming exemption on the purchase of wheat under Notification No. 4519 dated August 29, 1987. The Deputy Commissioner (Appeals) rejected the contention, holding the dealer liable for tax on atta, maida, suji, and enhanced the net turnover, creating additional tax liability. The Tribunal set aside the order of the first appellate authority, citing that the authority lacked the power to enhance tax liability under section 9 of the U.P. Trade Tax Act. The Tribunal relied on the judgment in Anand General Store v. Commissioner of Sales Tax [1987] 66 STC 349. The High Court, following the decision in Saru Smelting Pvt. Ltd. v. Commissioner of Sales Tax [1997] UPTC 204, held that the first appellate authority has the power to confirm, reduce, enhance, or annul the assessment order while hearing an appeal, thereby allowing the appeal and setting aside the Tribunal's order.Exemption on wheat purchase from sellers other than F.C.I.:The Tribunal's decision to exempt wheat purchase from general sellers, not limited to F.C.I., was challenged. The High Court, based on the precedent set by the Supreme Court in State of Andhra Pradesh v. Hyderabad Asbestos Cement Production Ltd. [1994] 94 STC 410, established that the first appellate authority's power extends to enhancing the tax amount. The court emphasized that the appellate authority's jurisdiction is wider than that of the assessing authority, allowing for modifications to the assessment order. Consequently, the High Court found the Tribunal's decision indefensible and set it aside, dismissing the second appeal filed before the Tribunal.Jurisdiction of the first appellate authority to enhance tax liability:The issue of whether the first appellate authority had the jurisdiction to enhance tax liability beyond the subject matter of the appeal was raised. The High Court, citing the decision in Saru Smelting Pvt. Ltd. [1997] UPTC 204, reiterated that the first appellate authority possesses the power to enhance tax liability while considering an appeal. By following the precedent and principles established in previous judgments, the High Court concluded that the Tribunal erred in holding that the first appellate authority exceeded its jurisdiction. The revision was allowed, setting aside the Tribunal's order and dismissing the second appeal filed before it, with no costs awarded.