2009 (11) TMI 846 - HC - VAT and Sales Tax

Court quashes tax approval orders, emphasizes need for reasons. Petitioner's liability argument unaddressed.

Nav Shakti Electric & Machinery Stores Versus Commissioner of Trade Tax, UP., Lucknow and others

The court allowed the writ petition, quashed the impugned orders granting approval under section 21(2) of the Act for the assessment years 2000-01, ... Tax imposed under section 21(2) of the Act for the assessment years 2000-01, 2001-02 and 2002-03 during the pendency of this writ petition Held that:- Impugned orders passed by the Additional Commissioner, Grade 1, Trade Tax, Gorakhpur shows the contents of the notice being noted down, by giving details that sale has not been shown in the books and as such the said sale has escaped attention, thereafter the reply in question furnished has been taken note of, and then proceeds to mention that the proceedings under section 21(2) of the Act can be initiated, and then proceeds to mention that counsel have been heard, documents have been perused and then mentions that bijak in question is of different date, and documents have also not been perused, as such claim is not being accepted and proceedings be undertaken. Similarly, for the assessment year 2001-02, it has been mentioned that bijak has not been produced, and then for the assessment year 2002-03 same reasons have been given. The objection, which had been raised by the petitioner that the petitioner was neither manufacturer nor importer and was not liable to pay any tax, has not at all been considered, and the documents which were not there, qua the same no opportunity was given to produce the same . W.P. allowed. Issues:Challenge to approval granted under section 21(2) of the Act for assessment years 2000-01, 2001-02, and 2002-03. Dispute over tax liability on purchased copper wire. Allegations of tax evasion and lack of tax payment proof. Legal validity of permission accorded under section 21(2) of the Act.Analysis:The petitioner, a registered dealer under the U.P. Trade Tax Act, challenged the approval granted under section 21(2) of the Act for the assessment years 2000-01, 2001-02, and 2002-03. The petitioner contended that as a purchaser within the State of U.P., it should not bear tax liability on copper wire purchased from registered dealers who are manufacturers of the product. The petitioner maintained that since it was neither a manufacturer nor an importer, tax exemption should apply as per the single-point taxation scheme of the Act.The counter-affidavit admitted that copper wire is taxable at the point of manufacturer or importer. It alleged that the petitioner failed to prove tax payment on goods purchased, leading to the recovery of untaxed copper wire from the petitioner's premises. The petitioner's rejoinder disputed these claims, asserting that the tax liability should not be imposed on them, and accused the permission accorded under section 21(2) of the Act as mechanical.During the final hearing, the petitioner argued that the proceedings lacked consideration of the fact that they were not the manufacturer or importer, thus challenging the reopening of the case. On the other hand, the respondent contended that the burden of proof regarding tax payment on purchased goods lay with the petitioner, and since this burden was not met, the actions taken were justified.The judgment cited the necessity for reasons to be recorded while granting sanction under section 21(2) of the Act, emphasizing the need for a thoughtful consideration of the issued notice and the reply submitted. It highlighted that the impugned orders failed to address the petitioner's contention of not being liable for tax as a purchaser. The court, referring to a relevant case law, allowed the writ petition, quashed the impugned orders, and remitted the matter back for re-examination in light of the legal principles outlined in the mentioned case, with a stipulated timeframe for reconsideration.