2014 (9) TMI 112 - HC - VAT and Sales Tax

Court enforces tax liability condition; petitioner bound by exemption terms; principle of approbate and reprobate applied

M/s Shalimar Paints Ltd. Versus Pradeshiya Industrial & Investment Corporation of UP. Ltd., State of UP. and others.

The Court upheld the validity of the condition imposing liability on the petitioner for the tax of the earlier manufacturer under the U.P. Trade Tax Act. ... Recovery of tax from successor company - Petitioner granted exemption u/s 4A - Held that:- From a perusal of the counter affidavit that the erstwhile Company was granted an exemption under Section 4-A of the Act exempting respondent No.4 from the payment of trade tax for a stipulated period, on the ground, that it was a new unit. The petitioner, upon purchase of the unit of respondent No.4, applied for continuation of the exemption under Section 4-A(2-B) of the Act - where there is a discontinuation of business of the manufacturer, who was eligible for exemption, the successor manufacturer may apply before the competent authority for grant of eligibility certificate and for exemption from payment of tax or for reduction in the rate of tax for the unexpired portion of the period for which exemption was granted to the former manufacturer. Condition imposed by the competent authority was accepted by the petitioner and that the petitioner availed the exemption from payment of trade tax for the remaining period. The petitioner, however, did not pay the tax of the earlier period which was required to be paid by the the earlier manufacturer and which became jointly and severally payable by the petitioner under the provisions of Section 3-C(2) of the Act by the petitioner - The petitioner cannot now turn around and contend that the said condition imposed was arbitrary or opposed to public policy or the condition was in contravention to the provision of sub-Clause (2) of Section 3-C of the Act. The petitioner is estopped from raising such contention at this stage, for the reason that having availed the exemption the petitioner cannot turn around and contend that at this belated stage that the said condition is a nullity being violative of the provisions of the Act or is opposed to public policy. The petitioner cannot approbate or reprobate at the same time - Decided against assessee. Issues:Petitioner seeks quashing of recovery certificate due to liability on assets purchased from a company facing trade tax dues. Whether liability on assets purchased by petitioner from a company facing trade tax dues can be enforced against petitioner.Analysis:The petitioner bought assets from a company facing trade tax dues. The company was granted exemption under Section 4-A of the U.P. Trade Tax Act. The petitioner sought continuation of the exemption under Section 4-A(2-B) of the Act after purchasing the unit. The provision allows a successor manufacturer to apply for exemption for the remaining period if the business of the former manufacturer discontinues. The liability of tax on the predecessor manufacturer can be transferred to the successor manufacturer under Section 3-C of the Act. The petitioner accepted the condition to pay the tax of the earlier manufacturer when availing the exemption. The petitioner's failure to pay the tax of the earlier period, which became jointly and severally payable by the petitioner, led to the issuance of a recovery certificate against the petitioner.The Court held that the condition imposed by the competent authority, making the petitioner liable for the tax of the earlier manufacturer, was valid and in accordance with the law. The petitioner, having availed the exemption, cannot challenge the condition at a later stage. The principle of approbate and reprobate applies, preventing the petitioner from benefiting from the exemption while contesting the liability. The judgments cited by the petitioner's counsel were found inapplicable to the present case. The Court concluded that the petitioner is not entitled to relief, and the writ petition was dismissed.