Composition scheme for coal purchases cannot be overridden by circulars or presumption without evidence of coal trading.

Composition under Section 7-D of the U.P. Trade Tax Act operated as an alternative to regular assessment once accepted, and the Assessing Authority could not impose a tax demand on a presumed sale of coal without material showing actual trading in coal. The composition order covered liability on coal purchased for use in the brick kiln, and no scheme-based limit tied to quantity or production capacity was shown. A Commissioner's circular could not override the statutory composition scheme. As the record disclosed no evidence of coal trading, abnormal consumption, or off-book sales, the demand was held unsustainable.

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Issues: Whether, after acceptance of composition under the trade tax compounding scheme, the Assessing Authority could levy tax on the presumed sale of coal in the absence of any material showing trading in coal.

Analysis: Composition under Section 7-D of the U.P. Trade Tax Act, 1948 operates subject to the directions issued by the State Government and, once accepted, functions as an alternative to regular assessment. The composition order in the present case covered the liability on purchase of coal used in the brick kiln, and no limitation restricting such composition by reference to a particular quantity or production capacity was shown in the State Government scheme. A circular of the Commissioner could not curtail or override the scheme framed under the statutory power. The record also disclosed no evidence of trading in coal, no exemplar data showing abnormal consumption, and no material to support an inference that coal had been sold outside the books.

Conclusion: The tax demand on presumed sale of coal was unsustainable. The issue was decided in favour of the assessee and against the Revenue.

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