2019 (11) TMI 1069 - HC - VAT / Sales Tax

Court Approves Tax Set-Off for Company, Accepts Adjustments as Payment Under U.P. Trade Tax Act for 1999-2001.

The Commercial Tax Tribunal, Kanpur Bench initially rejected the revisionists' claim under Section 4-BB of the U.P. Trade Tax Act, concerning tax set-off ... Rejection of claim of the revisionists under section 4-BB of the U.P. Trade Tax Act - benefit of setting off of tax on finished goods denied on the ground that it purchased the raw material from a dealer which is exempted under section 4-A of the Act - Whether on the facts and circumstances of the case the impugned order of the Tribunal is sustainable under law specially when the same has been passed in utter ignorance of the material on record and by recording erroneous and perverse findings? HELD THAT:- The issue involved in the present revisions has already been decided by this Court in the inter-parties case of COMMISSIONER, TRADE TAX, UP., LUCKNOW VERSUS SHRI MAHAVEER ROLLING MILLS (P) LTD. [2010 (5) TMI 754 - ALLAHABAD HIGH COURT] where it was held that The dealer, M/s. Mahaveer Iron Industry Pvt. Ltd., who has been given full exemption under section 4A of the Act was assessed to tax on the material sold to the assessee/revisionist and the tax so assessed on the sale of the said goods was deducted from his eligibility amount. Accordingly, it amounts to the payment of tax by way of adjustment. Section 4BB has not prescribed the manner of payment of tax and manner of payment cannot be confined to payment by actual tender but it would include payment of tax by adjustment also. In favour of assessee. Petition allowed. Issues Involved:Claim of revisionists under section 4-BB of the U.P. Trade Tax Act rejected by Commercial Tax Tribunal, Kanpur Bench; Common questions of law framed in both revisions; Revisionist's purchase of raw materials from dealer exempted under section 4-A of the Act; Tribunal's rejection of claim for setting off tax on finished goods; Interpretation of Section 4-BB of the U.P. Trade Tax Act; Dispute regarding actual payment of tax for grant of set off; Legal justification of tribunal's decision; Application of previous court judgment in a similar case.Detailed Analysis:1. The revisions were filed against the common order of the Commercial Tax Tribunal rejecting the revisionists' claim under section 4-BB of the U.P. Trade Tax Act. The revisionists, a Private Limited Company engaged in manufacturing iron and steel products, purchased raw materials from a dealer exempted under section 4-A of the Act. The assessing authority rejected the claim for the assessment years 1999-2000 and 2000-01, leading to appeals and subsequent dismissal by the Tribunal.2. The key legal issue revolved around the interpretation of Section 4-BB of the U.P. Trade Tax Act. The revisionists argued that the mode of tax payment was immaterial for claiming the benefit under this section, emphasizing the assessment and payment of tax on the purchase/sale of raw materials. They contended that the adjustment of tax liability through an eligibility certificate, even without actual payment, constituted payment of tax as envisaged by the Act.3. The tribunal's decision was supported by a previous court judgment that highlighted the importance of assessing the tax liability of the dealer and deducting it from the eligibility amount, which was deemed equivalent to tax payment. The court noted that the Act did not specify the manner of tax payment, allowing for adjustments to be considered as valid payments. This interpretation aligned with the principle that exemptions granted to dealers involve the assessment of tax liability rather than the physical payment of tax on goods.4. The court further emphasized that the dealer in question had been assessed to tax, which was adjusted from the eligibility amount, indicating compliance with tax obligations. The tribunal's finding that the tax had been effectively paid through adjustment was upheld, reinforcing the argument that the mode of payment, including adjustments, should be considered valid under Section 4-BB of the Act.5. In light of the above analysis and the precedent set by the previous court judgment, the court ruled in favor of the revisionists, granting them the benefit of set off under Section 4-BB for the assessment years in question. The questions of law were answered in favor of the assessee, affirming the tribunal's decision to allow the claim for setting off tax on finished goods purchased from an exempted dealer.