2023 (1) TMI 1385 - HC - VAT and Sales Tax

Court Overturns Penalty on Leather Manufacturer; Tribunal to Reassess Case Due to Lack of Entry Tax Liability.

The HC set aside the Tribunal's order imposing a penalty under Section 15-A (1) (a) of the U.P. Trade Tax Act on the assessee, a leather manufacturer, due ... Levy of penalty under Section 15-A (1) (a) of U.P. Trade Tax Act - assessment order has been passed and no tax has been assessed payable by the assessee-revisionist while passing the assessment order - revisionist was liable to realize the tax from its purchasers when its purchasers have exempted from payment of that tax or not. HELD THAT:- From perusal of record it transpires that once the assessment order was passed on 18.03.2006 and there was no levy of Entry Tax upon the assessee, the penalty proceedings could not have been initiated by the authorities hence the order passed by the Tribunal on 08.04.2010 is not justified. However, this fact was not brought to the notice of the Tribunal either by the Revenue or by the assessee. In view of the said fact, the order dated 08.04.2010 passed by the Tribunal is unsustainable in the eyes of law and the same is hereby set aside. The matter is remitted back to the Tribunal for reconsideration of the matter after considering assessment order dated 18.03.2006 and pass fresh order within a period of one month of the from the date of production of a certified copy of this order. Revision allowed in part. Issues Involved:1. Imposition of penalty under Section 15-A (1) (a) of the U.P. Trade Tax Act when no tax was assessed payable by the assessee-revisionist.2. Liability of the revisionist to realize tax from purchasers who were exempted from payment.3. Validity of penalty proceedings initiated against the assessee.Summary:Issue 1: The High Court considered the imposition of penalty under Section 15-A (1) (a) of the U.P. Trade Tax Act when no tax was assessed payable by the assessee-revisionist. The assessee, a manufacturer of leather items, had not charged Entry Tax on goods sold, leading to penalty proceedings. The Court noted that the assessment order passed in 2006 showed no levy of Entry Tax on the assessee. The Tribunal's decision upholding the penalty was deemed unjustified as this crucial fact was not brought to its attention by either party. The Court set aside the Tribunal's order and remitted the matter for reconsideration in light of the assessment order.Issue 2: The revisionist argued that until August 15, 2003, Finished Leather was exempt from Entry Tax, with only Dressed Leather being taxed at 5%. However, from August 16, 2003, Finished Leather goods were also subject to Entry Tax. The dispute pertained to the months of May, June, and July 2003. The Standing Counsel contended that the assessee failed to inform the Tribunal about the assessment order, leading to the Tribunal rightly upholding the penalty. The Court's decision highlighted the importance of disclosing all relevant information to the Tribunal for a fair assessment.Issue 3: The Tribunal, in its order dated April 8, 2010, had allowed the Revenue's appeals, resulting in the present revision. After considering arguments from both sides and reviewing the records, the Court concluded that the penalty proceedings were unjustified due to the absence of Entry Tax liability as per the assessment order. Consequently, the Court partly allowed all three revisions and directed the Tribunal to reconsider the matter within a month of receiving the Court's order.Overall, the High Court's judgment focused on the necessity of disclosing crucial information during legal proceedings to ensure a fair and accurate decision-making process.