TaxTMI 
TaxTMI 
2013 (6) TMI 28
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioner is aggrieved by issuance of notices bearing No. 428 and 429 dated 4.9.2009 purportedly under section 12(5) of the Act. Notice no. 428 states that the petitioner has sold non levy sugar from its Mawana unit to the dealers of the local area and although non levy sugar attracts entry tax @ 2% but the same has not been deducted nor deposited as per the provisions of section 12 of the Act and, therefore, the Company should show cause why penalty of twice the amount be not imposed upon it. It is for the month of April,2009. The other notice no. 429 is for the month of May, 2009 and is on the similar lines. Apart from challenging these notices and proceeding in pursuance thereto, the petitioner has also challenged the vires of the Act. 5.During pendency of the writ petition, the vires of the Act has been upheld by the Division Bench of this Court in the case of I.T.C. Ltd Vs. State of UP and others, 2012 (Vol. 48) NTN 1. In such circumstances, the petitioner had confined the writ petition to the legality and validity of the proceedings for penalty, pursuant to the notices dated 4.9.2009. 6. Sri Bharatji Agarwal, senior counsel assisted by Sri Rakesh Ranjan Agarwal Advocate sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e interest of both the petitioner and the Revenue. It in these circumstances, the Court proceeded to hear the matter on merits. On the basis of the arguments advanced by the counsel for the parties, following issues arise for consideration in the instant writ petition:- (1) Whether entry tax is leviable on goods manufactured and sold within the same local area? (2) What is the nature and scope of Section 12 of the Act? (3 ) Whether section 12 takes within it's ambit all sales made by a manufacturer? (4)Whether doctrine of 'no-prejudice' can be applied to compel the manufacturer to realize and deposit entry tax on all transactions irrespective of the intendment of the purchaser not to take the goods into another local area ? Question No. 1. 9. For appreciating the said submission, a paranomic view of the Act is essential. The long title states that the Act is to provide for levy and collection of tax on entry of goods into a local area for consumption, use or sale therein and for matters connected therewith or incidental thereto. Section 4 of the Act is the charging section which is reproduced herein below: Sec. 4. (1) For the purpose of development of trade, co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ''Local Area' is defined in section 2(d) as follows: Sec 2 (d) "Local Area" means the territorial areas of - (i) a Municipal Corporation under the Uttar Pradesh Municipal Corporation Act, 1969; (ii) a Municipality under the Uttar Pradesh Municipalities Act, 1916; (iii) a Zila Panchayat or a Kshettra Panchayat under the Uttar Pradesh Kshettra Panchayats and Zila Panchayats Adhiniyam, 1961; (iv) a Gram Panchayat under the United Provinces Panchayat Raj Act, 1947; (v) a Cantonment under the Cantonment Act, 1924; (vi)Any Industrial Development Area under the Uttar Pradesh Industrial Area Development Act, 1976; (vii)an Industrial Township by whatever name called; (viii)any other local authority by whatever name called under an Act of the Parliament or the State Legislature. 14. Bare perusal of the aforesaid provisions makes it clear that the taxing event comes into existence on entry of goods specified in the Schedule into a local area for consumption, use or sale thereof from any place outside that local area. 15. Entry of goods which has been defined under section 2(c) makes it explicit that there should be movement of goods into a local area from any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(ii) Transfer outside the State Rs............. (iii) Export sales Rs.............. (iv) Sale within local area Rs.............. (v) Other Sales (specify) Rs............... Total Rs.............. 19. It seems that legislature in order to remove confusion had itself chosen to amend form ''E' and to provide various categories under which manufacturer is not liable to collect entry tax, one of which being sale within the local area. 20. A Division Bench of this Court, in the case of the Commissioner, Trade Tax, UP Vs. S/s Ramesh Chandra Sanjaya Kumar Shamli, Muzaffarnagar; 2009 NTN (Vol. 39) 70 has taken the same view and has held that "The purchase of levy sugar manufactured within the local area of Shamli did not attract entry tax. 21. Thus there cannot be any iota of doubt that in case a person or dealer situate within the local area of Mawana purchases sugar from the manufacturing unit of the Petitioner Company at Mawana (within same local area), such sale will not attract any entry tax. 22. Question no 1 is answered accordingly. Question Nos. 2 and 3. 23. Section 12 of the Act is as follows: (1). Realization of tax through manufactu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o be sold within such local area for the purpose of being taken outside the local area without consumption, use or sale in such local is not ascertainable: [Sec. 4(6) Proviso (unamended)]. (b) Where a single consignment of goods, partially meant for consumption, use or sale within a local area and partially meant for transfer to any place outside such local area, is brought or received by a dealer into such local area and where value of the goods to be consumed, used or sold in the local area is not ascertainable, the dealer shall pay tax on the value of all goods of the consignment and shall, after any goods are transferred as aforesaid, may claim refund of the amount, paid as tax in respect of goods so transferred in the manner provided in Section 5 of this Act. [Sec. 4(7) unamended]. In these cases, as well, the manufacturer is required to realize entry tax from a purchaser. However, Section 12 is not all pervasive. It does not have universal application. It neither applies to all sale transactions, without exception, nor extends the liability of entry tax to a manufacturer. The liability continues to be of the person/dealer who intends to bring goods into a local area for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....manufacturer cannot compel a person, who does not intend to take goods outside the local area, to pay entry tax to him, for being deposited with the authorities in the prescribed manner. 28. Perusal of other provisions of the Act lends support to the aforesaid conclusion. Sec 5 (unamended) provides for the contingencies in which entry tax deposited can be refunded. These are:- Sec. 5. (a) Where purchased goods, without using them in such local area, are returned to the selling dealer within a period of six months from the date of purchase; (b) Where goods, without using them in such local area, are consigned to any place outside the State; (c ) Where goods, without using them in the local area, are consigned to any place in any other local area for consumption, use or sale therein; (d) Where goods are re-sold either in the course of inter-State trade or commerce or in the course of the export of the goods out of the territory of India; (e) Where any scheduled goods are sold for being taken outside such local area and are actually taken out. (f) Where a dealer has paid tax in respect of entry of any goods into any local area but goods are destroyed before entry ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under challenge on the ground that placing burden on Sugar factories to collect tax is an unreasonable restriction imposed on them and which is violative of Article 19(1)(g) of the Constitution of India. While repelling the said contention, it was held as under:- "In our opinion the liability continues to be of the dealer, but Section 4-A was inserted since the legislature in its wisdom thought there was some difficulity in collection/realisation of the tax. Under Section 4-A the manufacturer is in the position of middle man between the dealer and the Government and this concept is not unknown to Tax law. For instance under the Income Tax Act the employer is also in a position of the middle man when he deducts tax from the salary of the employee, or representative assessees. The penalty is imposed only if the manufacturer refuses to receive or fail to deposit the tax. If he does not want to suffer the penalty the manufacturer should not fail to receive or deposit the Tax. Moreever, sub-section (4) of Section 4-A makes it clear that if the goods are lost or destroyed after the delivery by the manufacturer and before its entry into the local area, the concerned authority shall di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dispute on the premise that the sales have been made to the persons within the same local area. 34. In view of it, it is held that the petitioner company could not be compelled to make deduction of entry tax at source for sales made to persons/dealers within the same local area. 35. Consequently, there is no infraction of law on part of the Petitioner Company in not making deductions of entry tax at source from persons/dealers for sales made within the same local area i.e. Mawana, as provisions of sec.12 will not apply to such sales. A fortiori, there is no justification for initiating penalty proceedings against the Petitioner Company. Conclusions 36. The question now arises is the relief to which petitioner is entitled to. In the case of M/s East India Commercial Co. Ltd Vs. Collector of Customs, AIR 1962 SC 1893, the Apex Court was called upon to adjudicate on the validity of proceedings initiated by the Collector of Customs for confiscation of goods and for taking penal action. The Apex Court by its majority judgment held that in case facts stated in the show cause notice are assumed to be correct and even then, the authority issuing notice lacks jurisdiction, then ....