Concessional trade tax rate against Form III-B Penalty leviable u/s 4B(6) not u/s 3B of the U. P. Trade Tax Act for failure to sell the goods within the State, export them or sell them in the course of inter-State trade or commerce-SC
ABCAUS Case Law Citation:
1043 (2016) (10) SC
Important Case Law Cited:
Camphor and Allied Products Ltd. v. State of U.P. & Ors. (2005 ) 139 STC 380 (All)
Brief Facts of the Case:
The present civil appeal was filed by the Uttar Pradesh Commercial Tax Department against the judgment of the Allahabad High Court. The respondent in this case was a limited company registered as a Dealer under Section 8-A of the U.P. Trade Tax Act, 1948 ( “the Act”), and was a holder of a recognition certificate as per provisions contained in Section 4-B.
The respondent used to make purchases of raw material at the concessional rate of tax against Form III-B issued by Trade Tax Officer. As per conditions prescribed under Section 4-B(2), the notified goods manufactured out of the raw material produced at the concessional rate of tax against Form III-B is required to be sold by such manufacturer in the State or in the course of inter-State trade and commerce or in the course of export out of India.
As per the provisions, if a recognition certificate holder sells goods manufactured by it out of the raw material purchased at the concessional rate of tax against Form III-B otherwise than prescribed u/s 4-B(2), a penalty equal to three times of the tax saved is liveable on the dealer.
In the instant case, it was noticed that after availing the concessional rate of tax, and after manufacture of the notified goods, some of it were transferred outside the State of Uttar Pradesh. The Revenue issued show cause notice to the respondent company for the assessment year 2005-06 and after considering the explanation offered held that under Section 3-B and 4-B(2) of the Act, the finished product manufactured from the raw material purchased at a concessional rate can only be sold in U.P. or in the course of inter-State trade and commerce or can be exported out of country, but stock transfer is not permissible. He further held that the assessee had acted contrary to the provision by purchasing raw material at a concessional rate and thereafter sending the finished goods as stock transfer outside the State which does not come under the term ‘sale’ and no revenue is generated by the State. Accordingly, the AO imposed the penalty by order passed under Section 3-B.
Being aggrieved, the respondent company preferred an appeal under Section 9 before the Joint Commissioner (Appeals) who dismissed the same confirming the penalty order.
On further appeal, the Tribunal allowed the appeal and the order imposing penalty was annulled.
Being aggrieved by the order of the tribunal, the Revenue filed Trade Tax Revision u/s 11 of the Act before the High Court which held that there had been no violation of Section 3-B.
Observations made by the Apex Court:
The Supreme Court observed that sub-section (2) to Section 4-B also requires that the notified goods should be “intended” to be sold by the dealer within the State or in the course of inter-State trade or commerce or in the course of exports out of India. The expression “intended” is significant and important. It refers to the intention of the dealer after the goods are manufactured and packed. The expression “in the course inter-State trade or commerce” is quite broad and wide.
The Court clarified that it is not dealing with the issue whether the stock transfer outside the State in terms of directions issued by the Central Government can be considered as sale or transaction in the course of inter-State trade or commerce as the said issue was not raised or argued.
The Court opined that the sub-section (6) is a specific provision which deals with the case of the dealer who has been issued the recognition certificate and has purchased goods without payment of tax or at concessional rates, but has sold the manufactured goods or packaged goods otherwise than by way of sale in the State, or in the course of inter-State trade or commerce or export out of India. Thus the sub-section which is a particular and a specific section which deals with and specifies the consequences when the dealer is unable to meet and comply with intendment, would be applicable.
The Court opined that though the section 3-B commences with a non-obstante clause, but the provision has to be read harmoniously with sub-section (6) to Section 4-B. It was clarified that any other interpretation would make sub-section (6) a dead letter. The Court dismissed the plea of the Revenue that whenever there is violation or failure to abide with the “intendment”, Section 3-B would be invoked and applied, not sub-section(6) to Section 4-B.
The Court clarified that Section 3-B would apply when a false and wrong certificate or declaration is made. Sub-section (6) on the other hand, deals with cases where the dealer is unable to comply with the intendment, i.e., for some reason he is unable to sell the goods within the State, export them or sell them in the course of inter-State trade or commerce. Intendment of the said nature has not been treated as false or wrong declaration as consequences have been prescribed in sub-section (6).
Also the Court emphasised that the principle of consistency and certainty in tax matters is necessary, particularly, in cases relating to “Indirect Taxation” where clarity in this regard is a necessity and the interpretative vision should be same.
The View taken by the Appellate Tribunal and concurred by the High Court was upheld.