w w w . L a w y e r S e r v i c e s . i n



M/s. Vijay Loha Bhandar v/s Commissioner Trade Tax U.P. Gomti Nagar


Company & Directors' Information:- I TRADE LIMITED [Active] CIN = U67120TN1999PLC043813

Company & Directors' Information:- TRADE INDIA LTD [Active] CIN = U51909PB1982PLC004822

Company & Directors' Information:- R P TRADE PRIVATE LIMITED [Active] CIN = U51909AS1999PTC005646

Company & Directors' Information:- A R TRADE IN PRIVATE LIMITED [Active] CIN = U51909AS1999PTC005710

Company & Directors' Information:- S 3 M TRADE PRIVATE LIMITED [Active] CIN = U74900WB2013PTC193812

Company & Directors' Information:- D M BHANDAR LTD [Strike Off] CIN = U52500WB1955PLC022073

Company & Directors' Information:- C TRADE (INDIA) PRIVATE LIMITED [Active] CIN = U74900KA2008PTC045372

Company & Directors' Information:- I-W TRADE PRIVATE LIMITED [Strike Off] CIN = U93030MH2012PTC233832

Company & Directors' Information:- U M TRADE PRIVATE LIMITED [Active] CIN = U67190MH2011PTC224523

    Trade Tax Revision No. 8 of 2009

    Decided On, 21 December 2017

    At, High Court Of Judicature At Allahabad Lucknow Bench

    By, THE HONOURABLE MR. JUSTICE RAJESH SINGH CHAUHAN

    For the Applicant: Naresh Chandra Mishra, Advocate. For the Opposite Party: Sanjay Sarin, S.C.



Judgment Text

1. Heard Sri Naresh Chandra Mishra, learned counsel for the revisionist and Sri Sanjay Sarin, learned counsel for the respondent.

2. By means of the instant revision filed under Section 11 of U.P. Trade Tax Act, the revisionist has assailed the judgment and order dated 01.11.2008, passed by the Division Bench of the Trade Tax Tribunal, Lucknow in cross Second Appeals No.310 of 2003 and 439 of 2003 (Assessment Year 2001-02), whereby the order of the First Appellate Authority in Appeal No.880 of 2002 decided on 07.03.2003, was set aside and the order passed by the Trade Tax Officer, Sector-2, Lakhimpur dated 30.09.2002 was restored.

3. In order to appreciate the short legal controversy involved in this revision, it may not be necessary to set-out the factual controversy involved in the case in detail and only narration of few facts to appreciate the legal question arising in the case would suffice for disposal of this revision.

4. M/s Vijay Loha Bhandar, revisionist herein, started business for purchase and sale of Cement, Iron & Steel in the State of U.P. from 01.04.1985.

5. On 07.11.2001, the Sales Tax Officer, Special Investigation Branch (In short S.I.B.), Sitapur made a survey at the business premises of the revisionist and undated show cause notice under the second proviso of Rule 41 (8) of the U.P. Sales Tax Rules, 1948 (here-in-after referred to as the 'Rules, 1948') was issued by the Assessing Authority.

6. The revisionist duly replied to the aforesaid show cause notice vide his reply dated 30.09.2002, however, the assessment order under Rule 41 (8) of the Rules, 1948 for the year 2001-02 was passed by the Assessing Authority i.e. the Trade Tax Officer, Section-2, Lakhimpur.

7. Feeling aggrieved against the order dated 30.09.2002, the revisionist filed an appeal before the Joint Commissioner (Appeals)-IV, Sitapur bearing Appeal No.880 of 2002. The First Appellate Authority i.e. the Joint Commissioner (Appeals)-IV, passed an order dated 07.03.2003 deleting the assessment of sale of imported Cement on the ground that the Cement is manufactured in the organized sector by a large companies and, therefore, there is no possibility of purchasing the Cement from the unregistered dealer. The learned First Appellate Authority also reduced the turnover of Iron & Steel, Shutters and Channels treating it as purchased from unregistered dealers and treating it the dealer as "Manufacturer" under Section 2 (ee) of U.P. Trade Tax Act, 1948 (here-in-after referred to as the 'Act, 1948').

8. Feeling aggrieved against the order dated 07.03.2003, passed by the First Appellate Authority, the revisionist as well as the Revenue filed cross appeals before the Tribunal.

9. The Revenue was aggrieved for the reason that the First Appellate Authority deleted the assessment of sale of imported Cement and reduced the turnover of Iron & Steel, Shutters and Channels, whereas the revisionist filed an appeal for the reason that the First Appellate Authority had treated the revisionist as "Manufacturer" under Section 2 (ee) of the Act, 1948 without any evidence on record or any purchase from the unregistered dealer. The learned Tribunal by means of impugned order dated 01.11.2008 set aside the order of the First Appellate Tribunal and confirmed the assessment order of the Assessing Authority dated 30.09.2002 by dismissing the appeal of the revisionist and allowed the appeal of the Revenue.

10. Learned counsel for the revisionist, Sri Naresh Chandra Mishra, has vehemently argued that in the show cause notice in question, no allegation was made against the revisionist regarding import of any Cement or Iron & Steel from outside the State or that it "Manufactures" any commodity within the State.

11. The next submission of learned counsel for the revisionist is that the revisionist does not manufacture any shutter/channel etc. nor any such evidence was found at the time of survey dated 07.11.2001 made by the S.I.B. Sitapur. It has also been submitted that no import of any Cement or Iron & Steel has been done by the revisionist and no purchase from the unregistered dealer was made.

12. The learned counsel for the revisionist has further submitted that there is no evidence on record nor there is any mention in the impugned order passed by the learned Tribunal, on the basis of which the imposition of tax on imported Cement or Iron & Steel and self manufactured the shutters/channels etc. has been restored.

13. Sri Mishra, learned counsel for the revisionist, has also submitted that the First Appellate Authority has imposed tax on the revisionist on the basis of Section 3-AAAA of the Act, 1948. Section 3-AAAA applies only when the commodity is purchased by the dealer from the unregistered dealer or from a registered dealer under the circumstance in which no tax is payable by the registered dealer and such goods are not re-sold in the same form and condition within the State in the course of inter-state trade or commerce or in the course of export out of India. Sri Mishra has vehemently submitted that in the instant case, there is no allegation at any stage that purchased goods were re-sold, therefore, as per his submission, Section 3-AAAA of the Act, 1948 is not applicable on the facts of the case and the reliance of Section 3-AAAA of the Act, 1948 is clearly against the provisions of law.

14. Sri Mishra has drawn attention of this Court towards some portion of the judgment of the learned Tribunal whereby the case of Saru Smelting Pvt. Ltd. v. Commissioner Sales Tax reported in 1997 NTN 109 has been cited supporting the imposition of tax under Section 3-AAAA of the Act, 1948. Sri Mishra has also submitted that the said judgment is not applicable on the facts of the instant case inasmuch as the case of Saru Smelting Pvt. Ltd. (supra) is related to the powers of the First Appellate Authority and it was held that the powers of the First Appellate Authority are akin to the powers of the Assessing Authority. But, it does not relate to the imposition of tax under Section 3-AAAA of the Act 1948, therefore, he submitted that the reliance of that case was absolutely misconceived.

15. Sri Mishra has also submitted that the Tribunal has also relied upon the judgment rendered in the case Mangal Prasad Kanhaiya Lal v. Commission Sales Tax reported in 2001 UPTC 295 for taking the view that in case the difference in stock, a best judgment assessment can be made. In that case there was shortage of stock in some goods and in some cases, the goods were in excess, which were not recorded in the book and on the basis of the best judgment assessment that was held to be valid. But, in the present case, no excess stock in any commodity was found and in fact the stock in books was more than estimated by the Survey Authority. Therefore, Sri Mishra on the strength of some judgments of this Court submitted that in case of shortage of stock at the time of survey than the stock shown in the books of accounts, no adverse view can be taken. Therefore, Sri Mishra has submitted that where the order of the Tribunal is based on evidence on record, it is question of law and the order of the Tribunal can be set aside under Section 11 of the Act, 1948. He further submitted that if the decision of Tribunal is passed without adverting to points raised by the revisionist, the said judgment/order is vitiated and is liable to be set aside.

16. Per contra, Sri Sanjay Sarin, learned counsel for the Revenue has submitted that order of the Tribunal dated 01.11.2008 is perfectly valid and justifiable and the Tribunal has passed the aforesaid order after considering each and every facts and circumstances of the case. Sri Sarin also submitted that "Manufacturer", as per Section 2(ee) of the Act, 1948 is a dealer who imports the first sale of such goods in the State and the revisionist is a dealer.

17. The aforesaid submission of Sri Sarin is misconceived inasmuch as there is no quarrel that the revisionist is a dealer but the definition under Section 2 (ee) of the Act, 1948 would be read in toto and as per the aforesaid definition the "Manufacturer" is a dealer who manufactures the goods. Therefore, every dealer may not be said to be "Manufacturer" but the "Manufacturer" can be said to be a dealer. Further, Sri Sarin could not controvert the factual submissions of learned counsel for the revisionist in respect of show cause notice, that is, no allegation was made against the revisionist regarding import of any Cement or Iron & Steel from outside the State or that it "Manufactures" any commodity within the State.

18. Having heard learned counsel for the parties and on perusal of the record of the case, I find force in the submission of learned counsel for the revisionist. The questions of law before this Court for adjudicating in the light of order dated 14.01.2009 passed by this Court are as under:-

(I) Whether on the facts and circumstances of the case, the Hon'ble Tribunal was justified in law to confirm the tax on self manufactured shutters/channels in the absence of any evidence on record of any manufacturing business.

(II) Whether on the facts and circumstances of the case, the Hon'ble Tribunal was justified in law to confirm imposition of tax by assessing authority on sale of imported Cement and Iron & Steel without any evidence of import on record.

(III) Whether on the facts and circumstances of the case, the Hon'ble Tribunal was justified in law to confirm imposition of tax on imported Cement and Iron & Steel and self-manufactured channels/shutters etc. without issue of show cause notice by the assessing authority.

19. In nutshell the question to be adjudicated here is that as to whether there is any finding by any of the authorities that the revisionist has sold any goods after "Manufacturing" or "Importing" the same. The perusal of records shows that there is no finding by any of the authorities that the revisionist has sold the goods in question after "Manufacturing" or "Importing" the same. The learned Standing Counsel, however, could not controvert the aforesaid position of law.

20. On perusal of the show cause notice, orders of the First Appellate Authority and the Second Appellate Authority, it appears that the submission of learned counsel for the revisionist has substance. The, learned Standing Counsel could not dispute the aforesaid submission of learned counsel for the revisionist.

21. In support of his submissions/contentions, learned counsel for the revisionist has drawn attention of this Court towards the case law of Hon'ble the Supreme Court in re: M/s Jhunjhunwala and others v. State of U.P. and others reported in S.T.I. 2006 SC 257. In the case of M/s Jhunjhunwala (supra) the Hon'ble Apex Court has interpreted the word "Manufacturer" as defined in Section 2 (ee) of the Act 1948 and also of 'liability to tax of purchase of goods in certain circumstances' as defined under Section 3-AAAA of the Act, 1948, besides other terms of the Act, 1948. The relevant paras of the case of M/s Jhunjhunwala are in paras- 4, 6, 8, 9, 10 and 11, which are being reproduced here-in-below:-

"4. In support of the appeals, learned counsel for the appellants submitted that the High Court proceeded on entirely erroneous premises. There could be no question of any levy of tax unless the seller is a manufacture-dealer. The High Court proceeded on the basis as if their case is covered under Section 2 (ee) (ii) of the Act. That provision applies to transactions between two registered dealers. No liability could have been created by a circular of the Commissioner. The definition of "Manufacturer" in terms of Section 2 (ee) does not encompass the case of the appellants.

6. In order to appreciate the rival submissions, the provisions of the Act and the circular issued by the Commissioner need to be noted. Section 2 (e-1) defines "Manufacture" and Section 2 (ee) defines "Manufacturer" while Section 3-AAAA deals with transaction regarding certain services. They read as follows:-

"2(e-1) 'Manufacture" means producing, making, mining, collecting, extracting, altering, ornamenting, finishing, or otherwise processing, treating or adapting any goods; but does not include such manufactures or manufacturing processes as may be prescribed;

2(ee) 'Manufacturer' in relation to any goods means the dealer who makes the first sale of such goods in the State after their manufacture and includes:

(i) a dealer who sells bicycles in completely knocked do wn form;

(ii) a dealer who makes purchases from any other dealer not liable to tax on his sale under the Act other than sales exempted under Section 4, 4-A and 4-AAA."

(Underlined for emphasis)

Section 3-AAAA. Liability to tax on purchase of goods in certain circumstances - Subject to the provision of Section 3, every dealer who purchases any goods liable to tax under this Act

(a) from any registered dealer in circumstances in which no tax is payable by such registered dealer, shall be liable to pay tax on the purchase price of such goods at the same rate at which, but for such circumstances, tax would have been payable on the sale of such goods:

(b) from any person other than a registered dealer whether or not tax is payable by such person, shall be liable to pay tax on the purchase price of such goods at the same rate at which tax is payable on the sale of such goods:

Provided that no tax shall be leviable on the purchase price of such goods in the circumstances mentioned in clauses (a) and (b), if

(i) such goods purchased from a registered dealer have already been subjected to tax or may be subjected to tax under this Act;

(ii) tax has already been paid in respect of such goods purchased from any person other than a registered dealer;

(iii) the purchasing dealer resells such goods within the State or in the course of inter-State trade or commerce or exports out of the territory of India in the same form and condition in which he had purchased them;

(iv) such goods are liable to be exempted under Section 4- A of this Act.

Explanation: For the purpose of this section and of Section 3-AAA, the sale of-

(i) ginned cotton after ginning raw cotton purchased as aforesaid; or

(ii) dressed hides and skins or tanned leather, after dressing or tanning raw hides and skins purchased as aforesaid; or

(iii) rice during the period commencing on September 2, 1976 and ending with April 30, 1977 after hulling paddy purchased as aforesaid;

shall be deemed to be in same form and condition."

8. The High Court appears to have completely lost sight of challenge before it and went on to decide issues which are really not relevant. It took note of paragraph 3(c )(iii) of the Counter Affidavit filed by the respondent before the High Court which reads as follows:

"Many of the big dealers, sells after showing the purchase from such alleged manufacturer dealer who are not liable to pay tax under the act and do not pay tax because the manufacturer-dealer liable to pay tax, only if, its sales exceeds Rs. 1 lakh in any assessment year. To prevent the evasion of tax and in the interest of revenue, these dealers have been brought by bringing in amending Section 2 (ee) so as to include such within the definition of manufacturer."

9. According to the High Court, the object of enacting amendment to Section 2 (ee) was to prevent evasion of tax. Even if the aforesaid object is in any way relevant for the purpose of the present dispute, the object appears to be to levy tax on manufacturer-dealer and/or manufacturer-dealer who did not pay tax as his turnover did not exceed Rs. 1 lakh in any assessment year.

10. It was, therefore, necessary to be established that the seller was a manufacturer-dealer. Commissioner's circular could not have created a liability by drawing inference that the purchases from farmers who have been grown, cut or sawn timbers, ball-is, bamboos will brings them within the umbrella of expression 'manufacturer'. The view that tax liability has been prescribed at the manufacturers and importers points and therefore after the amendment traders who purchase the timber from unregistered dealers fall within the category of manufacturer is indefensible. There is no logic for such a conclusion, where the statutory definition does not say so. It needs no emphasis that the circular cannot create tax liability. That is precisely what has been done which the High Court has failed to notice. Therefore, to that extent the circular cannot be of any assistance for levying tax. The crucial words in the definition of "Manufacturer" is the sale of goods "after their manufacture". As noted above, the expression "manufacture" cannot cover types of transactions referred to in the commissioner's circular Whether an activity amounts to manufacture has to be factually determined. There cannot be a direction to treat a particular type of transaction to be a manufacturing activity without examining the factual scenario. There cannot be a generalization in such matters

11. Learned counsel for the State submitted that even purchases from a person who is not a registered dealer is also liable to tax in terms of Section 3-AAAA of the tax and the circular is, therefore, in order. The argument is not acceptable for the simple reason that in Section 3-AAAA the sine qua non for liability is that the goods must be liable to tax under the Act. That aspect has to be factually determined. The Commissioner's circular is not and cannot be a substitute for such determination. The assessments in these cases appear to have been done solely on the basis of the view expressed in the circular."

22. The Hon'ble Supreme Court in the case of Commissioner of Customs (Preventive) v. Vijay Dasarath Patel reported in (2007) 8 RC 407 has held that where the order has been passed without adverting to the facts raised, then it is a question of law. Further, where the order is based on no evidence on record, it is liable to be interfered. The relevant paras-24, 25 & 26 of the aforesaid judgment are as under:-

"24. The High Court shall also be entitled to opine that a substantial question of law arises for its consideration when material and relevant facts have been ignored and legal principles have not been applied in appreciating the evidence. Arriving at a decision, upon taking into consideration irrelevant factors, would also give rise to a substantial question of law. It may, however, be different that only on the same set of facts the higher court takes a different view. (See Collector of Customs, Bombay v. Swastic Woollens (P) Ltd. & Ors. [(1988) Supp. SCC 796]; and Metroark Ltd. v. Commissioner of Central Excise, Calcutta [(2004) 12 SCC 505].

25. Even in a case where evidence is misread, the High Court would have power to interfere. {See West Bengal Electricity Regulatory Commission v. CESC Ltd. [(2002) 8 SCC 715]; and also Commissioner of Customs, Mumbai v. Bureau Veritas & Ors. [(2005) 3 SCC 265].}

26. In M/s. Dutta Cycle Stores & Ors. v. Gita Devi Sultania & Ors. [(1990) 1 SCC 586], this Court held :

"Whether or not rent for the two months in question had been duly paid by the defendants is a question of fact, and with a finding of such fact, this Court does not ordinarily interfere in proceedings under Article 136 of the Constitution, particularly when all the courts below reached the same conclusion. But where the finding of fact is based on no evidence or opposed to the totality of evidence and contrary to the rational conclusion to which the state of evidence must reasonably lead, then this Court will in the exercise of its discretion intervene to prevent miscarriage of justice."

23. This Court in M/s Rahul Departmental Store Nanakganj, Sipri Bazar, Jhansi v. Commissioner Trade Tax U.P., Lucknow reported in VSTI (2007) Allahabad High Court 428 has held that the best judgment assessment with regard to general merchandise goods cannot be said to be unjustified. The relevant paras-6 & 7 are being reproduced here-in-below.

"6. Having heard learned counsel for the parties, I find some substance in the arguments of the learned counsel for the applicant. So far as the estimate of turnover of Cement is concerned, I do not find any basis for the estimate of turnover of Cement. Cement is liable to tax at the point of manufacturer or importer. At the time of survey dated 26.08.2003, 242 bags of cement were found in the stock. At the time of survey itself cash memos of 400 bags of cement purchased locally from M/s Vijay Agency, Jhansi were produced. There appears to be no reason to disbe

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lieve the case of the dealer that 242 bags of cement which were found at the time of survey were out of purchase made in the month of June and August. There is no material on record of import of cement. 7. In view of the above, estimate of turnover of imported cement does not appear to be justified. So far as the estimate of turnover of general merchandise goods and the aisi is concerned, I do not find any error. Admittedly, the books of account and purchase vouchers have not been produced before the Assessing Authority in respect of the aforesaid items. Thus, the estimate of the turnover by way of best judgment, assessment cannot be said to be unjustified." 24. This Court in the case of Sri Krishna Steel Works through Projector Devendra Yadav v. Commissioner Trade Tax reported in 2013 NTN (52) 166 has held that the best judgment assessment cannot be made in an arbitrary manner on the basis of conjunctures and surmises. There has to be some material to support such an assessment. 25. This Court in the case of M/s Laxmi Narain Ashok Kumar v. Commissioner Trade Tax reported in 1993 UPTC 497 has held that the stock found less but recorded entry was on higher side at the time of survey, in normal course of conduct, it will not show that the assessee had an intention to evade the tax. 26. In the light of the foregoing discussions and the settled preposition of law by the Hon'ble Apex Court as well as by this Court, I cannot conquer with the reasoning's and the conclusion arrived at by the learned Tribunal and the submissions of learned counsel for the revisionist find substance. Therefore, the instant revision deserves to be allowed. 27. As a result, the revision succeeds and is allowed. 28. The questions no.1, 2 and 3, are answered in favour of the Assessee and against the Revenue. The impugned order dated 01.11.2008, passed by the learned Tribunal in Appeal Nos.310 of 2003 and 439 of 2003 (Assessment Years 2001-02), is set aside. 29. The matter is remanded back to the learned Tribunal with the direction to consider and decide the matter afresh in accordance with law after taking into consideration the points raised by the revisionist, within a period of two months from the date of receipt of certified copy of this order.
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