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2010 DIGILAW 434 (ALL)

BANSAL MOTORS v. STATE OF U. P.

2010-02-02

BALA KRISHNA NARAYANA, RAJESH KUMAR

body2010
JUDGMENT Heard Sri R. R. Agrawal learned counsel for the petitioner and Sri U. C. Pandey, learned standing counsel. The petitioner is carrying on the business of bajaj scooter, motorcycle and other spare parts. It appears that during the period of warranty of the vehicle, on the claim of the buyer of the vehicle, the petitioner supplied certain parts. The amount of the said parts had been received from the company. The claim of the petitioner was that the amount received from the company in respect of the part used for the repair of the vehicle during warranty period was not the part of the taxable turnover and not liable to tax. It appears that on the basis of the decision of the apex court in the case of Mohd. Ekram Khan & Sons v. Commissioner of Trade Tax, [2004] 136 STC 515; [2004] UPTC 1198, proceedings under section 21 of the U.P. Trade Tax Act, 1948 (hereinafter referred to as, "the Act") have been initiated for the assessment years 1999-2000 to 2002-03 and thereafter reassessment orders have been passed. The assessing authority has levied the tax on the amount received from the company in respect of the warranty claim. In the assessment order the assessed tax has been treated as admitted tax and the interest has been demanded for the assessment year 1999-2000 from June 1, 1999 till the deposit of the tax, for the assessment year 2000-2001 from June 1, 2000 till the deposit of the amount; for the assessment year 2001-2002, from October 1, 2001 and for the assessment year 2002-03 from October 1, 2002. For the assessment year 2003-04, the assessing authority has passed regular assessment order under rule 41(8) and the amount received towards the warranty claim has been assessed to tax and also demanded interest under section 8(1) with effect from June 1, 2003. The learned counsel for the petitioner submitted that the petitioner is not challenging the levy of tax and is only challenging the demand of interest under section 8(1) of the Act. He further submitted that at no stage the petitioner had admitted the liability of tax on such warranty claim. The learned counsel for the petitioner submitted that the petitioner is not challenging the levy of tax and is only challenging the demand of interest under section 8(1) of the Act. He further submitted that at no stage the petitioner had admitted the liability of tax on such warranty claim. The assessing authority in the years 1999-2000 to 2002-03, while passing original assessment order, has accepted the claim of the petitioner that such warranty claim was not liable to tax and accordingly exempted the turnover and it is only because of the decision of the apex court in the case of Mohd. Ekram Khan & Sons [2004] 136 STC 515; [2004] UPTC 1198, tax has been imposed on warranty claim therefore, the assessed tax on the warranty claim amount cannot be said to be admitted tax for the purposes of levy of interest under section 8(1) of the Act. In support of his contention he relied upon the decision of the apex court in the case of Commissioner of Sales Tax v. Hindustan Aluminium Corporation [2002] 127 STC 258; [1999] UPTC 1 and a Division Bench decision of this court in the case of Annapurna Biscuit reported in [1982] 50 STC 56 (All); [1980] UPTC 1320. For 2003-04 also he submitted that the petitioner is not liable for interest under section 8(1) with effect from June 1, 2003 and liable to interest under section 8(1B) of the Act. Sri U. K. Pandey, learned standing counsel, submitted that the learned single judge of this court in the year 2003 in the case of Commissioner of Trade Tax v. Mohammad Ekram Khan (T.T.R. No. 332 of 2001 dated April 25, 2003) of the Allahabad High Court has held that the amount received from the company towards warranty claim is liable to be taxed and at least from the date of decision of this court, the petitioner is liable for interest. In this view of the matter he submitted that the demand of interest for the assessment year 2003-04 from June 1, 2003 is justified. In the case of Hindustan Aluminium Corporation [2002] 127 STC 258; [1999] UPTC page 1, the apex court while dealing with the provisions of section 8 of the U.P. Trade Tax Act, 1948 has held as follows : "4. In the case of Hindustan Aluminium Corporation [2002] 127 STC 258; [1999] UPTC page 1, the apex court while dealing with the provisions of section 8 of the U.P. Trade Tax Act, 1948 has held as follows : "4. What is required is a plain interpretation of the provisions of section 8, sub-section (1) thereof requires the assessee to deposit within the time prescribed or by August 31, 1975, whichever is later, the tax that is admittedly payable by him. What 'tax admittedly payable' means, for the purpose, is set out in the Explanation to sub-section (1). It means the tax payable under the Act on the assessee's turnover as disclosed in his accounts or as admitted by him in his return or other proceeding under the Act, whichever is greater, or, if no accounts are maintained, according to his estimate. Sub-section (1A) deals with the post-assessment scenario. It says that the tax assessed under the Act shall be deposited within thirty days of service of notice of assessment and demand. Sub-section (1B) applies if the tax assessed is not deposited as required by sub-section (1A). 5. The dispute here, as aforestated, was in regard to the classification of the assessee's products. Such classification dispute is ordinarily resolved in assessment proceedings and, if resolved against the assessee, the assessee has to make payment of the differential amount of tax as required by sub-section (1A) failing which the provisions of sub-section (1B) apply. 6. The requirement of sub-section (1) is that the assessee must pay tax on the amount of his turnover as particularised in the Explanation thereto. Interest under the provisions of sub-section (1) cannot be levied in respect of a dispute such as a classification dispute which is resolved only by the assessment. Sub-section (1) has no application to such a situation. 7. Interest under the provisions of sub-section (1) cannot be levied in respect of a dispute such as a classification dispute which is resolved only by the assessment. Sub-section (1) has no application to such a situation. 7. Having regard to the conclusion that we reach upon the plain words of section 8, it is unnecessary to go into the assessee's contention that a substantial part of the amount claimed by the Revenue as and by way of interest is under the provisions of the Central Sales Tax Act, 1956 and under that Act no interest is leviable." In the case of Annapurna Biscuit Manufacturing Company [1982] 50 STC 56 (All); [1980] UPTC 1320, the Division Bench of this court has held that if the dealer has not admitted the liability to tax on a turnover and subsequently by way of legislative enactment or on account of any judicial interpretation such turnover is liable to tax the said tax cannot be said to be admitted tax and no interest can be charged under section 8(1) of the Act. Having heard learned counsel for the parties we find substance in the argument of learned counsel for the petitioner so far as assessment years 1999-2000 to 2002-03 are concerned, wherein the assessing authority while passing the original assessment orders has accepted the claim of the petitioner that the warranty claim was not liable to tax and the petitioner became liable to pay tax on such warranty claim amount under the reassessment orders under section 21 inasmuch as before the reassessment orders there was no occasion with the petitioner to deposit the amount. Therefore for these years it cannot be said that the claim of the petitioner was not bona fide. Therefore, the tax assessed on the warranty claim amount by reassessment order under section 21 cannot be said to be admitted tax for the purpose of demand of interest under section 8(1) of the Act. The petitioner is only liable to pay interest under section 8(1B) of the Act. Therefore, the tax assessed on the warranty claim amount by reassessment order under section 21 cannot be said to be admitted tax for the purpose of demand of interest under section 8(1) of the Act. The petitioner is only liable to pay interest under section 8(1B) of the Act. The learned single judge of this court in the case of Commissioner of Trade Tax v. Mohammad Ekram Khan (T.T.R. No. 332 of 2001 dated April 25, 2003) of the Allahabad High Court in the year 2003 has held that the amount received from the company towards warranty claim is liable to tax and therefore, the petitioner should have deposited the tax on such warranty claim. If the petitioner has not deposited the tax it was the tax admittedly payable in accordance to the law and therefore, we are of the view that the interest under section 8(1) of the Act is chargeable from June 1, 2003. The assessing authority is accordingly directed to modify the order so far as interest is concerned. So far as assessment year 2003-04 is concerned, we do not find any substance in the argument of learned counsel for the petitioner. In the result the writ petition is allowed in part. We hold that the petitioner is not liable to pay interest under section 8(1) of the Act for the assessment years 1999-2000 to 2002-03 and is only liable to pay interest under section 8(1B) of the Act. The claim of the petitioner for the assessment year 2003-04 is rejected.