Research › Search › Judgment

Allahabad High Court · body

2019 DIGILAW 1952 (ALL)

Commissioner Commercial Tax Bhawan Gomti Nagar Lucknow v. Shashi Cables Ltd.

2019-08-14

ALOK MATHUR

body2019
JUDGMENT : ALOK MATHUR, J. 1. Heard Sri Rohit Nandan Shukla, learned Standing Counsel appearing on behalf of revisionist as well as Sri Manish Singh, learned counsel for the opposite party. 2. Since both the revisions have been preferred by the Revenue against the common impugned judgment and order dated 11.08.2011, and Revision No. 196 of 2012 is related to assessment year 2006-07 while Revision No. 191 of 2012 relates to assessment year 2005-06, they are decided by the common judgment. 3. The Revenue has preferred these revisions under Section 11(1) of the U.P. Trade Tax Act, against the judgment and order dated 11.08.2011, passed by the Commercial Tax Tribunal, Bench-II, Lucknow in Second Appeal No. 123 of 2011 - M/s Shashi Cables Ltd. Lucknow Vs. The Commissioner of Trade Tax, U.P. (Assessment year 2006-07 and 2005-06), by which they have allowed the appeal filed by the assessee thereby setting aside the order of the first appellate authority, and also setting aside the orders passed under section 22 of the Trade Tax Act dated 5th November, 2009. 4. Brief facts giving rise to this revision are that at the time of final assessment proceeding of the assessment year 2006 - 07, the Tax on the sale of ACR Conductor against Form 3 - Kha was determined at the rate of 2.5%. The total sale turn over of ACR conductor as shown by the dealer was Rs.5,54,96,494.54 in the assessment year 2006-07. 5. After final assessment of the assessee the records were examined and during the examination of the records it was found that out of total 22 Form-Kha, 9 Form-Kha were relating to sale of ACR conductor. It has also revealed that certain forms were issued against the sale of ACR conductor to the sugar and spinning mills. 6. 5. After final assessment of the assessee the records were examined and during the examination of the records it was found that out of total 22 Form-Kha, 9 Form-Kha were relating to sale of ACR conductor. It has also revealed that certain forms were issued against the sale of ACR conductor to the sugar and spinning mills. 6. As per notification No. KA-NI-2-731/XI-9(37) U.P. Act- 15-48-order(14)-2005 dated 07.03.2005, the Tax on the sale of goods to the units manufacturing the non-leviable goods, the Tax on ACR Conductor against Form-3Kha is 4% and as such, the assessment order passed under Rule 41(8) attracted the provisions of Section 22 of the Trade Tax Act and therefore, the order passed under Rule 41(8) was modified to the extent that the ACR conductor which was sold to the sugar and spinning Mills against Form-Kha, which in the opinion of the Assessing Officer was liable to be taxed at the rate of 4% and not 2.5% which was inadvertently assessed at the time of assessment proceedings and the said error crept into records. It has been submitted by the Revenue that there was no change of opinion while it was realized that the Tax was liable to be levied at the rate of 4% and not at the rate of 2.5%. 7. Looking to the above facts, notice under Section 22 of the Act was issued to the Respondent/Firm which was responded to by the respondent/ dealer. 8. The said reply of the respondent was considered by the assessing authority and the facts mentioned in the reply were not found supportive to its case and as such, the order dated 5.11. 2009 was passed whereby the tax at the rate of 4% was determined on the sale turn over of ACR conductor and additional demand was raised. 9. Being aggrieved by the order dated 5.11.2009 passed by the assessing authority under Section 22 imposing the Tax on the sale turn over of ACR Conductor for the assessment year 2006-07 after having found that there was error apparent on the face of record relating to assessment of Tax, the respondent/firm filed a First Appeal before the Additional Commissioner Grade-II (Appeal), Judicial Zone, Commercial Tax, Lucknow. Similarly an appeal was also filed by the respondent for the assessment year 2005-06. 10. Similarly an appeal was also filed by the respondent for the assessment year 2005-06. 10. The first Appellate Authority after hearing both the parties, decided the appeals of the respondent vide judgment and order dated 25th November 2010 whereby the appeals as filed by the respondents challenging the orders passed under Section 22 were rejected being devoid of merits. However, the first appellate authority observed that the respondent/firm ought to have obtained Form-XIX from the purchasing dealer, sugar/spinning mill as per law, but this was laxity on the part of the respondent. Finally, the appeals of the respondent were dismissed by the First Appellate Authority by the aforesaid judgment and order dated 25th November 2010. 11. The judgment dated the 25th November 2010 was challenged by the respondent/firm before the Commercial Tax Tribunal, Lucknow. The appeals as filed by the respondent/ firm were registered as Second Appeal No. 123 of 2011 (assessment year 2006-07), and Second Appeal No.120 of 2011(assessment year 2005-06). 12. Both the appeals of the respondent were heard and decided by the learned Commercial Tax Tribunal, Lucknow vide judgment and order dated 11 August 2011 whereby the learned Tribunal has allowed both the appeals of the respondent and set aside the first appellate orders as well as the orders passed under Section 22. 13. According to the Tribunal the liability of Tax on the sold goods were liable to be levied at the rate of 4%, which were in fact, levied at the rate of 2.5% but the said mistake was not on the part of the respondent/firm but the same had occurred due to lapse on the part of purchasing dealer who had supplied Form-Kha to the opposite party. In support of its observation Commercial Tax Tribunal placed reliance on the judgment rendered in the case of Commissioner, Sales Tax Vs. Rana Steel Saharanpur, 2003 UPTC 532 wherein the Hon'ble High Court held that for any wrong committed by the purchasing dealer, selling dealer cannot be held responsible and necessary action can be taken only against the purchasing dealer under Section 3-B of the Act. 14. Rana Steel Saharanpur, 2003 UPTC 532 wherein the Hon'ble High Court held that for any wrong committed by the purchasing dealer, selling dealer cannot be held responsible and necessary action can be taken only against the purchasing dealer under Section 3-B of the Act. 14. The Tribunal further observed that Section 22 of the Act is attracted only in those cases where errors are apparent directly after looking at the records and not after application of mind and wisdom of the authority concerned and in support of this observation the Tribunal placed reliance on the judgment and order passed in the case of Commercial Sales Tax Vs. Indian Explosive Limited, Kanpur, 2003 UPTC 363. In the said judgment it was laid down that provisions of section 22 of the Act was confined to verification of mistake apparent on the face of record. 15. It has been vehemently argued by learned counsel for the revisionist that the assessing officer has rightly invoked power under section 22 of the Trade Tax Act and corrected the mistake which was apparent from the record. He further submits that said correction was with regard to the mistake which was apparent on the face of record, which could be ascertained without any deep discussion and same did not amount to any change of opinion. 16. Learned counsel for the respondent on the other hand has submitted that judgment of the Commercial Tax Tribunal does not suffer from any infirmity and has rightly been concluded that the order passed by the assessing authority under Section 22 of the Act was beyond its jurisdiction. 17. After hearing learned counsel for the parties following questions of law emerges for the consideration of this court :- (1) Whether the Assessing Authority correctly exercised his jurisdiction under section 22 of the Trade Tax Act, imposing Tax at the rate of 4% on the sale of goods in view of the notification dated 7 March 2005 ? (2) Whether Trade Tax Tribunal was legally justified in setting aside-the order dated 05.11.2009 passed by assessing authority? 18. The undisputed facts which emerge are that respondent had sold ACR conductors against Form 3-B which was supplied by the sugar and spinning mills to the respondent wherein rate of Tax of 2.5% was endorsed. (2) Whether Trade Tax Tribunal was legally justified in setting aside-the order dated 05.11.2009 passed by assessing authority? 18. The undisputed facts which emerge are that respondent had sold ACR conductors against Form 3-B which was supplied by the sugar and spinning mills to the respondent wherein rate of Tax of 2.5% was endorsed. The respondents were duly charged and subsequently deposited the Tax at the rate of 2.5% and even the assessing authority accepted return filed by the respondent. Subsequently the assessing authority noticed the discrepancy in the rate of Tax charged which undisputedly as per notification number KA-NI-2-731/XI-9(37) U.P. Act- 15-48-order(14)-2005, dated 7 March 2005 was leviable on the aforesaid goods i.e. ACR Conductors against Form 3-B at the rate 4%. 19. The assessing authority in the aforesaid circumstances issued notice to the respondent firm and after hearing the respondent passed order dated 5 November 2009 under Section 22 of the Trade Tax Act imposing the Tax on the sale turn over of ACR conductors for the assessment year 2006-07 at the rate of 4% after recording that there was error apparent on the face of record relating to the assessment of Tax. 20. It is relevant to mention at this stage that the Tribunal in its impugned judgment has admitted that liability of Tax on the goods sold was 4% but was levied at the rate of 2.5%. The ground on which action of the assessing authority has been found to be infirm is that the mistake was not on the part of the respondent firm but occurred due to lapse on the part of purchasing dealer and relying on the judgment of Commercial Sales Tax Tribunal Vs. Rama Steels Saharanpur, 2003 UPTC 532, held that if any wrong is committed by the purchasing dealer the selling dealer cannot be held responsible and necessary action can be taken against the purchasing dealer under section 3-B of the Act. 21. The jurisdiction of the assessing authority under Section 22 is confined to the rectification of a mistake apparent on the face of the record of the assessment. It must be a mistake and it must be apparent on the face of the record. Clearly Section 22 does not envisage rectification of an error of judgment. The mistake must be apparent on the face of the record. It must be a mistake and it must be apparent on the face of the record. Clearly Section 22 does not envisage rectification of an error of judgment. The mistake must be apparent on the face of the record. It must be a mistake which will appear upon a glance at the record and not a mistake which emerges after prolonged debate on the merits of the question. 22. Section 4B(2) of the Trade Tax Act is quoted below:- "4-B. Specific relief to certain manufacturers.- (2) Where a dealer requires any goods, some referred to in sub-section (1) for use in the manufacture by him in the State, of any notified goods, or in the packing of such notified goods manufactured or processed by him, and such notified goods are intended to be sold by him in the State or in the course of inter-State Trade or commerce or in the course of export out of India, he may apply to the assessing authority in such form and manner and within such period as may be prescribed, for the grant of a recognition certificate in respect thereof, and if the applicant satisfies such requirements including requirement of depositing late fee, and conditions as may be prescribed, the assessing authority shall grant to him in respect of such goods recognition certificate in such form and subject to such conditions, as may be prescribed." 23. Learned counsel for the respondent submitted that the Sales Tax Officer after recording his satisfaction and making inquiries furnished the form as prescribed under sub-section 3 of Section 4B of the Trade Tax Act. It is not in dispute that the selling dealer had made sale to the purchaser who has produced genuine record mentioning articles in it. Liability of the selling dealer, who accepts form 3-B is only to check them to ensure that there is no defect on them which can be reasonably detected by an intelligent person. It is not his duty to ensure by all possible means that the form is genuine or is not being misused. A dealer cannot be expected to consult a document expert or to send the certificate to the Sales Tax Office, who issued the same, for verification before accepting the same. 24. In the present case undisputedly the form under section 4-B was genuine and rate of Tax was duly endorsed at 2.5%. A dealer cannot be expected to consult a document expert or to send the certificate to the Sales Tax Office, who issued the same, for verification before accepting the same. 24. In the present case undisputedly the form under section 4-B was genuine and rate of Tax was duly endorsed at 2.5%. The rate of Tax as mentioned in the form has been duly deposited by the seller and subsequently in exercise of power under section 22 of the Trade Tax Act, rate of Tax has been levied at 4% and difference is being sought to be recovered from the seller. 25. The respondent/assessee has vehemently urged that the seller is no where responsible for negligence in recovering Trade Tax at the rate 2.5% in as much as he had recovered the Tax at the rate 2.5% as mentioned in the form handed over to him by the purchaser which was published by the Sales Tax Authorities as per provisions of Sales Tax Act. 26. It has further been submitted that in the case of Gaurav Trader Vs. Commissioner of Trade Tax, U.P., Lucknow, 1996 9 NTN 262, this Court observed as follows:- "I have already mentioned the relevant provisions in the Act and the Rules which made it clear, as emphasized by the honourable Supreme Court as well as in my judgment in Bharat Iron Stores, 1994 UPTC 130 that the selling dealer is expected to act only as a careful businessman and the Act does not place on the selling dealer the burden of making all sorts of verification. If there is nothing in form III-A raising a doubt about its genuineness or the genuineness of the purchasing dealer of the fact that the purchasing dealer is a registered dealer the selling dealer having acted on such a form III-A cannot be burdened with any liability if later on it is found that the purchasing dealer was non-existent or its registration certificate had already been cancelled." 27. It is stated that at no point of time was form 3-B ever questioned by the authorities with regard to its genuineness and therefore, form being genuine, rate of Tax mentioned therein was levied on the transaction and the respondent cannot be saddled with the liability of enhanced Tax on the basis of notification dated 7th March, 2005 which was observed by the assessing authority subsequently. This aspect of the matter has already been considered by this Court in the case of - Star Paper Mills Ltd. Vs. Commissioner of Sales Tax, 2005 139 STC 245 All. 28. The Tribunal in the impugned order has considered the fact that it was the duty of the Purchaser to provide Form 3 Kha to the petitioner, wherein the rate of Tax to be charged was endorsed. The Purchaser (Assessee/Revisionist) on the basis of the said Form had charged Tax at the rate of 2.5% and duly deposited the same with a Revenue. The Assessing Authority while passing the assessment order had also assessed the rate of Tax to be 2.5%, but subsequently in exercise of power under Section 22 of the Trade Tax Act on discovering the mistake he has reassessed the Tax leviable on the said items at the rate of 4% and sought to recover the differences from the revisionist. 29. Exercise of power under Section 22 is confined to rectification of mistakes which are apparent on the record, during the period of three years from the date the order sought to be rectified. In order to attract the provisions of Section 22 of the Trade Tax Act the mistake must exist and the same must be apparent from the record, as has been interpreted by the Hon'ble Supreme Court in the case of Devi Metal Powders (P) Ltd. Vs. Commissioner, Trade Tax, Uttar Pradesh, 2008 2 SCC 439 in paragraph No.12 of the said judgment it has been held as follows :- "12. A bare look at Section 22 of the Act makes it clear that a mistake apparent from the record is rectifiable. In order to attract the application of Section 22, the mistake must exist and the same must be apparent from the record. The power to rectify the mistake, however, does not cover cases where a revision or review of the order is intended. "Mistake" means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error, a fault, a misunderstanding, a misconception. "Apparent" means visible; capable of being seen, obvious; plain. The power to rectify the mistake, however, does not cover cases where a revision or review of the order is intended. "Mistake" means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error, a fault, a misunderstanding, a misconception. "Apparent" means visible; capable of being seen, obvious; plain. It means "open to view, visible, evident, appears, appearing as real and true, conspicuous, manifest, obvious, seeming." A mistake which can be rectified under Section 22 is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration." 30. This Court has also perused the assessment order which has been handed over by the learned counsel for the revisionist, from which it is clear that the Assessing Authority has not discussed or considered at that stage - as to whether the rate of Tax leviable would be 2.5% or 4%. Further it is also an admitted position that as per the Notification No. KA-NI-2-731/XI-9(37) U.P. Act- 15-48-order(14)-2005 dated 07.03.2005 the rate of Tax leviable in the present case would be 4%. The question to be considered in order to resolve the controversy at hand, would be as to whether the transaction was correctly taxed at the rate of 2.5% or the Assessing Authority was within its jurisdiction as provided in Section 22 of the Trade Tax Act to rectify the mistake and to Tax the said transaction at the rate of 4%. 31. As already discussed above, the counsel for the assessee has relied on judgments passed by this Court, wherein on equitable considerations it has been held that the assessee had no role in preparation and submitting of the Form 3 Kha on which the rate of Tax is endorsed and therefore cannot be held to be liable for any wrong committed by the purchasing dealer. This argument has also found favour with the Tribunal, which has proceeded to allow the appeal preferred by the revisionist. 32. On one hand on the ground of equity the revisionist has relied on a series of judgments to canvas his contention that there being no fault on the part of the revisionist, he could not be again saddled with the liability of enhanced rate of Tax while on the other hand the admitted position is that the said transaction was taxable at higher rate of Tax i.e. 4%. 33. 33. To resolve the controversy at hand it is relevant to notice that in matters of taxation equity has no role to play and admittedly as per the notification No. KA-NI-2-731/XI-9(37) U.P. Act- 15-48-order(14)-2005 dated 07.03.2005 the said transaction was to be taxed at the rate of 4% and also there being an error apparent on the face of record, therefore, the Assessing Authority was within its jurisdiction to pass the order under Section 22 of the Trade Tax Act. 34. In the case of Commissioner of Income Tax, Madras Vs. MR. P. Firm, 1965 AIR(SC) 1216 in paragraph No. 13 the Hon'ble Supreme Court has held as under : "Equity is out of place in tax law; a particular income is either eligible to tax under the taxing statute or it is not. If it not, the Income-tax Officer has no power to impose tax on the said income." 35. Similar observations have been made by the Hon'ble Supreme Court in the case of Kapil Mohan Vs. The Commissioner of Income Tax, Delhi, 1999 1 SCC 430 , wherein in paragraph 14 it has been held : "As to the argument based equity, it has long been recognised that tax and equity are strangers. Just as reliance upon equity does not avail as assessee, so it does not avail the Revenue." 36. Further, in the case of Pradip Nanjee Gala Vs. Sales Tax Officer and Ors., 2015 13 SCC 149 , the Apex Court in paragraph No.17 has held in the following manner : "17. It is trite that the letter of law has to be accorded utmost respect and strictly adhered to especially while interpreting a taxing statute. There ought not exist any scope for impregnating the interpretation by reading equity into taxing statutes. The classic statement of Rowlatt, J, in Cape Brandy Syndicate v. IRC, 1921 1 KB 64, 71] still holds the field. It reads as under: In a Taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." 37. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." 37. In this regard it is relevant to place reliance on the recent judgment of the Hon'ble Supreme Court in the case of Prashanti Medical Services & Research Foundation Vs. Union of India and Ors, Civil Appeal No. 5849 of 2019 (decided on 25.07.2019), wherein in paragraph No.29 the Court has been held as follows: "29. ... We find no merit in this submission. In a taxing statute, a plea based on equity or/and hardship is not legally sustainable. The constitutional validity of any provision and especially taxing provisions cannot be struck down on such reasoning." 38. In the case of Krishi Utpadan Mandi Samiti Vs. Union of India (UOI) and others, 2004 267 ITR 460 (All) the Hon'ble Supreme Court in paragraph Nos. 11 & 19 held as under : "11. The principle of strict interpretation of taxing statutes was best enunciated by Rowlatt, J, in his classic statement in Cape Brandy Syndicate v. IRC, 1921 1 KB 64; "In a Taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." 19. It is said that tax and equity are strangers vide Patrington v. Attorney General, 1869 4 LRHL 100. This view was best expressed by Lord Cairns as follows:- "If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind. On the other hand if the Court seeking to recover the tax cannot being the subject within the letter of the law, the subject is free, however apparently with the spirit of the law the case might otherwise appear to be." 39. The series of judgments as cited hereinabove clearly lay down the law in this regard that the equity has no role to play in Tax matters. The series of judgments as cited hereinabove clearly lay down the law in this regard that the equity has no role to play in Tax matters. In the instant case, admittedly the transaction was liable to be taxed at 4% but the assessee has only canvased the ground of equity and that he was not at fault while submitting the Form 3 Kha, wherein the rate of Tax was endorsed, hence he cannot be held liable. 40. The aforesaid argument does not hold good in light of the settled legal position discussed hereinabove. Equity will have to give way to the provisions of law and in the present case according to the Notification No. KA-NI-2-731/XI-9(37) U.P. Act- 15-48-order(14)-2005, dated 07.03.2005, the transaction was liable to be taxed at the rate of 4%. 41. In the aforesaid view of the matter, I am of the considered opinion that the Assessing Authority, rightly exercising the jurisdiction vested in him under Section 22 of the Trade Tax Act to rectify the mistake and to levy Tax on the transaction in question as per Notification No. KA-NI-2-731/XI-9(37) U.P. Act-15-48-order(14)-2005, dated 07.03.2005. 42. Needless to say that it is always open for the respondent to recover the shortfall of Tax levied on the goods supplied from the purchaser in accordance with law. 43. In light of the discussion as well as the legal proposition discussed above, the revisions are allowed. 44. The questions of law framed above are answered in favour of the Revenue and against the assessee. 45. The impugned judgment and order of the Tribunal is hereby set-aside.