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2025 (5) TMI 1524 - HC - VAT / Sales TaxLiability on issuing false certificates etc. - Issuance of Form III B without mentioning the rate of tax - Tribunal s failure to give due weightage to binding circulars - Short payment of tax without pinpointing specific instances of false or wrong declaration of Form III B - intention for obtaining form either for purchase on concessional rate or at higher rate - HELD THAT - On bare reading of the section 3 B it shows that on issuing of false or wrong certificates to another person by reasons of which tax leviable under the Act on the transaction of purchase or sale made with or by such other person ceases to be leviable or becomes leviable at a concessional rate shall be liable to pay on such transaction an amount which would have been payable as tax on such transaction had such certificate or declaration not been issued. In other words if the registered dealer in a particular transaction issued a certificate on the intent on which no tax is levied or concessional tax was levied then for the balance amount if found to be paid can be realized on such certificate or declaration. The word such certificate or declaration clearly shows that every certificate or declaration has to be looked into independently and for each default if any separate order has to be passed. For the complete assessment year no common order can be passed. The legislature in its wisdom has not used the word certificates or declarations for such transaction to which only one order can be passed. Further the record shows that the circular dated 15.4.1986 and 24.4.1987 have not given due weightage though it was binding upon the authorities. Thus the matter requires reconsideration by the assessing authority and for that purpose the impugned orders passed by the Commercial Tax Tribunal in all the aforesaid revisions are hereby set aside. The matter is remanded to the assessing authority who shall decide the case de novo in accordance with law. Accordingly all the revisions are allowed. The questions of law are answered accordingly.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in the revisions under the UP Trade Tax Act were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Binding Nature of Commissioner's Circulars Regarding Form III B Legal Framework and Precedents: The Commissioner of Commercial Tax issues circulars to provide administrative guidance and directions to subordinate authorities. Such circulars are generally binding on the authorities unless ultra vires or contrary to statute. Court's Interpretation and Reasoning: The Court noted that circulars dated 15.4.1986 and 24.4.1987 provided specific directions concerning the issuance of Form III B, including the use of different color shades of the form corresponding to concessional and full tax rates. The Tribunal's failure to give due weightage to these binding circulars was found to be legally unjustified. Key Evidence and Findings: The circulars were part of the record and clearly mandated procedural compliance by the assessing authority. The assessing authority did not follow these instructions in issuing Form III B, which was a procedural lapse. Application of Law to Facts: Since the circulars are binding, the assessing authority was obligated to comply with them. Ignoring these circulars undermined the validity of the penalty proceedings. Treatment of Competing Arguments: The State argued that the dealer's intent was paramount and that the burden to clarify lay with the dealer. The Court rejected shifting the entire burden on the dealer and emphasized compliance by the authority with binding circulars. Conclusion: The Tribunal erred in ignoring the binding circulars, and this issue requires reconsideration. Issue 2: Requirement of Establishing False or Wrong Form III B under Section 3B of the Act Legal Framework and Precedents: Section 3B of the UP Trade Tax Act penalizes the issuance of false or wrong certificates or declarations that result in tax not being leviable or being leviable at a concessional rate. The provision requires that before imposing penalty, the certificate or declaration must be shown to be false or wrong, and the person must be given an opportunity of hearing. Court's Interpretation and Reasoning: The Court emphasized that Section 3B applies to each certificate or declaration independently. The assessing authority must identify specific certificates that are false or wrong and cannot pass a blanket order for the entire assessment year. The language "such certificate or declaration" indicates individual scrutiny. Key Evidence and Findings: The impugned order held the revisionist liable for short payment of tax for the whole assessment year without pinpointing any specific Form III B that was false or wrong. No finding was recorded that the revisionist had issued any false or wrong Form III B. Application of Law to Facts: Since the assessing authority failed to identify particular forms or transactions that were false or wrong, the penalty under Section 3B could not be sustained. Treatment of Competing Arguments: The State contended that the revisionist should have informed the assessing authority about the intended rate of tax and that the dealer's intent could not be tested at the time of form issuance. The Court found this argument insufficient to uphold penalty without concrete evidence of falsehood or wrong declaration. Conclusion: The penalty demand under Section 3B without establishing falsity or wrongness of Form III B is unsustainable. Issue 3: Whether Form III B Requires Mention of Tax Rate and Consequences of Omission Legal Framework and Precedents: Rule 25B of the UP Trade Tax Rules prescribes the format of Form III B. The Court examined whether the form requires mentioning the rate of tax. Court's Interpretation and Reasoning: The Court observed that Form III B as prescribed does not contain any column for mentioning the rate of tax leviable. Therefore, the revisionist cannot be held responsible for omission of tax rate in the form. Key Evidence and Findings: The prescribed Form III B does not mandate specifying the tax rate. Circulars provide for different color shades of the form for different tax rates, but the form itself does not require the rate to be filled. Application of Law to Facts: Since the form does not require the rate to be mentioned, the revisionist's issuance of Form III B without tax rate cannot be treated as false or wrong under Section 3B. Treatment of Competing Arguments: The State argued that the revisionist should have clarified the intended rate. The Court held that the statutory form does not impose such a requirement on the dealer. Conclusion: The revisionist's issuance of Form III B without mentioning the tax rate does not amount to issuance of false or wrong certificate. Issue 4: Burden of Proof and Onus in Issuance and Use of Form III B Legal Framework and Precedents: The principle of burden of proof in tax matters generally lies on the revenue to establish non-compliance or falsehood. Court's Interpretation and Reasoning: The Court held that the negative onus cannot be shifted to the revisionist to prove that the form was not false or wrong. The assessing authority must discharge its duty properly and cannot penalize the dealer for the authority's failure. Key Evidence and Findings: The assessing authority did not record any finding that the revisionist had submitted false or wrong forms. The forms were obtained through due process. Application of Law to Facts: The revisionist cannot be penalized for procedural lapses or failures by the assessing authority. Treatment of Competing Arguments: The State argued that the dealer should have clarified the purpose of the form. The Court rejected this as an insufficient basis for penalty. Conclusion: The burden to establish falsehood or wrong issuance lies with the assessing authority, which was not discharged. Issue 5: Validity of Penalty Demand for Entire Assessment Year Without Specific Findings Legal Framework and Precedents: Section 3B requires action against issuance of false or wrong certificates or declarations. Such action must be specific and individual. Court's Interpretation and Reasoning: The Court held that passing a general order for the entire assessment year without pinpointing specific forms or transactions is impermissible. Each certificate or declaration must be examined independently. Key Evidence and Findings: The impugned order was a blanket confirmation of penalty for the whole year without identifying particular forms. Application of Law to Facts: The penalty order is invalid as it lacks specificity and fails to comply with statutory requirements. Treatment of Competing Arguments: The State did not provide justification for the general order. The Court emphasized legislative intent for individual scrutiny. Conclusion: The penalty order for the entire assessment year without specific findings is unsustainable. Issue 6: Procedural Compliance and Opportunity of Hearing Legal Framework and Precedents: Section 3B mandates that before taking any action, the person concerned must be given an opportunity of being heard. Court's Interpretation and Reasoning: The Court found no dispute that the revisionist was issued show cause notice and given hearing opportunity. However, the substantive defects in the order required remand for fresh decision. Key Evidence and Findings: Procedural compliance was observed but substantive legal requirements were not met. Application of Law to Facts: The matter was remanded for fresh adjudication in accordance with law. Treatment of Competing Arguments: No conflicting arguments on procedural compliance. Conclusion: Procedural safeguards were met, but substantive reconsideration is necessary. 3. SIGNIFICANT HOLDINGS The Court held:
Core principles established include:
Final determinations on each issue led to setting aside the impugned orders of the Commercial Tax Tribunal and remanding the matter to the assessing authority for fresh adjudication in accordance with law and binding circulars.
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