TMI Blog2015 (9) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled that Courts, in exercise of their power of judicial review did not ordinarily interfere with policy decisions of executive unless policy can be faulted on account of malafide, unreasonableness, arbitrariness or unfairness etc – Therefore relief sought by petitioners to declare aforesaid compounding scheme as ultra vires, hereby rejected. Compounding Scheme – Applicability for part of session – Whether compounding applications for part of season from 1.4.2008 to 30.9.2008 may be accepted despite fact that compounding under Section 6 of UP VAT Act was offered for fixed period and for fixed lump sum amount – Held that:- scheme does not provide for computation of lump sum amount for part of season which may be accepted by assessing authority – Settled law that in interpreting taxing statute, equitable consideration are entirely out of place nor can taxing statute be interpreted on any assumptions or presumptions – Thus it is not open for assessing authority either to bifurcate period of season or lump sum amount under scheme unless assessing authority is permitted to do so under scheme itself – In absence of any such direction or power, assessing authority committed no error ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered dealer within the State and whose turnover on sale of such goods, for any assessment year, does not exceed fifty lakh rupees or his turnover, is neither likely to exceed fifty lakh rupees nor his such turnover, for the assessment year preceding that assessment year, has not exceeded fifty lakh rupees, the State Government may notify a rate percent on sale of such goods. Different rates may be notified for different goods: Provided further that any change in the rate of tax which may come into force after the date of such agreement shall have the effect of making a proportionate change in the lump sum or the rate agreed upon in relation to that part of the period of assessment during which the changed rate remains in force. (2) Any dealer, who opts for payment of lump sum under this section, shall not be entitled to claim credit of input tax under section 13 in respect of purchase of goods which are re-sold by him during the period in which he is liable to pay composition money under this section or in respect of purchase of goods which have been used, consumed or utilized in manufacture or processing of goods which are sold by him during such period and where the dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) dealer by whom tax return for one or more tax periods of the assessment year have not been submitted; or (iii)dealer in whose case assessing authority has passed provisional assessment order under section 25 in respect of one or more tax periods to the best of its judgment; or (iv)dealer in whose case, on the basis of material available on records, if the assessing authority is satisfied that the turnover of sales or purchases or both, as the case may be, and amount of tax shown payable as disclosed by the dealer in annual return of turnover and tax are not worthy of credence or tax shown payable in the return has not been deposited by the dealer, or the amount of input tax credit claimed is wrong or the amount of tax payable shown is incorrect; or (v)dealer who has prevented or obstructed an officer empowered to make audit, survey, inspection, search or seizure under the provisions of this Act; or (2) Where after examination of books, accounts, documents and other records referred to in sub-section (1), - (i) the assessing authority is satisfied about correctness of turnover of sale or purchase or both, as the case may be, disclosed by the dealer, it may asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his section. (9) Notwithstanding anything to the contrary in any other provision of this Act, where an unregistered dealer brings any taxable goods from outside the State more than once during an assessment year, separate assessment relating to goods brought on each occasion may be made for the same assessment year. (10) The provisions of this Act shall apply to each assessment order passed under sub-section (9) as they apply to an order passed under sub-section (2). (11) Dealers under sub-section (9) shall not be required to furnish annual return of turnover and tax and in cases of such dealers assessment under sub-section (9) may be made even before the expiry of the assessment year. (12) Provisions of sub-sections (5), (6) and (7) shall, mutatis mutandis, apply to every assessment order passed under any provisions of this Act. 4. Assessment of the petitioner was completed by the assessing authority under Section 28 of the Act for the A.Y. 2007-08 (From 1.1.2008 to 31.3.2008) against which the petitioner filed an appeal which was allowed in part and the tax liability was reduced. 5. Subsequently, the State Government announced a compounding scheme for brick kiln ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SUE NO. I 9. It is settled law that the validity of a provision can be challenged only on limited grounds, namely, that the provision infringes any of the fundamental or constitutional rights or it lacks legislative competence or the Rule is violative of any provision of the Act or beyond the Rule making power under which it has been enacted. Undisputedly, the compounding scheme dated 9.6.2009 has been framed by the State Government in exercise of powers conferred under Section 6 of the Act. Section 6(1) of the Act starts with a non obstante clause, but it is subject to other provisions of the same Section and the direction of the State Government. A plain reading of sub-Section 1 of Section 6 clearly indicates the following: i). It gives over riding effect over the other provisions of the Act. ii). It is subject to other provisions of Section 6 and the directions of the State Government. iii) The assessing authority may agree to accept the composition money either in lump sum or at an agreed rate on the turn over of sale in lieu of tax that may be payable by a dealer in respect of such goods or class of goods and for such period as may be agreed upon. 10. In the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference in this regard may be had to the judgments of Hon'ble Supreme Court in the cases reported in (1993) 66 ELT 3 SC, (Subhash Photographics Vs. Union of India) para-13, (1996) 2 SCC 405 (Delhi Science Forum Vs. Union of India and another) para-7, JT (2006) 6 SC 500 (Ekta Shakti Foundation Vs. Govt. of NCT of Delhi para-12, AIR 1997 SC 128 (Krishnan Kakkanth Vs. Govt. of Kerla and others) para-34, (2002) 6 SCC 252 (State of Rajasthan and others Vs. Lata Arun) para -10 and 12, (2002) 4 SCC 510 (State of H.P. and another Vs. Padam Dev and others) para-13, AIR 1996 SC 149 (State of H.P. and others Vs. Ganesh Wood Products and others) para-51, 54 and 57, (2001) 3 SCC 635 (Sugar Works Ltd. Vs. Delhi Administration and others), AIR 1973 SC 588 (State of Maharastra and others Vs. Lok Shiksha Sansthan and others, (AIR 1990 SC 1277) M/s Shri Sita Ram Sugar Co. Ltd. and another vs. Union of India, (1998 4 SCC 117 (State of Punjab and others Vs. Ram Lubhaya Bagga and others) para- 25 and 26) JT (2001) 10 SC 466 para 91 to 99 (Balco Employees Union Regd. Vs. Union of India and others, (AIR 1998 SC 137 para-17) Gyan Prakash Vs. Union of India, (2007) 6 SCC 44 (Ram Singh Vijay Pal Singh a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or all these reasons, the High Court held that the said sub-sections were clearly beyond the legislative competence of the State Legislature. This Court repelled the submission urged before it in the following words: (SCCp.188, para 9) The first feature to be noticed is that the alternate method of taxation provided by Sub-section (7) or (7-A) of Section 7 is optional. The sub-section expressly provided that the method of taxation provided thereunder is applicable only to a contractor who elects to be governed by the said alternate method of taxation. There is no compulsion upon any contractor to opt for the method of taxation provided by Sub-section (7) or Sub-section (7-A). It is wholly within the choice and pleasure of the contractor. If he thinks it is beneficial for him to so opt, he will opt; otherwise, he will be governed by the normal method of taxation provided by Section 5(1)(iv). Sub-section (8) provides that the option to come under Sub-section (7) or (7-A) has to be exercised by the contractor 'either by an express provision in the agreement for the contract or by an application to the assessing authority to permit him to pay the tax in accordance with any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be availed of by a contractor if he thinks it advantageous to him. It must be remembered that the analogous system of alternate method of taxation evolved by certain State Legislatures in the matter of levy of entertainment tax has been upheld by his Court in Venkateshwara Theatre v. State of A.P (1993)3SCC 677. The rough and ready method evolved by the impugned sub-section for ascertaining the tax payable under Section 5(1)(iv) of the Act cannot be said to be beyond the legislative competence of the State or violative of Clause (29-A) of Article 366 either. The Constitution does not preclude the legislature from evolving such alternate, simplified and hassle-fire method of assessment of tax payable, making it optional for the assessee. The object of Sub-sections (7) and (7-A) is the same as that of Section 5(1)(iv); it is only that they follow a different route to arrive at the same destination. 16. We are of the considered view that principles laid down by this Court in the aforesaid decision squarely apply to the facts of this case having regard to the similarity of the provisions in the two Acts. We therefore find ourselves in complete agreement with the High Court and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es by retrospective operation of the amended scheme of composition the State Government itself submitted that the appellants and other like them may be given option to opt for assessment under Section 5-B of the Act even if they had earlier opted for assessment under Sub-section 6 of Section 17. The High Court has in fact made such a direction. The appellants are therefore not prejudiced in any manner whatsoever. 14. In the case of Venkateshwara Theatre Vs. State of Andhra Pradesh and others 1993(3) SCC 677, Hon'ble Supreme Court considered the applicability of Article 14 of the Constitution of India with reference to the compounding scheme under A.P. Entertainment Tax Act 1939 and held in para 20,21 and 22 as under: 20. Article 14 enjoins the State not to deny to any person equality before the law or the equal protection of the laws. The phrase equality before the law contains the declaration of equality of the civil rights of all persons within the territories of India. It is a basic principle of republicanism. The phrase equal protection of laws is adopted from the Fourteenth Amendment to U.S. Constitution. The right conferred by Article 14 postulates that all per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods and services, has yet been devised which is free of all discriminatory impact. In such a complex arena in which no perfect alternatives exist, the court does well not to impose too rigorous a standard of scrutiny lest all local fiscal schemes become subjects of criticism under the Equal Protection Clause. 15. In view of the above discussion we do not find any illegality or unconstitutionality in the compounding scheme dated 9.6.2009. Under the circumstances, the relief sought by the petitioners to declare the aforesaid compounding scheme as ultra vires, is hereby rejected. ISSUE NO. II 16. It is undisputed that regular assessment orders of the petitioners for the assessment year 2007-08 (1.1.2008 to 31.3.2008) were passed under Section 28 of the Act after affording opportunity of hearing to them. They participated in the assessment proceedings. Once the assessment orders have been passed, the tax stood assessed and therefore the scheme itself would not be applicable. 17. By the said scheme the State Government issued directions under Section 6(1) of the Act that for the season 2007-08 (1.1.2008 to 30.9.2008) the lump sum amount may be accepted by the assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compounding applications of the petitioners for part of the season in the absence of any stipulation either in Section 6 of the Act or direction in the scheme and quantification of compounding amount for the period 1.4.2008 to 30.9.2008 23. In the case of Lallooji and Sons, Allahabad Vs. State of U.P. and others, 2003 U.P.T.C. 900 the Division Bench of this Court considered the provisions of compounding under Section 7-D of the U.P. Trade Tax Act and held as under: 10. In our opinion there is no merit in this petition. As stated in Section 7-D itself, the compounding scheme is subject to any direction of the State Government, which itself means that no one has a right to claim composition and this is subject to the decision of the State Government. In tax matters the Government has greater latitude to tax one category and not to tax other categories vide Anant Mills v. State of Gujarat, A.I.R. 1975 SC 1234; R.K. Garg v. Union of India, 1982 U.P.T.C. 355 (SC); Malwa Bus Service v. State of Punjab, 1983(3) S.C.C. 237; Income Tax Officer v. N.T.R. Rymbai, A.I.R. 1976 SC 670; Amalgamated Tea Estate v. State of Kerala, 1975 U.P.T.C.89, etc. A taxing statute is not open to attack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercised by an asseessee under Section 6(1) of the Act in respect of a compounding scheme results in an agreement which agreement can be entered only if both the parties are agreed. Under Article 226 of the Constitution of India, the Court cannot compel the State Government to enter into a composition agreement in conflict with or beyond the terms of the composition scheme. 27. In Writ Petition Nos.896 of 2012, 897 of 2012 and 898 of 2012 the compounding application was allowed, but, subsequently a notice under Section 31 of the Act was issued by the assessing authority pursuant to which the order passed under Section 6 of the Act was recalled and the application of the petitioner was rejected. The petitioner has questioned the said order, on the ground, that the assessing authority had no power to recall the order since there was no mistake which was apparent on the face of the record. In support of his submissions, the learned counsel has placed reliance upon a decision of the Supreme Court in M/s Deva Metal Powders Pvt. Ltd. vs. Commissioner of Trade Tax, U.P., 2008 NTN (Vol.36)-4 and M/s Ram Prakash Vijai Kumar Pvt. Ltd. Saharanpur vs. Deputy Commissioner (Executive), Sales T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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