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M/s Chandok Textiles Enterprises Pvt. Ltd., M/s S.B. Fabtex Pvt. Ltd Versus State of U.P. & 2 Others

2016 (5) TMI 911 - ALLAHABAD HIGH COURT

Imposition of VAT on the dyes, chemicals etc. - treating them to be deemed sales - used in the dyeing, colouring and printing of cloth for various traders - Held that:- it was no longer open to the assessing authorities to take a different stand as given by the State Government, which has also been affirmed by this Court. The State Government has clearly given a decision that dyes and chemicals used in the processing of the cloth loose their identity and are, therefore, consumables and is not a .....

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arise. Consequently, omission of additional excise duty as contended by the learned Special Counsel for the State has no relevance to the issue. - Decided in favour of petitioner - Civil Misc.Writ Petition No. 273 of 2014, Civil Misc. Writ Petition No. 59 of 2015, Civil Misc.Writ Petition No. 60 of 2015, Civil Misc.Writ Petition No. 403 of 2014, Civil Misc.Writ Petition No. 161 of 2016, Civil Misc.Writ Petition No. 162 of 2016 - Dated:- 18-5-2016 - Hon'ble Tarun Agarwala And Hon'ble Vin .....

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nd is engaged in the process of dyeing, colouring and printing of cloth on job-work basis for various traders within and outside the State of U.P. The controversy regarding the taxability of dyes and chemicals used in colouring, bleaching, dyeing, printing of cloth was engaging the attention of the tax authorities for quite some time. The assessing authority was levying the tax on the dyes and chemicals by treating them to be a deemed sale. According to the traders, there was no deemed sale as t .....

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and which do not loose their identity even after use would be exigible to tax under Section 3-F of the U.P.Trade Tax Act. Based on this circular, a large number of assessing authorities initiated the assessment proceedings against various dealers including the petitioners. 3. In this regard, representations were made by some traders as well as by the Northern India Textile Processors Association, in which the petitioners are members before the State Government for an authoritative decision in t .....

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tive pronouncement by the State Government, the assessing authorities ignored the decision of the State Government and continued to impose tax on various traders treating the use of dyes and chemicals on the processing of cloth as a deemed sale. 5. The matter eventually was challenged in various writ petitions. The leading writ petition was Writ Petition No. 1683 of 2007, M/s Superfine Processors Pvt. Ltd. Vs. State of U.P. and others, which was ultimately decided by the writ Court by a judgment .....

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conclusion that dyes and chemical used in the bleaching, colouring and dyeing etc. on gray cloth are consumed in the process and not transferred. In our considered opinion, the said finding is binding upon the assessing authorities as the representation made by the Northern India Textile Processors Association was also decided by the said order. The stand taken by the respondents that the State Government had not decided any other representation except the two preferred by M/s Ganga Processors .....

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r to pay tax on the dyes and chemicals used by it. The petitioner challenged the assessment order by filing Writ Petition No. 718 of 2011, Chandok Textiles Enterprises Pvt. Ltd. Vs. State of U.P. and others. The said writ petition was decided in a bunch of writ petitions. The leading writ petition being Writ Petition No. 1020 of 2009, M/s Style Dyers Vs. State of U.P. and others, was decided on 15.01.2013. The writ Court following the decision of Superfine Processors (Supra) allowed the writ pet .....

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f the cloth for the assessment year 2010-11. The assessing authority by an order dated 20.03.2014 for the assessment year 2010-11 under U.P. as well as Central again imposed tax on dyes and chemicals treating it to be a deemed sale. Petitioner, being aggrieved by the aforesaid two orders, has filed the present writ petition. Similar prayer and contention has been made by the other petitioners. 8. We have heard Sri Rahul Agrawal, the learned counsel for the petitioners and Sri Vipin Kumar Pandey .....

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ng the decision of this High Court. 9. Sri C.B.Tripathi, the learned Special Counsel for the State has further relied upon a decision of a learned Single Judge of this Court in Commissioner, Trade Tax, U.P.Lucknow Vs. M/s Aristo Printers Pvt. Ltd., 2010 NTN 355, in which it was held that the printing work is a works contract and is exigible to tax. The learned Special Counsel for the State has further submitted that since additional excise duty was payable on cotton fabric, the State Government .....

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l excise duty was no longer payable, tax is now payable on cotton fabric under the VAT Act. 10. Having heard the learned counsel for the parties, we are of the opinion that the impugned assessment orders are contrary to the decision of the State Government dated 07.10.2005. The State Government gave a categorical finding that dyes and chemicals, which are consumed in the process of dyeing, colouring, bleaching do not get transferred to the persons, who have given the material for carrying out dy .....

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held : "Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the Sta .....

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ated 07.10.2005 was binding upon the assessing authorities. We are, therefore, of the considered opinion that it was no longer open to the assessing authorities to take a different stand as given by the State Government, which has also been affirmed by this Court. The finding given by the State Government in its order dated 07.10.2005 and by the Division Bench of this Court dated 10.01.2013 in the case of Superfine Processors (Supra) and in the case of the petitioner dated 15.01.2013 involving i .....

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M/s Aristo Printers (Supra) of a learned Single Judge is distinguishable. In that case, a specific finding has been given that the assessee of that case did not contend that the chemicals used by him in the process of the cloth were consumables and that it had not passed on to the customers. In view of that finding, the learned Single Judge held that the ink and chemicals used in the process had passed on to the customers and consequently, were exigible to tax. In the instant case, a specific ca .....

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