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2017 (3) TMI 486 - ALLAHABAD HIGH COURT

2017 (3) TMI 486 - ALLAHABAD HIGH COURT - TMI - Liability of interest - Section 8 (1) of the Act - there was a bonafide dispute with regard to liability to pay tax, and the assessment order was passed after nearly 3 years - Held that: - there was no dispute relating to classification of goods or the rate of tax payable. The turnover and the rate of tax were clearly mentioned in the books of account and therefore, the present case was fully covered by the explanation to Section 8(1) of the Act .....

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t under Section 8(1) of the Act, upon the shortfall in payment of tax - revision fails - decided against applicant. - Sales/Trade Tax Revision No. 783 of 2003 - Dated:- 7-3-2017 - Hon'ble Ashwani Kumar Mishra, J. For the Applicant : Rishi Raj Kapoor, Bharaj Ji Agarwal For the Opposite Party : C.S.C. ORDER 1. This revision under Section 11 of the U.P. Trade Tax Act, questions an order passed by the Tribunal dated 11.6.2003, allowing department's second appeal, and thereby holding the asse .....

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extent of ₹ 57,76,673.57/-. The Assessing Authority, however, allowed benefit under Section 4-BB to the extent of ₹ 42,26,036/- only as against the amount claimed of ₹ 57,76,673.57/-. Since turnover was accepted, the Tribunal treated the shortfall in tax to be admitted, and thereby required payment of interest under Section 8 (1) of the Act. The assessee felt aggrieved and preferred an appeal. The appeal was partly allowed in so far as payment of interest is concerned, on the p .....

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assessee has preferred the present revision. 3. Sri R.R. Agrawal, learned Senior Counsel assisted by Sri R.R. Kapoor submitted on behalf of the assessee that there was a bonafide dispute with regard to amount admissible towards set off, under Section 4-BB of the Act, and deficient amount of tax could not be treated to be admitted tax so as to incur liability of interest under Section 8(1) of the Act. Learned counsel in support of such contention has relied upon decision of Hon'ble Supreme C .....

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The Commissioner of Trade Tax,U.P. Lucknow). 4. Learned Standing Counsel, on the other hand, supported the order of Tribunal contending that turnover and tax was admitted, and there was no classification dispute or the tax payable. Moreover the assessee has already given up its claim of set off in respect of balance amount, and the tax payable, therefore, falls within the category of tax admitted, and the levy of interest is valid. Learned Standing Counsel has placed reliance upon a judgement of .....

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or by thirty 1st days of August, 1975, whichever is later, failing which simple interest at the rate of two per cent (per menssum) shall become due and be payable on the unpaid amount with effect from the day immediately following the last date prescribed (till the date of payment of such amount) whichever is later, and nothing contained in Section 7 shall prevent or have the effect of postponing the liability to pay such interest. Explanation:- For the purpose of this Sub-Section, the tax admi .....

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payable to which sub-section (1) applies) assessed, reassessed or enhanced by any authority or Court remains unpaid for three months after the expiration of the period specified in the notice of assessment and demand, simple interest at the rate of one and half per cent per mensem on the unpaid amount calculated from the date of such expiration shall become due and be payable: Provided that the amount of interest under this sub-section shall be recalculated if the amount of tax is varied on app .....

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ble under the Act, on the turnover of sales or turnover of purchase, or both, as the case may be, in the accounts of the dealer or admitted in the return or proceedings under the Act. Thus where the amount of tax payable under the Act on the turnover as disclosed in the account maintained by the dealer, or is admitted by him in any return or proceedings, not deposited, the balance amount of tax together with interest under Sub-Section (1) would be liable to be paid. This provision has been a sub .....

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r as such by any authority. The explanation defines the expression "tax admittedly payable". It means the tax which is payable, inter alia, according to the return filed by the dealer. 3. In this case, the dealer filed a return for the assessement year 1975-76. The goods in which he was dealing fell within the category of unspecified goods. For unspecified goods, the rate of tax prior to 1st December, 1973 was 3.5 per cent. With effect from the said date, however, the rate was revised .....

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tion was levied. The Appellate Authority as well as the Tribunal affirmed the said levy. The matter was carried to the High Court by way of a revision. The learned Judge allowed the revision holding that "There have been no finding by the Tribunal that the assessee acted mala fide" in not depositing the tax at the rate of 7 per cent. The demand of interest was not justified." 4. We are unable to see any relevance of the mala fides in this case. Section 8(1) does not say that the n .....

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st at the rate of ½ per mensem, would arise from the notice of assessment and demand. The question that falls for consideration, in this case, is as to whether the shortfall in payment of tax fell within the category of admitted tax, so as to incur liability of interest under Section 8(1), or from the assessment notice under sub-Section (1-B)? 8. The revisionist herein claimed set-off under Section 4-BB to the extent of ₹ 57,76,673.57/-. The department however, allowed partial set-o .....

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ds as are notified by the State Government in this behalf and such goods are sold in the State or in the course of inter-State trade or commerce, the amount of tax paid on the purchase or sale of the raw material or packing material shall, subject to such conditions and restrictions as may be specified in the said notification, be deducted from the taxes payable on the sale of such goods- (a) inside the State, to the extent the tax has been paid on the purchase or sale of raw material or packing .....

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Tax, Act, 1956." 9. The authorities have held that tax paid on raw material actually used for manufacture of end product was to the extent of ₹ 42,26,036/- , and thereby restricted the benefit of set-off to that extent. The first Appellate Authority, however, altered liability of interest under Section 8(1-B), on the ground that there was a bonafide dispute with regard to set-off admissible and consequent liability to pay tax. The Appellate Authority, affirmed the set-off allowed by .....

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and amounted to 'tax admitted'. 10. Learned Senior Counsel for the revisionist has relied upon the decision of Apex Court in E.I.D. Parry (India) Ltd. (Supra). The Court was dealing with the provisions of the Tamil Nadu General Sales Tax Act, wherein liability to pay interest arose from the notice of assessment. The provision of the nature herein did not fall for consideration in that case. Paragraph 12 of the judgement classifies this aspect in following words:- "Under Section 24(1 .....

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an admitted position that tax as per the monthly return had been paid within time. It is also an admitted position that there was no assessment, even provisional, by the Assessing Authority prior to the final assessment made after the revised returns had been filed. Interest becomes payable under Section 24(3) on an amount remaining unpaid after the date specified for its payment under sub-section (1) of Section 24. As seen above sub-section (1) of Section 24 deals with an assessed tax or tax wh .....

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t would be payable under Section 24(3). In this case, it is an admitted position that as soon as the revised return was filed the Appellants paid the tax as per the revised return. Therefore they paid the tax even before the final assessment took place. Thus the claim for interest, under Section 24(3) from the date that the advances were paid to the sugarcane growers is not sustainable. There is no provision under the Act which permits charging of interest unless and until there has been a provi .....

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ity of Section 8(1) of the Act was ruled out. 12. The facts in M/s. Bharti Airtel Ltd. (Supra) is also distinguishable, inasmuch as the liability to pay tax was not admitted, and had been disputed since the very beginning. Para 14 of the Judgement, noticing facts in that regard reads as under:- "14. Having heard the learned counsel for the parties and having perused the impugned order as well as the assessment orders, we find that even though the vires of the Act of 2007 had been upheld, th .....

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We are consequently of the opinion that since the petitioner has disputed its liability from the very inception, the same cannot be treated to be the admitted tax for the purpose of Section 8 (1) of the Act read with Section 33(2) of the U.P.VAT Act. Thus, for the purpose of imposition of interest, the provisions of Section 8 (1B) of the U.P.Act read with Section 33(4) of the U.P. VAT Act would be applicable for the purpose of determining the interest liability." 13. In Indian Oil Corporat .....

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fore, liability of interest under Section 8(1) was set aside. Reliance was placed upon the judgement of the Apex Court in Commissioner of Sales Tax Bombay Vs. Bharat Petroleum 1992 (2) SCC 579, to hold that set-off cannot be restricted in any manner to only those sales upon which tax has been levied or collected. 15. The factual scenario in the present case is quite distinct. The amount of turn over was admitted. There was no issue relating to rate of tax payable. The assessee had claimed set-of .....

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extent of raw material used alone, has already been accepted by the assessee. The submission advanced on behalf of the revisionist that partial set-off was unjustified in view of the law laid down by the Apex court in Commissioner of Sales Tax Bombay (Supra), as relied upon by this Court in M/s Maiden Industries (Supra) do not fall for consideration, inasmuch as the assessee has already accepted partial set-off allowed by the authorities under the Act. The set-off moreover has not been restricte .....

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the assessee during subsequent period, as and when the raw material gets utilized. Section 4-BB permits the tax payable on sale of end product to be set-off from the tax paid on raw material/packing material, to the extent of tax paid on purchases of raw material/packing material from which the end product itself was manufactured/packed. This is clear from sub-Section (a) of Section 4-BB. In the absence of any challenge laid in this revision, the issue of correctness of allowing partial set-off .....

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16. The observation of the Apex Court in Commissioner of Sales Tax Vs. Hindustan Aluminum Corporation, 1999 U.P.T.C. 1, in paragraph 4 is apposite and is reproduced:- "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 1st August, 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 explanatio .....

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