This is a revision under Section 11 of the U.P. Trade Tax Act for the assessment year 1995-96 under the Central Sales Tax Act (hereinafter referred to as the ("Central Act") arising from the order of the Tribunal dated 22.2.2003.
In the present revision the following questions have been raised :
1- "Whether inasmuch as notification no. 1157 dated 16.5.1998 was issued for the first time on 16.5.1998 providing for levy of tax at the point of sale by the manufacturer or importer, hence section 3A (1) (c) as amended by U.P. Act No. 11 of 1997 was not applicable prior to 16.5.1998 and accordingly the rate of tax on the inter-State sale of motor spirit and diesel oil was only @ 16% and the Trade Tax Tribunal was not justified in imposing the tax @ 25%?
2- Whether even assuming without admitting that section 3A (1) (c) as substituted by U.P. Act No. 11 of 1997 was applicable prior to the issuance of the notification dated 16.5.1998 and 25% was the tax payable on the sale of motor spirit and diesel oil, no surcharge can be legally realized under Central Sales Tax Act and the Trade Tax Tribunal was not justified in confirming the imposition of tax @25% instead of 20% as mentioned in section 3A (1) (c) ?
3- Whether the Trade Tax Tribunal was not justified in confirming the imposition of tax on the Notional Excise Duty which under the statutory provisions of the Central Excise Act and Rules was payable by the purchasing oil Company only?
4- Whether in view of Section 4 (4) o the Central Excise Act read with Rules 139 to 158 and the Notification No. 21/86CE dated 10.2.1986, the Excise Duty being payable at the time of removal of the excisable goods at the value which is assessable at the time and place of removal from the warehouse, the said Duty cannot be legally treated as duty payable by the applicant-Corporation and no tax can be legally imposed on that?
5- Whether the assessed tax on the Notional Excise Duty treated as part of the taxable turnover having been disputed from the levy beginning cannot be treated as admitted tax and no interest was payable?
6- Whether in any view of the matter, the levy of interest on the assessed tax on the amount of Notional Excise Duty is liable to be quashed?"
Heard Sri Bharat Ji Agrawal, Senior Advocate, appearing on behalf of the applicant and Sri B.K. Pandey, learned Standing Counsel.
Question nos. 1 & 2 relate to the rate of tax on inter-State sales of motor spirit and diesel oil.
I have perused the impugned order of the Tribunal and the authorities below.
These two questions do not arise from the order of the Tribunal. Question nos. 1 & 2 relating to the rate of tax has neither been raised nor has been dealt with by the Tribunal. It has not been considered by the first appellate authority. In the circumstances, no cognizance can be taken about question nos. 1 & 2.
So far as question nos. 3 & 4 are concerned, it relate to the question whether the Central Excise Duty paid by the Ex-U.P. purchaser on the clearance of the goods manufactured by the applicant, from their warehouse would form part of the turnover of the applicant and liable to Central Sales Tax.
A similar question is also involved in Trade Tax Revision No. 500 of 2003 wherein it has been held that Central Excise Duty paid on the goods while clearing from the warehouse is part of the turnover and is liable to tax.
Following the decision of this Court in T.R.R. No. 500 of 2003, the order of the Tribunal is upheld.
So far as the question nos. 5 & 6 are concerned, they relate to interest charged under Section 8(1) of the Act.
Reliance is placed on the decision of Supreme Court in the case of Commissioner of Sales Tax vs Hindustan Aluminium Corporation, reported in 1999 UPTC-1 the Apex Court held as follows:
"The dispute here, as aforesaid, was in regard to the classification of the assessee's products. Such classification dispute is ordinarily resolved in assessment proceedings and if resolved against the assessee. The assessee has to make payment of the differential amount of tax as required by sub-section (1-A) failing which the provisions of sub-section (1-B) apply.
The requirement of sub-section (1) is that the assessee must pay tax on the amount of his turnover as particularised in the explanation thereto. Interest under the provisions of sub-section (1) cannot be levied in respect of a dispute such as a classification dispute which is resolved only by the assessment. Sub-section (1) has no application to such a situation."
The above view is also supported by the decision of the Constitution Bench of the Apex Court in the case of J.K. Synthetics Limited Vs. The Commercial Tax Officer, reported in 1994 U.P.T.C-893 wherein it has been held as follows:
"Let us look at the question from a slightly different angle. Section 7 (1) enjoins on every dealer that he shall furnish prescribed returns for the prescribed period within the prescribed time to the assessing authority. By the proviso the time can be extended by not more than fifteen days. The requirement of Section 7(1) is undoubtedly a statutory requirement. The prescribed return must be accompanied by a receipt evidencing the deposit of full amount of 'tax due' in he State Government on the basis of the return. That the is the requirement of Section 7 (2). Section 7 (2-A), no doubt, permits payment of tax at shorter intervals but the ultimate requirement is deposit of the full amount of 'tax due' shown in the return. When Section 11-B (1) uses the expression 'tax payable under sub-sections (2) and (2-A) of Section 7', that must be understood in the context of the aforesaid expressions employed in the two sub-sections. Therefore, the expression 'tax payable' under the said two sub-sections is full amount of tax due and 'tax due' is that amount which becomes due ex-hypothesi on the turnover and taxable turnover 'shown in or based on the return'. The word 'payable' is a descriptive word, which ordinarily means 'that which must be paid or is due, or may be paid' but its correct meaning can only be determined if the context in which it is used is kept in view. The word has been frequently understood to mean that which may, can or should be paid and is held equivalent to 'due'. Therefore, the conjoint reading of Sections 7(1), (2) and 11-B of the Act leaves no room for doubt that the expression 'tax payable' in Section 11-B can only mean the full amount of tax which becomes due under sub-sections (2) and (2-A) of the Act when assessed on the basis of the information regarding turnover and taxable turnover furnished or shown in the return. Therefore, so long as the assessee pays the tax which according to him is due on the basis of information supplied in the return filed by him, there would be no default on his part to meet his statutory obligation under Section 7 of the Act and, therefore, it would be difficult to hold that the 'tax payable' by him 'is not paid' to visit him with the liability to pay interest under clause (a) of Section 11-B. It would be a different matter if the return is not approved by the authority but hat is not the case here. It is difficult on the plain language of the section to hold that the law envisages the assessee to avoid the liability to pay interest. That would be asking him to do the near impossible."
The Division Bench decision of the Apex Court in the case of Commissioner of Sales Tax Vs. Quareshi Crucible Centre, reported in 1993 U.P.T.C.-901 is not applicable to the present case. In the said case the classification of the goods or rate of tax was not in dispute still lesser tax has been paid on the pleading of ignorance of the change in rate of tax. This issue is not in the present case.
The contention of the petitioner is that the applicant has always disputed the liability of tax on the amount of Central Excise Duty paid by the purchaser and no point of time the liability of tax has been admitted on such Central Excise Duty. The dispute has been raised before this Court also in several revisions. This issue has not been settled by any of the Court in the case of the assessee and, therefore, it cannot be treated as admitted tax under Section 8 (1) of the Act as the assessee was disputing the liability bonafidely.
I find substance in the argument of learned counsel for the applicant. The applicant is contesting the liability of tax on the amount of Central Excise Duty since very beginning. At no stage the liability has been admitted. In the present revision also, the liability is being disputed. There is no earlier decision of this Court or Apex Court in the case of assessee or in any other case on the similar facts and circumstances, at the relevant time wherein it has been held that the Central Excise Duty is part of the turnover and liable to tax. Therefore, it is a case where the assessee is bonafidely disputing the liability of tax on the Central Excise Duty. Thus, it cannot be treated as admitted tax and the interest under Section 8 (1) of the Act cannot be levied and demanded. The authority below is only entitled for the interest under Section 8 (1-B) of the Act and not under Section 8 (1) of the Act.
In the result, the revision is allowed in part. Question nos. 1 & 2 have not been adjudicated as they do not arise from the order of the Tribunal. Question nos. 3 & 4 have been decided against the assessee and question nos. 5 & 6 are decided in favour of the assessee.
Dated: 31st March, 2011 OP