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M/S S. And C. Ltd. v. The Sales Tax Commisioner - SALES/TRADE TAX REVISION No. 692 of 1994  RD-AH 869 (22 September 2004)
SALES TAX REVISION NO.692 OF 1994
M/s Synthetics & Chemicals Ltd., Bareilly. ....Applicant
Commissioner of Sales Tax, U.P., Lucknow. ....Opp.party
Hon'ble Rajes Kumar, J.
Present revision under Section 11 of U.P. Sales Tax Act (hereinafter referred to as "Act") is directed against the order of Tribunal dated 22.04.1994 relating to the assessment year 1985-86 under the U.P. Trade Tax Act.
Applicant was carrying on the business of synthetic rubber. Applicant entered into contract with M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur for the sale of their products in the State of U.P. Perusal of the assessment order shows that the contract was that M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur to sell the product in the name of the company and collect the necessary documents from the party and also deposit the tax. It appears that M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur sold the goods to the various parties against Form 3-B for Rs.48,78,550/-. It also appears that M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur received Form 3-B relating to the aforesaid sales but could not delivery the said Forms to the applicant. Applicant in the return and during the course of the assessment proceedings disclosed the aforesaid sales of Rs.48,78,550/- against Form 3-B and had not admitted the liability of tax. However, Form 3-B relating to the aforesaid sales could not be furnished before the assessing authority, because the same were not delivered by M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur, in as much as some dispute arose between the applicant and M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur. In the absence of Form 3-B assessing authority levied the tax and treated the assessed tax as admitted tax and demanded the interest under section 8 (1) of the Act. Applicant filed appeal before Deputy Commissioner (Appeals), which was rejected. Applicant further filed second appeal before the Tribunal, which has also been rejected by the impugned order.
Heard learned counsel for the parties.
Learned counsel for the applicant submitted that before the Tribunal they have moved an application that the necessary direction be issued to M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur for handing over Form 3-B but the Tribunal has illegally refused to issue such direction. He further submitted that the demand of interest under section 8 (1) of the Act, on the facts and circumstances of the case is illegal. He submitted that a Writ Petition No. (O.M.P. No.91 of 1987) was filed before the Delhi High Court under the Arbitration Act for the appointment of arbitrator. Delhi High Court vide its order dated 18.10.1987 has appointed Sri H.L.Anand, retired Judge as arbitrator to decide the dispute between the applicant and M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur arising from the contract dated 27.12.1985. Copy of the order is filed alongwith revision as annexure no.6. He further submitted that before the arbitrator Sri V.K.Sehgal, Managing Director of M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur in his statement on 29.07.1989 admitted the receipt and possession of Form 3-B. He submitted that the matter is still pending before the arbitrator. In view of the aforesaid fact, he submitted that the applicant had reason to believe that he could get the Form 3-B and could submitted before the authority concerned. In fact Form 3-B were collected from the purchasers but the same could not be handed over by M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur to the applicant. He submitted that at no stage the liability of tax had been admitted on the aforesaid turn over and, therefore, assessed tax could not be treated as admitted tax and no interest could be demanded under section 8 (1) of the Act. Learned Standing Counsel relied upon the order of Tribunal and submitted that applicant had disclosed the turn over in the return and was liable for the tax also. He further submitted that it was his claim that the sale was against Form 3-B but since the Form 3-B was not filed, he was not entitled for exemption and therefore, tax assessed in the absence of Form 3-B has been rightly treated as admitted tax and the interest has been admitted. In support of his contention, he relied upon the decision of Apex Court in the case of CST Vs. Qureshi Crucible Centre, reported in 1993 UPTC, 901.
Heard learned counsel for the parties.
I have perused the order of the Tribunal and the authorities below.
So far as levy of tax on the turn over of Rs.48,78,550/- is concerned, it has rightly been assessed in the absence of Form 3-B. Hon'ble Apex Court in the case of CST Vs. Prabhu Dayal Prem Narain, reported in 1988 UPTC, 1204 held that for the claim of exemption filing of form is mandatory. I do not agree with the submission of learned counsel for the applicant that the Tribunal should direct M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur for handing over the alleged Form 3-B. No such power is vested with the Tribunal to issue any direction to the third party for the enforcement of the contract. For this purpose proper remedy is elsewhere. In the circumstances, I upheld the order of the Tribunal confirming the levy of tax on the turn over of Rs.48,78,550/- in the absence of Form 3-B.
So far as the demand of interest under section 8 (1) of the Act is concerned, I find force in the submission of learned counsel for the applicant. There is no dispute that in pursuance of the agreement M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur sold the goods of the applicant in the State of U.P. Under the agreement M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur had to collect the forms and to deposit the tax. It appears that some dispute arose between the applicant and M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur and, therefore, the collected forms from the purchaser relating to the aforesaid sales could not be handed over to the applicant, with the result applicant could not furnish those forms before the assessing authority and even at the stage of Tribunal. Record shows that the applicant had filed Writ Petition No. (O.M.P. No.91 of 1987) before the Delhi High Court for the appointment of arbitrator and to settle the dispute between the parties in pursuance of the agreement. Delhi High Court vide order dated 18.10.1987 appointed Sri H.L.Anand, retired Judge as arbitrator. Before the arbitrator on 29.07.1989 Sri V.K.Sehgal, Managing Director of M/s Nav Durga Rubber Products Pvt. Ltd., Kanpur had admitted that the Form 3-B have been collected by them and they are retaining the same. As per the applicant arbitration proceeding is still pending. On the aforesaid facts, it appears that the applicant all along was under the genuine bonafide believe that the Forms relating to the aforesaid sales could be furnished. Therefore, the dispute about the taxability of the aforesaid item was a genuine bonafide dispute on the peculiar facts of the present case. Therefore, tax assessed on the aforesaid amount in the absence of Form 3-B can not be said to be admitted tax. In the case of M/s Annapurna Biscuit Company Vs. State of U.P. and others, reported in 1980 UPTC, 1320 while dealing with the provisions of section 8 (1) of the Act, Division Bench of this Court held as follows:
"What has therefore to be seen is whether determination or calculation of tax payable on this date was in accordance with Act or not. If it was according to law as it then stood then it does not alter by subsequent events. The tax determined or calculated by the dealer and tax assessed may differ due to change in law or its interpretation or non-compliance of certain conditions but it does not result in changing the tax payable under the Act for purposes of levy of interest under section 8 (1). For instance a commodity is taxable under a notification at a particular rate. A dealer carrying on business in it and liable to pay tax has to deposit the tax on its turnover while filing return within time specified at that rate. If the payment is not made or it is made at lesser rate the dealer becomes liable to pay interest on it at the rate of two percent from the date of filing of return or if no return is filed from the date it should have filed till the date of assessment. But the dealer may raise dispute about taxability or about rate. And then the question may arise what is tax payable under the Act. That which is calculated or determined by dealer or that found to be due by assessing authority. In such cases it is the bona fide of assessee which shall have to be examined. So long the calculation is honest and fair the dealer shall not incur any liability to pay interest. The apprehension of the learned Standing Counsel that if this view is taken no assessee shall deposit any tax and he shall escape liability to pay interest does not appear to be justified. Whether the determination by dealer was bona fide or not can be easily ascertained on well settled principles laid down by Hon'ble Supreme Court and this Court in numerous decisions. It is true that it shall differ from case to case and may create difficulty at times. But the provision being well known and the rate of interest being so high no dealer shall dare to take risk for the fun of it. In taking this view we think that the Legislature intention of levying interest on those dealers who deliberately omit to deposit tax payable is effectuated. It also safeguards the interest of honest dealers. These aspects shall further stand highlighted when we take up individual petitions."
In view of the law laid down by the Division Bench, in my opinion, the facts of the present case shows that the applicant raised a bonafide dispute about he taxability on the aforesaid sales and, therefore, the interest under section 8 (1) of the Act can not be demanded. Decision of the Apex Court in the case of CST Vs. Qureshi Crucible Centre, reported in 1993 UPTC, 901 cited by learned Standing Counsel is not applicable to the present case. In that case fact was that the prior to 01.12.1973 rate of tax on the good was 3.5% and thereafter, it was revised to 7%. Dealer deposited the tax @ 3.5% on the sales after 01.12.1973. Assessing authority as per notification levied the tax @ 7% and demanded the interest. Apex Court upheld the payment of the interest, in as much as there was no bonafide dispute. Apex Court referred the decision of this Court in the case of Annapurna Biscuit Manufacturing Company Vs. State of U.P., (Supra) and held that the aforesaid case has no relevancy to the facts of the present case.
For the reasons stated above, in my opinion, the payment of interest under section 8 (1) of the Act is not justified.
In the result, revision is allowed in part. Order of Tribunal is set aside and the tax levied in the turn over of Rs.48,78,550/- is upheld and the payment of interest under section 8 (1) of the Act is set aside.
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