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The Commissioner, Trade Tax U.P. v. S/S National Thermal Power Corporation - SALES/TRADE TAX REVISION No. 1661 of 1994 [2004] RD-AH 963 (29 September 2004)


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The Commissioner, Trade Tax, U.P. ....Applicant


S/S National Thermal Power Corporation

Limited, Dadri, Ghaziabad. ....Opp.party


Hon'ble Rajes Kumar, J.

Present revision under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") is directed against the order of Tribunal dated 15.07.1994 relating to the assessment year 1987-88 under the U.P. Trade Tax Act.

Dealer/opposite party (hereinafter referred to as "Dealer") entered into a contract with the contractor for the erection of the power plant. As per the contract cement and iron were supplied by the dealer. Dealer had deducted the amount under section 8-D (1) of the Act, from the payment made to the contractor within time but it appears that the deduction on the value of cement and iron supplied by it to the contractor could not be made within time. On the ground that the amount could not be deducted and deposited on the value of iron and cement within specified time, penalty proceeding under section 8-D (6) of the Act was initiated and thereafter, penalty order was passed under section 8-D (6) of the Act and penalty at Rs.9,99,993/- was levied. First appeal filed by the dealer was rejected.  Dealer filed second appeal before the Tribunal, which was allowed and the penalty was quashed.

Heard learned counsel for the parties.

In the case of dealer itself in Sales Tax Revision No.522 of 1994, CST Vs. S/s N.T.P.C. Ltd, Dadri, Ghaziabad, reported in 2004 (39) STR, 182, this Court has held as follows:

"A perusal of Section 8-D (1) says that every person responsible for making payment of any dealer for discharge of any liability on account of valuable consideration payable for the transfer of the property in goods in pursuance of Work Contract shall deduct an amount equal to four percent at the time of making for such contractor. The amount which was not liable to be paid or has not been actually paid no deduction is required to be made u/s 8-D.

In the Circular issued by Commissioner of Sales Tax No.Sa.A(Bi.Anu.Sha.Anubhag) Sa.Va.Ka. Sa(1)-91-92-1508/Bikrikar (Bi.Anu.Sha.Anubhag) dated 25.9.1991 on the basis of State Government clarification it has stated that the deduction u/s 8-D(1) is to be made only an amount which is payable and not the amount which is not payable and since in respect of the material supplied no payment is to be made no deduction is required to be made u/s 8-D(1). It has been consistently held by Hon'ble Supreme Court and by this Court also that Circular is binding upon the authorities. In the case of Commissioner of Sales Tax Vs. Indra Industries reported in 2000 UPTC, 472 and Hon'ble Supreme Court in case of M/s. Eskay Remedies Vs. State of U.P. reported in [2003] 37 STR 273: 2003 UPTC 254. Division Bench of this Court held that circular issued by the Government is binding on the revenue authority. For the reasons stated above, I do not find any error in the order of Tribunal."

It is stated that opposite party had not made any payment to the contractor towards the value of material supplied by it, rather deducted the value of material supplied, from the payment to the contractor.

In view of the aforesaid decision, there was no liability to deduct the amount on the value of the material supplied by the dealer under section 8-D(1) of the Act. Therefore, the levy of penalty under section 8-D (6) of the Act for non-deduction of tax on the value of iron and cement was illegal and the Tribunal has rightly deleted the penalty.

In the result, revision fails and is accordingly, dismissed.




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