The two-judge bench of the Supreme Court, in a recent judgment upheld the order of the High Court, in which it was observed that,under the relevant provisions of the U.P. Trade Tax Act, 1948, exemption can be granted on purchase of raw material against Form III-B whereas the dealer has made a stock transfer of finished goods.
The factual settings of the case are that, the respondent-assessee is a registered dealer under Section 8-A of the U.P. Trade Tax Act, 1948 and has also obtained a recognition certificate as per provisions contained in Section 4-B of the Act. The respondent used to make purchases of raw material at the concessional rate of tax against Form III-B obtained by it from the office of the Trade Tax Officer.
While rejecting the returns filed by the assessee for the relevant assessment year, the Department observed that the assessee had made purchases of natural gas against Form III-B at the concessional rate of tax, and after manufacture of the notified goods, that is, fertilizers, out of the said purchases of natural gas purchased against Form III-B, some of the finished goods were transferred outside the State of Uttar Pradesh. Accordingly, penalty was imposed on the assessee after concluding of the assessment proceedings.
The order was sustained by the first appellate authority. On second appeal, the Judicial Member of the Tribunal deleted the order of assessment and penalty. Hence, the Revenue preferred an appeal before the High Court impugning the decision of the Tribunal, in which the single bench, relying upon the decision in Camphor and Allied Products Ltd. v. State of U.P.& Ors held that the assessee had purchased the material and used it in manufacture and there was no violation of Section 3-B of the Act. Aggrieved with the order, the Revenue approached the Apex Court.
The Court noted that section 4-B(2) is applicable to the dealer who manufactures notified goods in the State or engaged in packaging of such notified goods manufactured or processed by him. The said dealer can apply to the assessing authority in such form, manner and within the time prescribed for grant of the recognition certificate. The assessing authority can grant the recognition certificate to the dealer in respect of goods used in the manufacture of the notified goods or packing of the notified Goods. Explanation to the sub-section defines the word “Goods” which means raw materials, processing material, machinery, spare parts and also fuels. The expression “Notified Goods” means such goods as notified by the State government from time to time.
“Sub-section (2) to Section 4-B also requires that the notified goods should be “intended” to be sold by the dealer within the State or in the course of inter-State trade or commerce or in the course of exports out of India. The expression “intended” is significant and important. It refers to the intention of the dealer after the goods are manufactured and packed. The expression “in the course inter-State trade or commerce” is quite broad and wide. An issue may arise as to whether the stock transfer outside the State in terms of directions issued by the Central Government can be considered as sale or transaction in the course of inter-State trade or commerce. In the case at hand, we would not decide the said issue or question, for it was not raised or argued before the authorities and can be examined in an appropriate case when raised and considered. Be it noted, sub-section (6) is a specific provision which deals with the case of the dealer who has been issued the recognition certificate and has purchased goods without payment of tax or at concessional rates, but has sold the manufactured goods or packaged goods otherwise than by way of sale in the State, or in the course of inter-State trade or commerce or export out of India. The provision specifically deals with cases where the dealer manufactures or packs the notified goods and has taken benefit of lower/concessional or nil rate of tax on the raw material but is unable to fulfill the intendment, i.e., he has not been able to sell the notified goods by way of sale within the State or in course of inter-State state or commerce or by way of export. In such cases, the dealer is liable to pay the amount of difference on the amount of sale or purchase of such goods on which concession or nil rate of tax was paid on account of issue of the requirement certificate and the amount of tax calculated @ 4%. The sub-section is a particular and a specific section which deals with and specifies theconsequences when the dealer is unable to meet and comply with intendment. The sub-section (6) would, thus, be applicable.” The Court said.
Concurring with the findings of the Tribunal and the High court, the bench comprising Justice Dipak Misra and Justice Shiva Kirti Singh, held that “section 3-B undoubtedly commences with a non-obstante clause, but the provision has to be read harmoniously with sub-section (6) to Section 4-B. Any other interpretation would make sub-section (6) a dead letter, for if we accept the plea of the Revenue whenever there is violation or failure to abide with the “intendment”, Section 3-B would be invoked and applied, not sub-section(6) to Section 4-B. Section 3-B would apply when a false and wrong certificate or declaration is made. Sub-section (6) on the other hand, deals with cases where the dealer is unable to comply with the intendment, i.e., for some reason he is unable to sell the goods within the State, export them or sell them in the course of inter-State trade or commerce. Intendment of the said nature has not been treated as false or wrong declaration as consequences have been prescribed in sub-section (6). It is essential to be stated that consistency and certainty in tax matters is necessary. In cases relating to “Indirect Taxation”, this principle is even more important. Clarity in this regard is a necessity and the interpretative vision should be same.”
Read the full text of the Judgment below.
