Allahabad High Court
Darbari Engineering Industries ... vs Commissioner Of Trade Tax, U.P., ... on 28 July, 2011
Bench: Arun Tandon
HIGH COURT OF JUDICATURE AT ALLAHABAD
?Court No. - 10
Case :- SALES/TRADE TAX REVISION No. - 841 of 2003
Petitioner :- Darbari Engineering Industries Pvt. Ltd.
Respondent :- Commissioner Of Trade Tax, U.P., Lucknow
Petitioner Counsel :- Kunwar Saksena
Respondent Counsel :- C.S.C.
Hon'ble Arun Tandon,J.
This Trade Tax Revision has been filed by the assessee against the order of the Trade Tax Tribunal passed in Second Appeal No. 88 of 1998. The second appeal was directed against the order of the Deputy Commissioner (Appeals), Trade Tax, Allahabad wherein it was held that since the transaction was covered by Section 26(2) of the Central Sales Tax Act, the assessee was exempted from payment of tax thereon.
The Tribunal under the impugned order allowed the appeal of the department. It has recorded that since there was an agreement between the assessee and the Ganga Pollution Control Unit qua the goods in question being supplied at Allahabad. The goods were purchased by the assessee from a dealer outside the State of U.P., the transfer of title during transit was in breach of the terms and conditions of the agreement between the parties and, therefore, violative of Section 23 of the Indian Contract Act being opposed to public policy as it was so done for evading the tax. It has also been recorded that the transfer was in violation of Section 34 of the Trade Tax Act. Consequently such transfer by endorsement has been held to be null and void. The second appeal of the department has been accordingly allowed.
Challenging the order so passed counsel for the assessee submits that if there is an alleged breach of terms and conditions of contract between the assessee and the Ganga Pollution Control Unit, the same has absolutely no bearing on the exemption as provided under Section 26(2) of the Central Sales Act. He explains that Section 34 of the Trade Tax Act applies to movable properties only.
Shri B.K.Pandey counsel for the department disputes the contention so raised. He submits that there was a written agreement between the assessee and the Ganga Pollution Control Unit for supply of goods at Allahabad. The assessee made purchases from a dealer out the State of U.P. Such goods during transit could not have been transferred to Ganga Pollution Control Unit by endorsement during transit. The purpose is to avoid the tax liability. He submits that in the facts of the case Section 26(2) had no application. The Tribunal has rightly come to a conclusion that the order of the First Appellate Authority granting the exemption was unsustainable. However he could not dispute that Section 23 of the Contract Act and Section 34 of the U.P. Trade Tax Act, 1948 had no application in the facts of the case.
I have heard learned counsel for the parties and have gone through the records of the present writ petition.
The issue as to whether the assessee was entitled to exemption from tax in the facts of the case on record had to be examined by the Tribunal with reference to the satisfaction of the conditions mentioned under Section 26(2) of the Trade Tax Act. In case it was found that such conditions stands satisfied, the assessee becomes entitle for exemption provided thereunder. Even accepting for argument sake that the assessee had breached any terms and conditions of the contract entered into with another private person, it cannot be the basis to deny the benefits which flows from Section 26(2) of the Trade Tax Act. Breach of contract entered into with a private person may lead to other civil consequences but cannot be the basis for denying exemption under Section 26(2) to the assessee if all other conditions are satisfied. This Court has no hesitation to record that in the facts of this case violation of terms of the contract by the assessee cannot result in the transfer by endorsement being held as violative of any public policy so as to be declare the transfer by endorsement as void under Section 23 of the Contract Act. Consequently the findings recorded to that extent are unsustainable.
Counsel for the assessee is justified in contending that Section 34 of the Trade Tax Act has no application in the facts of the case as it applies to moveable properties only.
This Court finds that the Tribunal was completely off target while referring to Section 23 of the Contract Act and Section 34 of the Trade Tax Act while allowing the appeal of the department. The issue as to whether the assessee was entitled to the benefits flowing from Section 26(2) of the Central Sales Tax Act, needs to be examined afresh on the basis of facts/material as it exists on record.
The order passed by the Tribunal dated 07.07.2003 is hereby set aside. The Second Appeal filed by the department is restored to its original number. Let the appeal be decided by the Tribunal afresh within two months from the date a certified copy of this order is filed before it.
Trade Tax Revision is allowed.
Dated : 28.07.2011
VR/TTR 841/03
