M/S Kohinoor Jewellers vs State Of U.P. & Others
2013 Latest Caselaw 1449 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

RESERVED
 
											(AFR)
 

 

 
Case :- WRIT TAX No. - 1779 of 2008
 

 
Petitioner :- M/S Kohinoor Jewellers
 
Respondent :- State Of U.P. & Others
 
Petitioner Counsel :- Rahul Agarwal
 
Respondent Counsel :- C.S.C.
 

 
Hon'ble Prakash Krishna,J.

Hon'ble Manoj Kumar Gupta,J.

(Delivered by Prakash Krishna, J.)

Raising a short but interesting point with regard to the liability of the petitioner to pay the interest on its turnover of sale of jewellery articles and bullion, the present writ petition has been filed. The petitioner had opted for payment of composition fee as envisaged under section 7-D of the U.P. Trade Tax Act and the said composition scheme after three years was turned down by the State of Uttar Pradesh. Whether petitioner having deposited the requisite amount in lieu of the tax under the scheme, can be held as defaulter in payment of admitted tax due so as to hold him liable to pay interest, is the point mooted in the writ petition.

The facts are few and are not much in dispute. The petitioner, dealing in silver and gold ornaments, and bullion, is a registered dealer under the U.P. Trade Tax Act as also under the U.P. VAT Act. In exercise of powers conferred under section 7-D of the U.P. Trade Tax Act, the State of U.P. on 8th of August, 2005 issued a compounding scheme no. Vidhi-1(3)-Sarafa-Sama.Yo.-2005-2006-977/Vyapar Kar under Section 7D of the U.P. Trade Tax Act enabling a dealer to pay an ascertained amount in lieu of tax. On 17th of September, 2005 the Commissioner of Trade Tax issued an amendment to the said scheme which is not very relevant for the purposes of the present writ petition.

Under the said compounding scheme dated 8th of August, 2005, it was provided that a dealer opting the scheme would pay a lump-sum amount in lieu of tax. The relevant terms and conditions of the scheme will be noted in the later part of the judgment. Suffice it to say that the petitioner indisputably opted the payment of tax under the aforesaid composition scheme and deposited the prescribed amounts on various dates such as on 13th September, 2005, 14th September, 2005, 8th December, 2005 and 10th of January, 2006 in pursuance of his application dated 25th of August, 2005.

The poor response to the aforesaid scheme dissuaded the State Government and it was decided not to give effect to the aforesaid scheme and to drop it. In this scheme it was also provided that if less than 30,000 dealers opt for scheme or requisite amount of tax under the scheme is not collected, the Government would be at liberty not to enforce the scheme. Consequently, on 1st of May, 2008, the State Government decided to scrape the aforesaid composition scheme in respect of dealers in silver and gold ornaments for the Assessment Year 2005-2006.

In the light of the above, the Commissioner Commercial Tax also issued a circular dated 14th of May, 2008 informing the authorities under the Act, to act accordingly. The petitioner on 5th of August, 2008 deposited a sum of Rs.8,90,000/- towards the tax in addition to what had been already deposited earlier in view of the above fact that the composition scheme is no longer in vogue. The difficulty to the petitioner arose by the letter dated 3rd of September, 2008 (Annexure-8) impugned in the writ petition asking it to pay interest on the aforesaid amount of Rs.8,90,000/- as according to the respondent it was the admitted tax liability of the petitioner. Challenging the legality and validity of the said letter/order, the present petition has been filed.

Sri Anoop Kumar Singh, Commercial Tax Officer, Sector-16 and 17, Agra has filed a counter affidavit on behalf of the respondents, delineating therein the various clauses of the composition scheme. It is admitted that "the government has decided to withdraw the scheme of compounding and the Commissioner, Commercial Tax vide letter dated 14th of May, 2008 informed about the decision of the government. Meaning thereby, the compounding scheme for the dealers dealing in silver and gold ornaments and bullion has been cancelled". The further averment is that within the meaning of section 8(1) of the U.P. Trade Tax Act, the petitioner is liable to pay the interest on the admitted turnover.

In the rejoinder affidavit, the stand taken in the writ petition has been reiterated with the allegation that till 14th of May, 2008 when the compounding scheme was in existence, the petitioner had deposited tax due and payable under the compounding scheme, after having opted for the same. Till that time, there was no tax that was payable by the petitioner as the entire amount which was payable under the compounding scheme in lieu of tax stood paid as per and/or under the scheme.

Heard Sri Rahul Agrawal, learned counsel for the petitioner and Sri C.B. Tripathi, special standing counsel for the respondents.

Considered the respective submissions of the learned counsel for the parties and perused the record.

Section 3 of the U.P. Trade Tax Act is the charging section and it provides that every dealer shall, for each assessment year pay a tax at the rates provided for or under section 3-A or section 3-D on his turnover of sale or purchase of goods or declared goods, as the case may be, which shall be determined in such a manner as may be prescribed. Section-7 of the Act deals with the determination of turnover and assessment of tax. It requires every dealer who is liable to pay tax to submit return of his turnover at the prescribed interval and shall deposit the tax along with return or before the amount of tax due on the turnover shown in such return. Section-8 provides that the admitted tax shall be deposited within the prescribed time failing which the dealer shall pay simple interest at the rate of 2 per cent per mensem.

Section 7-D provides for composition of tax liability. It opens with a non obstante clause by providing that the State Government may issue a scheme popularly known as composition scheme for payment of composition money in lieu of tax that may be payable by a dealer in respect of such goods or class of goods and for such period as may be agreed upon.

In exercise of power conferred under section 7-D, the State Government issued scheme under section 7-D of the Act on 5th of August, 2005 for the Assessment Year 2005-2006. A copy of the said scheme has been annexed by the Commissioner of Trade Tax to his letter dated 8th of August, 2005. The salient features of the scheme may be noticed in brief:-

1. Fifty per cent of the estimated amount of composition fee shall be deposited up to 15th of August, 2005 failing which it could be deposited on such terms and conditions with interest as provided in clause-3.

2. It further gives the option to such dealers, who fail to apply up to 15th of August, 2005, to file a composition application up to 15th of September, 2005 subject to fulfilment of the conditions made therein.

3. It further provides that the composition application can be filed along with late payment of fee up to 15th of October, 2005 subject to the fulfilment of other conditions mentioned therein.

4. Its clause-6 provides that if the scheme is not opted by 30,000 dealers by 4th of November, 2005 it shall be deemed that the scheme has been taken back and every tax-payer will have to pay the tax at full rate on its turnover. The said clause is reproduced below:-

**6- fnukad 4-11-2005 rd] 30]000 O;kikfj;ksa }kjk bl ;kstuk dk fodYi izLrqr u djus ij ;kstuk okil gks tkuh ekuh tk,xh rFkk izR;sd djnkrk dks vius VuZvksoj ij iwjh nj ls dj nsuk gksxkA**

This is one of main clauses, which needs consideration.

5. Its clause-8 provides that the dealers, who have failed to opt the scheme up to 4th of November, 2005 and in the event that scheme has not been taken back and thirty thousand dealers have submitted their option for accepting the scheme, may avail the benefit of scheme by 15th of December, 2005 subject to the deposit of the amount as mentioned therein.

6. Clause-10 further states that after evaluation of the applications received up to 4th of November, 2005 the State Government may take back the scheme if the expected revenue is not received under the scheme. The said clause-10 is reproduced below:-

**10- fnukad 4-11-2005 rd izkIr vkosnuks dh leh{kk ds le; visf{kr jktLo izkIr u gksus ij] 'kklu }kjk ;kstuk okil yh tk ldrh gSA**

The other relevant fact of the case is that the Commissioner of Trade Tax by his letter dated 14th of May, 2008 informed its officials about the cancellation of the aforesaid composition scheme dated 5th of August, 2005 on the ground that the applicants were very less in comparison to the expected number of thirty thousand dealers who opted for the scheme and the State Government after consideration of the matter through its letter dated 1st of May, 2008 has annulled the composition scheme dated 5th of August, 2005 by providing that the said scheme is no more effective and is cancelled.

The case of the petitioner is that thereafter, the petitioner deposited the balance amount of admitted tax through challan dated 5th of August, 2008 for Rs.8,90,000/-. The Assessing Officer of the petitioner on 3rd of September, 2008 has issued the impugned notice/order directing the petitioner to pay the interest thereon as the said amount of Rs.8,90,000/- deposited on 5th of August, 2008 represents the admitted tax as envisaged under section 8(1) of the Act. The said order is impugned in the present writ petition.

The main crux of the petitioner's argument is that the petitioner had applied for composition through the application dated 25th of August, 2005 and had deposited the requisite amount as per the terms of the scheme on various dates such as 13th September, 2005, 14th September, 2005, 8the December, 2005 and 10th of January, 2006. The submission is that the State Government for the first time made it public that due to insufficient number of dealers opting for composition scheme, it decided to discontinue or cancel the scheme for the first time after about three years from the promulgation of scheme, on 5th of May, 2008. The petitioner had deposited the composition money in lieu of tax as contemplated under section 7-D of the Act. The submission is that "the tax admittedly payable means the tax which is payable under this Act on the turnover of sales or, as the case may be, the turnover of purchase, or both" used in the Explanation to section 8(1) of the Act should be read in conjunction with the phrase "Assessing Officer may agree to accept the composition money either in lump-sum or at an agreed rate of his turnover in lieu of tax that may be payable by a dealer.........................." The submission is that both the provisions should be construed harmoniously. The amount deposited by a dealer under section 7-D "in lieu of tax will be the admitted tax payable by the such dealer."

In contra, the learned counsel for the respondents submitted that section 8(1) and the Explanation thereto clearly obliges a dealer to pay the interest on his failure to pay the tax admittedly payable by him. In other words, the petitioner having failed to pay the tax at the normal rate, composition scheme notwithstanding, is liable to pay the interest as it has failed to deposit the tax payable under the Act.

The second limb of the argument is that the composition scheme was only a proposal given by the State Government and it was never fructified into an agreement.

The following points fall for determination before us:-

1. Whether on the facts and circumstances of the case can it be said that the petitioner has failed to pay the tax admittedly payable under this Act on its turnover?

2. Whether the scheme was in the form of proposal and it was not given effect to by the State Government and as such the petitioner cannot claim any advantage thereunder?

Taking the first point first, it may be noted that so far as the factual aspect of the case is concerned, there is practically no dispute between the parties. The impugned order would show that liability to interest has been fastened having regard to Section 8(1) of the Act. The dispute centres round the meaning of phrase "the tax admittedly payable" used in the Explanation to section 8(1). Explanation to section 8(1) defines the tax admittedly payable. The said Explanation is reproduced below:-

Explanation.--For the purpose of this sub-section, the tax admittedly payable means the tax which is payable under this Act on the turnover of sales or, as the case may be, turnover of purchases, or of both, as disclosed in the accounts mentioned by the dealer or admitted by him in any return or proceeding under this Act, whichever is greater, or, if no accounts are maintained, then accordance to the estimate of the dealer 1 [and includes the amount payable 2[under Section 3-B or sub-section (6) of Section 4-B.]

Although it is not mentioned in so many words that the petitioner having failed to deposit the tax as per return, deposited the tax under section 7-D, instead, is liable to pay the interest also, but it follows from the impugned order. The petitioner contends the full compliance of section 8(1) and or its inapplicability to the facts of the case.

Section 8 of the Act provides for payment and recovery of tax. It says that the tax admittedly payable shall be deposited within the time prescribed, failing which the interest shall be payable @ 2% per mensum. For the applicability of the section two things are required to be established. They are --

1. Tax admittedly payable is not paid.

2. Such tax has not been paid, within the "time prescribed".

The time prescribed is on or before the due date of filing of the return. A dealer who has opted for payment of lump-sum amount of tax, is not required to file monthly, quarterly or annual returns of his turnover. It is the choice of a dealer to opt for compounded payment of tax and if the said choice is in accordance with the scheme and is ultimately accepted by the authority concerned, it becomes an agreed amount of tax. Rule-41 deals with the submission of returns and assessment of tax, by every dealer liable to tax, under the Act. Dealers who have validly opted the payment in lump-sum under section 7-D, being not required to file the returns, are not subjected to assessment of tax, will be outside the purview of section 8 dealing with provision of payment and recovery of tax or Rule-41, till the acceptance or otherwise of the option of the dealer. To put it differently the 'time prescribed' will not mean the due date for filing the return, with regard to such dealers who have opted for under section 7-D of the Act.

Sri Rahul Agrawal, learned counsel for the petitioner, has placed strong reliance upon the judgment of the Apex Court in the case of J.K. Synthetics Ltd. Vs. Commercial Tax Officer, (1994) 4 SCC 276, a case under the Rajasthan Sales Tax Act to buttress his arguments that no tax admittedly payable was due. In this case a dispute was raised by the dealer that freight is not part of turnover, therefore, he is not liable to pay the tax on the components of freight. The matter ultimately reached to the Apex Court and the above contention of that dealer was repelled. Thereafter, a dispute arose as to whether the dealer is liable to pay interest on the tax amount payable on freight. It was submitted that if at a later date on the basis of a different interpretation put on the language of relevant provisions of law, the dealer becomes liable to pay tax in respect of that already paid, he may be called upon to make good the difference but he cannot be visited by penalty under section 7-AA or the interest. In that connection, the Apex Court interpreted the expressions "tax payable" and "payable". It has been held that the expression "tax payable" is the full amount of tax due and 'tax due' is that the amount which becomes due ex-hypothesises on the turnover and taxable turnover shown in or based in the return. The word "payable" is a descriptive word which means "that which must be paid or is due or may be paid." Emphasis has been laid that its correct meaning can only be determined if the context in which it is used is kept in view. For the sake of convenience paragraph-17 which is relevant for our purposes is reproduced below:-

17. "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 15 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 the State Government on the basis of the return. That 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(a) 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 the 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 (2-A) 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 that is not the case here. It is difficult on the plain language of the section to hold that the law envisages the assessee to predicate the final assessment and expect him to pay the tax on that basis to avoid the liability to pay interest. That would be asking him to do the near impossible."

It has been laid down in the context of Rajasthan Sales Tax Act that 'tax payable' would not mean as "tax is not paid" to visit upon him the liability to pay interest under the statutory provision. Similar provisions for filing the monthly or quarterly returns of turnover and deposit of tax on the basis of those returns are there in the U.P. Trade Tax Act also. Section 7 of the Act casts an obligation on every dealer to file return of turnover and deposit of tax on the basis of such return. Rule-41 of the Rules framed under the Act has laid down the procedure for submission of return and assessment of tax. It also contains Explanation-I which is similarly worded to Explanation to section 8(1). For the sake of convenience the said Explanation is reproduced below:-

Explanation I.--"Admitted tax liability" means the tax which is payable under this Act on the turnover or, as the case may be, the turnover of purchases or both, as disclosed in the accounts maintained by the dealer or admitted by him in any return or proceeding under this Act, whichever is greater, or, if no accounts are maintained, then according to the estimate of the dealer.

Admittedly, the petitioner has deposited the tax payable by him under the composition scheme i.e. under section 7-D of the Act. In other words, tax which is payable under the Act. Even the Explanation which defines the "tax payable" provides that it means the tax which is payable under this Act. Logically, it follows that it will include the amount of tax payable under section 7-D paid in lieu of tax payable under the Act. The aforesaid relied upon judgment fully supports the stand of the petitioner. The aforesaid decision of the Apex Court is a constitution bench decision and has been followed subsequently in Frik India Limited and another versus State of Haryana and others, (1994) 5 SCC 559, a case under Haryana General Sales Tax Act holding that the additional amount of tax found due after the dealer had deposited the entire tax due as per return without wilfully omitting any material information, interest charged to such amount is not proper.

Reliance was placed on EID Parry (India) Limited Versus Assistant Commissioner of Commercial Taxes, (2005) 4 SCC 779. It is apt to take note of the facts of the case. The dealers were given an option under the Tamilnadu General Sales Tax of paying tax in advance on the basis of monthly return on the provisional price of sugar. Subsequently, on the basis of the final price of sugar, the tax deposited by the dealer thereon fell short. The interest was also demanded. In this background, the question arose whether interest can be charged and if so from what date. The Court said that the final price was fixed under clause 5-A on the basis of the formula set out therein and it could not be decided at least till the end of the sugar year. In practice, it is, however, decided much later. In this fact situation, the Court observed that as the price would be unknown, neither the assessee could predict what the price would be nor could the assessing officer, even on the basis of his best judgment, could predict what that price would be. Till the price is fixed, there would not be any question of assessee including it in the monthly return filed by him and levy of interest was held unjustified. Para-9 is the relevant paragraph which is reproduced below:-

"The question then arises whether interest under Section 24(3) can be charged on the clause 5-A price or on the advance and if so, from what date. As has been noted hereinabove, the price fixed under clause 5-A can only be decided on the basis of a formula set out hereinabove. It therefore cannot be decided at least till the end of the sugar year. In practice it is however decided much later. As the price would be unknown, neither the assessee could predict what the price would be nor could the assessing officer, even on the basis of his best judgment, predict what that price would be. Therefore till the price under clause 5-A is fixed there would be no question of an assessee including it in the monthly returns filed by him. A monthly return filed not showing the price fixed under clause 5-A would neither be incorrect nor incomplete. It is only after the price under clause 5-A is fixed that the assessee would be required to file a revised return showing the price fixed under clause 5-A as part of turnover........................... .

The Court proceeded further. It has been held that in absence of any determination by the Assessing Authority, the tax is to be paid, on the basis of "such returns". Tax as per return has been, admittedly, paid. Following the decision given in the case of J.K. Synthetics Limited (supra), the demand of interest was set aside.

We are of the view that the ratio laid down by the Apex Court in the aforementioned two cases is fully applicable to the facts of the present case. Similar kind of phrases have been used in sections 7, 8(1), Explanation to section 8(1) and section 7-D of the Act. The procedure for filing the return and its finalization either by passing provisional assessment order or final assessment order are akin to other States Sales Tax Law. Similar kinds of expressions such as "liable to pay tax under this Act", "the tax admittedly payable", etc. have been extensively used in the provisions relating to assessment and recovery of tax due to the State Government. They should be interpreted in the like manner as has been interpreted in the two cases by the Apex Court referred to herein above. The basic factual situation is common to the case on hand. The present case stands even on a better footing as the petitioner all the time complied with the letters of law by making the necessary deposit of tax as contemplated under section 7-D. It has not disputed its liability to pay the admitted tax even remotely while in the case of J.K. Synthetics Limited (supra), the issue as to whether the freight is part of turnover or not was raised by the dealer unsuccessfully. The petitioner has deposited the difference in the tax amount voluntarily on 5th of August, 2008. Whereas the State Government took a final decision not to continue the composition scheme only on 1st of May, 2008 and the information was given by the Commissioner of Commercial Tax through its Circular dated 14th of May, 2008. The petitioner has deposited the entire tax due as per the composition scheme and there is no allegation that the petitioner wilfully omitted any material information. On any additional amount of tax found due as the result of withdrawal of the composition scheme, the petitioner is not liable to pay interest on the differential amount.

The learned standing counsel submitted on the strength of decision of the Apex Court in the case of Commissioner of Sales Tax Vs. Qureshi Cruchible Center, AIR 1994 SC 25, and Pepsico Co. Ltd. Vs. Commissioner of Trade Tax, U.P. Lucknow, (2011) 40 VST 220 to support the stand of the department. These two cases are under the U.P. Trade Tax Act, therefore, require consideration in depth. In the case of Qureshi Cruchible Center (supra), the dealer did not dispute the rate of tax applicable to the commodity with which he was dealing. The commodity fell under the category of nonspecified goods and the rate of tax was enhanced even prior to two years of the relevant assessment year but in the return, the tax was deposited at the old rate which was lesser. In this fact situation, the Apex Court held that it was a case where the dealer calculated the tax at an inapplicable rate and therefore, was liable to pay the interest. The question of bonafide or malafide was not at all germane. The ratio laid down therein has no application to the facts of the case on hand as the factual matrix therein was quite distinct and different. The said decision has been followed by the Apex Court in a subsequent decision in the case of Pepsico Co. Ltd. (supra). In the latter case, the dealer disputed its liability to pay the tax on realized rental charges for glass, bottles and crates. Subsequently, it was found that the stand of the dealer is not justified in view of the decision of Apex Court in the case of State of Orissa Vs. Asiatic Gases Limited, (2007) 5 SCC 766. The dealer then urged that as he was bonafidely disputing the liability of payment of tax on the aforesaid item, the interest should be charged under section 8(1B) of the Act i.e. from the date of the assessment. In this factual background, the Apex Court held that the tax becomes admittedly payable once it has been held that the tax is payable under the Act, the interest would be payable in the terms of sub-section (1) of section 8 and not in terms of sub-section (1B) of section 8 of the Act. We may point out that the U.P. Trade Tax Act provides for the payment of interest on different rates under different circumstances. Under section 8(1) interest @ 2 per cent per mensem is payable when the admitted tax is not paid or short paid. While under section 8(1B) interest at the rate of 1.5 per cent per mensem is payable if the tax assessed is not paid within the specified time.

The aforesaid relied upon decisions by the learned standing counsel are not applicable to the facts of the present case as they were rendered under different factual situation. They relate to classification dispute or disputing the liability to pay interest. In the case on hand, in short the case of the petitioner is that the petitioner has deposited the tax, admittedly, payable by him under the scheme/Act. The petitioner is not raising any classification dispute. In our view, these cases do not advance the case of the department any further and are of little assistance.

The upshot of the above discussion is that on true and correct interpretation of Explanation to section 8 (1) of the Act, this provision is not attracted here and the petitioner has paid the tax admittedly payable by him under the scheme and the liability of interest cannot be fastened when the scheme itself has been withdrawn after a period of three years. Our view also finds support from clause-6 of the scheme (already reproduced in the earlier part of the judgement) which provides that if the scheme is taken back, every dealer will have to pay the tax at full rate on the turnover. It does not provide for payment of any interest on the differential amount.

Now, we take up the point no.2.

The learned standing counsel for the department referred various clauses of the scheme to impress upon the Court that the said scheme never became effective. The relevant clauses are produced below:-

**¼>½ lek/kku ;kstuk dk fodYi pquus okys O;kikjh dj dh olwyh Øsrk O;fDr ls ugha djsaxs rFkk mUgs vkSj dksbZ NwV ugha ns; gksxhA

¼V½ lek/kku ;kstuk iwjs o"kZ ds fy;s Lohdkj dh tk;sxh rFkk o"kZ ds nkSjku vkaf'kd :i ls ns; ugha gksxhA

¼B½ jkT; ljdkj ds }kjk bldk iqujh{k.k le; le; ij fd;k tk;sxk fd i;kZIr la[;k esa iathd`r O;kikfj;ksa us bldk fodYi pquk gS vFkok ughaA jkT; ljdkj fcuk fdlh iwoZ lwpuk ds ;g ;kstuk lekIr djus ds fy;s vf/kd`r gksxhA

¼M-½ ---------------------------------------------------

¼<½ ---------------------------------------------------

¼r½ ;g ;kstuk rHkh izHkkoh gksxh tc 'kklukns'k fuxZr gksus dh frfFk ls 03 ekg ds Hkhrj de ls de 30 gtkj O;kikfj;ksa }kjk bl ;kstuk dks Lohdkj fd;s tkus dk fodYi fn;k tkrk gSA

¼Fk½ bl ;kstuk ds vUrxZr izkIr lek/kku jkf'k dh frekghokj leh{kk dh tk;sxh vkSj ;fn bl ;kstuk ds vUrxZr visf{kr jktLo izkIr ugha gksrk rks 'kklu }kjk bls okil fy;k tk ldrk gSA**

Emphasis was laid on condition No. Tha ¼B½ and Ta ¼r½ thereof. At first flash, the argument of the learned standing counsel appears to be attractive but on deeper scrutiny we find that they have no merit. A perusal of the scheme would show that it provides a time frame within which a dealer has to opt for the scheme and deposit the amount in lieu of tax as per the time table given in the scheme. Fifty per cent of the estimated amount is required to be deposited along with an application opting for the scheme and the remaining 50% in five equal instalments. 04th of November, 2005 appears to be cut off date fixed in the scheme. It provides that if 30000 dealers do not opt for scheme and/or the requisite amount is not received within that period, the State Government may discontinue the scheme. There appears to be no dispute with regard to the aforesaid terms of the scheme but the fact remains that the scheme does not envisage any mechanism through which the dealers may come to know either requisite number of applications have not been received or the amount deposited by such applicants is below the expected amount of tax. Everything lies within the province of the State Government to continue or not to continue the scheme. But that is not the end of the matter.

The scheme provides that the State Government shall review the scheme from time to time to ascertain the fact as to whether it has been opted for by the requisite number of dealers or not. It further provides that the scheme can be cancelled by the State Government without giving any prior notice. The condition No. Ta ¼r½ provides that unless 30000 dealers opt for the scheme within a period of three months from the date of its commencement, the scheme shall be effective only then. None of the conditions in the scheme can be read in isolation. The scheme should be read as a whole and its every condition should be given harmonious construction. While giving meaning to the various conditions of the scheme, one should also bear in mind the liability which was incurred by such dealers who opted for the scheme. The condition No.Jha ¼> provides that a dealer who has opted for the scheme has been injuncted to realise the tax from the purchasers. Such dealer has been denied any other type of concession which might be available otherwise under the Act. It also casts an obligation on the State Government to review the situation periodically to find out the response of the scheme. 04th of November, 2005 is the cut off date fixed under the scheme beyond which no dealer could opt for the scheme even after the payment of late fee, interest etc. The least which could be expected from the State Government to have given consideration to the number of applicants who opted for the scheme and the amount collected under the scheme on the cut off date i.e. 04th of November, 2005 or shortly thereafter within a reasonable period of time. It appears that the State Government slept over the matter and did nothing. It could not move either way due to inertia and woke up after three years i.e. on 1st of May, 2008 when it took a conscious decision that due to inadequate number of applicants, it is not desirable to continue with the scheme and cancelled it. The delay in scraping the scheme is totally attributable to the State Government. It may be true, as was submitted by the learned standing counsel that the scheme was still born but it is an accomplished fact that the scheme was floated like other schemes in the exercise of powers under section 7-D of the Act and unfortunately, the response to the present scheme was lukewarm. The State Government was required to evaluate the response of the scheme from time to time but it failed to do so. The petitioner is not asking either for continuance of the scheme or his liability to pay the tax at the normal rate. The only dispute raised is with regard to its liability for payment of interest amount for no fault of his.

In view of the fact that the State Government failed to adhere the cut off date and to review the scheme periodically, which resulted such lapse of time solely on account of inaction at the end of the State Government, the petitioner who has changed his position by opting the scheme cannot be asked to pay the interest on the differential amount even if the scheme is held to be still born. There can hardly be any dispute with the right of the State Government either to withdraw any such scheme or not to enforce it any further but it does not mean that such dealer who has complied with the letter and spirit of the scheme, may be saddled with the liability to pay the interest on the differential amount of tax. The scheme captured the attention of the dealers but it failed as it could not achieve the target, for no fault of the persons like the petitioner.

The petitioner could not predicate of the cancellation/non-enforcement of the scheme and to expect from the such applicants to pay the tax at the normal rate to avoid the liability to pay the interest, would be asking them to do the near impossible (borrowed from the judgment of J.K. Synthetics Limited) (supra).

Our above view finds support from clause-10 of the scheme, already reproduced above, which provides that the State Government shall examine the applications received up to 04th of November, 2005 and can take back the scheme if the requisite revenue is not found deposited. Even if the contention of the learned standing counsel that the scheme was still born, is upheld, it would in no manner make the petitioner liable to pay the interest under section 8(1) of the Act on the differential amount of tax.

We may notice one decision of this Court in Jhamman Lal Oil Mills Vs. State of U.P., (2007) 6 VLJ 3, a case under section 7-D of the Act. Sri Rahul Agrawal very fairly placed the above decision before us which is apparently against his stand but he distinguishes it on facts. This was a case with regard to another scheme as in the case on hand, issued under section 7-D of the Act by the State Government. It was withdrawn within six months from the date of the scheme and the writ petitioner therein challenged the authority of the State Government to withdraw the scheme, contending that he has opted under the scheme and deposited the tax. The Court interpreted the condition no.1 of the composition scheme, in which it was provided that if the amount of Rs.750 Lakhs is not collected then the scheme would not be enforced. The Court interpreted that the scheme was still born and rejected the challenge to withdrawal of the scheme. The said decision is distinguishable on facts as the challenge therein was with regard to the power of the State Government to withdraw the scheme which is not so here. Moreover, the scheme was withdrawn by the State Government within a short period of around six months.

In the result, the writ petition succeeds and is allowed. The impugned order/notice dated 3rd of September, 2008 (Annexure-8) asking the petitioner to deposit the interest under section 8(1) of the Act is quashed.

No order as to costs.

(M.K. Gupta, J.) (Prakash Krishna, J.)

Order Date :- 29.4.2013

LBY