M/S U-Neek Surfactants Pvt. Ltd. vs Dy. Commissioner (Asstt.)-Iii, ...
2013 Latest Caselaw 813 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

RESERVED
 
(AFR)
 

 
Case :- WRIT TAX No. - 951 of 2008
 

 
Petitioner :- M/S U-Neek Surfactants Pvt. Ltd.
 
Respondent :- Dy. Commissioner (Asstt.)-Iii, Commercial Tax, Meerut & Ors.
 
Petitioner Counsel :- Rakesh Ranjan Agrawal,Pramod Jain
 
Respondent Counsel :- C.S.C.
 

 
Hon'ble Prakash Krishna,J.

Hon'ble Ram Surat Ram (Maurya),J.

(Delivered by Prakash Krishna, J.)

1. The only point mooted in the present writ petition is whether the Additional Commissioner Grade-I, Commercial Tax, Meerut Zone, Meerut is justified in granting the sanction under section 21(2) of the U.P. Trade Tax Act to reopen the concluded assessment proceedings relating to the Assessment Year 2001-2002 simply on the ground that one Form 3-B filed by the petitioner claiming concessional rate of tax on the turnover of raw material i.e. liquid detergent supplied by it to selling dealer holding recognition certificate for an amount exceeds Rs.5 Lakhs in view of Rule 25B (4) of the Rules framed under the U.P. Trade Tax Act is invalid.

2. The facts are few and are not in dispute. Only a legal point is involved, therefore, we are noticing the minimal facts to understand and resolve the controversy.

3. The petitioner during the relevant assessment year 2001-2002 disclosed the sale of liquid detergent against the form 3-B amounting to Rs.16,28,408/- to M/s. Modi Rubber Limited, Modipuram, Meerut and M/s. Modi Tyre Factory, Modi Nagar, Meerut. It could not produce form 3-B in the course of assessment proceedings, which was concluded by the order dated 3rd February, 2002 by creating a demand of Rs.3,47,688/- due to the absence of form 3-B. The disclosed turnover was accepted. Thereafter, the petitioner filed an application under Rule 25-B within the prescribed period of limitation of six months enclosing the requisite form before the Assessing Authority. The Assessing Authority after getting the form 3-B verified through the Deputy Commissioner, Trade Tax, Modi Nagar rectified the demand and reduced it to Rs.25,180/- by the order dated 31st of May, 2004. Thereafter, it appears, a proposal was submitted by the Assessing Authority to the Additional Commissioner Grade-I, Commercial Tax Meerut Zone seeking permission to reopen the assessment on the ground that the form produced by the petitioner exceeds Rs.5 Lakhs and as such, the said form would be valid up to the turnover of Rs.5 Lakhs and for the excess turnover the petitioner is not entitled for the concessional rate of tax.

4. A show cause notice was given before granting the sanction for reopening which was duly replied by the petitioner on the ground that the day on which the said form was issued by the selling dealer, the relevant rule stood amended and as per the amended rules, the turnover of the purchasing dealer being more than Rs.25 Crore, the limit of Rs.5 Lakhs is inapplicable. The said reply has not been found satisfactory and the impugned order granting the sanction was passed.

5. We may, at the outset, notice few relevant provisions of the Act as they stood at the material time. Section 4-B of the U.P. Trade Tax Act provides special relief to certain manufacturers. The said section opens with an obstante clause and has precedence over sections 3, 3A, 3AAAA and 3D of the Act. The State Legislature has provided special relief to certain manufacturers upon the fulfilment of the conditions mentioned therein for manufacture of specified goods . A manufacturer holding the recognition certificate shall be liable to pay tax at the concessional rate or be wholly or partially exempted from tax on the purchase of raw material or packing material, as may be notified in the gazette of the State Government in that behalf. Its clause (b) of section 4B (1) gives relief to a selling dealer to such manufacturers holding recognition certificate on furnishing by the selling dealer the prescribed form which is form 3- B. The Rule 25-B is the relevant rule which prescribes the document 3B the requisite form to be furnished by such manufacturer to its selling dealer to avail the benefit of concessional rate of tax or tax at nil rate, as the case may be.

6. In the present case, there is no dispute that the petitioner sold the liquid detergent to M/s. Modi Rubber Limited and M/s. Modi Tyre Factory were holding valid recognition certificate under section 4-B of the Act and were entitled to pay the trade tax at the concessional rate. There is also no dispute that the selling dealers furnished the requisite document i.e. form 3-B to the petitioner as prescribed under Rule-25B. The genuineness and correctness of the said form 3-B is not in issue.

7. The only dispute which could be pointed out by the department is that one form 3-B filed on 31st of March, 2004, is in respect of Rs.43,00,050/-. The bone of contention of the department is that under Rule 25-B Sub-rule 4, one single form can not cover more than Rs. 5 Lakhs and as such, the said Form 3-B is valid for an amount up to Rs. 5 Lakhs on which the benefit of concessional rate of tax has been granted and for the rest, the department contends that the petitioner is liable to pay the tax at full rate. This is the point in issue in the present case. In other words, the scope and ambit of Rule 25-B (4) is involved.

8. Sub-rule (4) of Rule 25-B has been subjected to amendments from time to time and it is relevant to notice the amendments. Section 25-B (4) as it stood earlier is reproduced below:-

(4) "Before furnishing a declaration form to the selling dealer, the purchasing dealer or one of the persons mentioned in sub-rule (1) of Rule 25-A shall fill in all the required particulars and shall sign it. Thereafter the counter-foil of the form shall be retained by the purchasing dealer and the other two portions marked "Original" and "Duplicate" shall be made over by him to the selling dealer :

Provided that no single form shall cover more than one bill or cash memo, as the case may be."

9. By the U.P. Trade Tax (Second Amendment) Rules, 2000 the then existing sub sections (2) and (4) were substituted by the following:-

5. Amendment of Rule 25-B.--In the said rules, in Rule 25-B, the following shall be substituted, namely:--

"(2) A dealer holding a recognition certificate who wishes to avail of the concession referred to in clause (b) of sub-section (1) of Section 4-B, shall apply to the Assessing Authority within whose jurisdiction his principal place of business is situated for the issue of blank declaration forms. No blank declaration form shall be issued by the Assessing Authority except on payment of the fee by the dealer at the rate of rupees five per form. The application shall be signed by one of the persons mentioned in sub-rule (1) of Rule 25-A.

(4) "Before furnishing a declaration form to the selling dealer, the purchasing dealer or one of the persons mentioned in sub-rule (1) of Rule 25-A shall fill in all the required particulars and shall sign it. Thereafter the counterfoil of the form shall be retained by the purchasing dealer and the other two portions marked "Original" and "Duplicate" shall be made over by him to the selling dealer :

Provided that no single form shall cover more than one bill or cash memo, of more than one assessment year."

(Source 2001 LLT part -V page 1)

10. These rules came into effect w.e.f. 1st of September, 2000.

11. Then, sub-rule (4) was amended and was substituted by the U.P. Trade Tax (Amendment) Rules, 2001 (w.e.f. 1.5.2001) by the following Rule:-

(4) "Before furnishing a declaration form to the selling dealer, the purchasing dealer or one of the persons mentioned in sub-rule (1) of Rule 25-A shall fill in all the required particulars and shall sign it. Thereafter the counterfoil of the form shall be retained by the purchasing dealer and the other two portions marked "Original" and "Duplicate" shall be made over by him to the selling dealer :

Provided that no single form shall cover the transactions of purchase or sale, of more than one assessment year and of value more than Rupees five lakhs."

(Source 2001 LLT Part V page 130)

12. The said Rule was again substituted by the U.P. Trade Tax (Amendment) Rules, 2002 (w.e.f. 20.12.2002). The substituted Sub-rule 4 reads as follows:-

(4) "Before furnishing a declaration form to the selling dealer, the purchasing dealer or one of the persons mentioned in sub-rule (1) of Rule 25-A shall fill in all the required particulars and shall sign it. Thereafter the counterfoil of the form shall be retained by the purchasing dealer and the other two portions marked "Original" and "Duplicate" shall be made over by him to the selling dealer :

Provided that no single form shall cover the transactions of purchase or sale, of more than one assessment year and of value more than Rupees five lakhs:

Provided further that the restriction of mentioning transactions of sale or purchase of more than Rupees Five Lakhs, shall not apply to department of the Central Government or the State Government or a Corporation or Undertaking established or constituted by or under a Central Act or an Uttar Pradesh Act or a Government Company as defined in Section 617 of the Companies Act, 1956, having a yearly turnover of Rupees Five crore or more."

(Source 2003 LLT Part V page 102)

13. It was again substituted by the U.P. Trade (Third Amendment) Rules, 2003 (w.e.f. 30.4.2003). Sub-rule (4) is reproduced below:-

(4) "Before furnishing a declaration form to the selling dealer, the purchasing dealer or one of the persons mentioned in sub-rule (1) of Rule 25-A shall fill in all the required particulars and shall sign it. Thereafter the counterfoil of the form shall be retained by the purchasing dealer and the other two portions marked "Original" and "Duplicate" shall be made over by him to the selling dealer :

Provided that no single form shall cover the transactions of purchase or sale, of more than one assessment year and of value more than Rupees five lakhs:

Provided further that the restriction of mentioning transactions of sale or purchase of more than Rupees Five Lakhs, shall not apply to--

(i) Department of the Central Government or the State Government or a Corporation or Undertaking established or constituted by or under a Central Act or an Uttar Pradesh Act or a Government Company as defined in Section 617 of the Companies Act, 1956, having a yearly turnover of Rupees Five crore or more; or

(ii) dealer having an yearly turnover of Rupees Twenty-five crore or more."

(Source 2003 LLT Part V page 123)

14. Successive amendments in Sub-rule (4) of Rule 25 B as reproduced above would show that every time, the State Legislature has attempted to whittle down its rigour. Earlier, the Rule provided that in respect of each transaction, form 3-B in respect thereof should be given by the purchasing dealer to the selling dealer. To reduce the hardship, the Rule was amended by providing that one form 3-B may cover the sales for the entire Assessment Year, without restricting or prescribing any monetary limit. The monetary limit of Rs.5 Lakhs per form was prescribed by the U.P. Trade Tax (Amendment) Rules, 2001 w.e.f. 1st of May, 2001. A proviso -II was added by the U.P. Trade Tax (Amendment) Rules, 2002 to Sub-rule (4) by providing that the monetary limit of Rs.5 Lakhs in respect of transaction of sale and purchase shall not apply, the department of Central Government, or the State Government or a corporation or undertaking established or constituted by or under a Central Act or a U.P. Act or a Government Company, having a yearly turnover of Rs. 5 crores or more. Thereafter, to the aforesaid proviso, clause (ii) was added in the second proviso by substitution by providing that if a dealer is having yearly turnover of Rs.25 Crores or more, the restriction of sale or purchase of more than Rs. 5 Lakhs shall not apply. Vividly, the above is the history of Sub-rule (4). Now, the limited question which is required to be answered, is which one of amended Rules would apply to the facts of the present case.

15. The learned counsel for the petitioner submits that the petitioner filed the form 3-B within the prescribed period of six months after the Assessment Order, on 31st of July, 2004. By that time, the clause (ii) of second proviso to Sub-rule 4 of Rule 25 B had come on the Statute Book. The petitioner contends that its selling dealer namely Modi Rubber had a turnover of more than Rs.25 crores validly issued a single form covering sale/purchase transaction of Rs. 43,00,156/-. The stand of the department is that the matter relates to the Assessment Year 2001-2002 and therefore, the relevant Rule as stood before the U.P. Trade Tax (Third Amendment) Rule, 2003, bereft of clause (ii) to sub-section (4) of section 35 would be applicable, notwithstanding the subsequent amendment in the Rule.

16. On a consideration of respective submissions of the counsel for the parties, we find that the Rule in question is in the nature of subordinate legislation. The purpose and object of Rule is to prove the essential facts that the purchasing dealer is a recognition certificate holder and manufacturer of specified goods and has purchased the goods in question as raw material or for packaging. The history of the amendments made in Sub-rule (4) would show that the State Government carried amendments from time to time to whittle down the rigour of the original Rule beginning from the requirement of form 3-B in respect of each transaction of sale and purchase separately by making it a provision that the purchasing dealer may provide single form for one assessment year. Thereafter, the monetary limit of Rs. 5 Lakhs was provided which was found to be cumbersome specially in the case of Government Companies including the department of Central Government, State Government etc.. Clause (i) was added at appropriate place. To give further relief, sub clause (ii) was added in respect of dealer having a yearly turnover of Rs. 25 crores or more. The amendments carried on by the State Government are remedial and for the benefit of the business community as a whole and in respect of a person having large turnover in particular. Considering the object and purpose of the Rule 25 B, we are of the considered opinion that the Rule as it exists on the date of issuance of form 3B would apply. To put it differently, here form 3B was issued on 31st of May, 2003 i.e. after the commencement of clause (ii) to second proviso to Rule 35 B (4), therefore, Rule 25 B(4), as lastly amended will apply.

17. The argument of the learned counsel for the respondent that the Rule as amended on 20th of December, 2002 will apply has no force. The object and purpose of filing form 3B is to satisfy the requirements of section 4-B of the Act. The said requirement stands fulfilled here as it has been accepted for up to rupees five lakhs keeping in view the above object and purpose of section 4B, Sub-rule (4) should not be interpreted in a pedantic manner or narrowly.

18. Now, we may take note of certain observations of the Apex Court in Phool C. Gupta Versus State of Andhra Pradesh, 1997: U.P.T.C. 793 with regard to the document - Form C as required under the Central Sales Tax Act. In this case, the issue was slightly different as to whether the filing of Form 3 C is mandatory or not and a dealer can prove inter-state sale by any other mode but certain observations made therein are useful here. It has been laid down that the filing of the prescribed form is mandatory as this mode of proof is the sole or exclusive mode of proof made by the legislature. It follows that filing of form is a mode to prove the essential ingredients required under a particular provision to prove the existence of certain facts for availing the concessional rate or nil rate of tax. That is all. Here also, the requirement of form 3B is to prove that the said transaction took place in between the selling dealer and the purchasing dealer, being recognition certificate holder and manufacturer of specified goods and purchased the goods in question as raw material for the manufacture of the specified goods. The nature of the amendment made in Sub-rule (4) being remedial with a view to whittle down the rigour of Sub-rule (4), it should be given retrospective effect in such circumstances.

19. At this juncture, we may usefully refer a judgment of the Apex Court in the case of Allied Motors Versus CIT (1997) 224 ITR 677. The aforesaid decision has been given with reference to section 43 B of the Income Tax Act which provides certain deductions to be allowed only on actual payment. Section as originally enacted required that deduction otherwise allowable under the Income tax Act in respect of any sum payable by the assessee by way of tax, duty, cess or fee shall be allowed only when the such sum is actually paid by him during the previous year. Subsequently, section was amended by adding the Explanation-I. The Explanation-I was introduced with a view to address practical difficulties faced by the assessee in certain cases in not making actual payment of tax etc. during the previous year but before the due date for making the such deposit. In that connection the Supreme Court has laid down that the provision being clarificatory in nature will have retrospective operation. The relevant paragraph is reproduced below:-

"In the case of Goodyear India Ltd. v. State of Haryana and Anr. (188 ITR 402) this court said that the rule of reasonable construction must be applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and purpose of the Act. Therefore, in the well known words of Judge learned Hand, one cannot make a fortress out of the dictionary; and should remember that statutes have some purpose and object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning. In the case of R.B. Jodha Mal Kuthiala v. Commissioner of Income-tax, Punjab, jammu & Kashmir and Himachal Pradesh (82 ITR 570), this Court said that one should apply the rule of reasonable interpretation. A proviso which is inserted to remedy unintended consequences and to made the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole."

20. In this view of the matter, the amended Sub-rule (4) of Rule 25-B which includes (ii) of second proviso as it stood on the date of issuance of form 3B will be available to the petitioner.

21. Viewed as above, we find sufficient force in the argument of the learned counsel for the petitioner that it is not a case of escapement of turnover as contemplated under section 21 of the Act or under assessment or the like. The irregularity, if any, is form 3-B curable and it will not in any manner invalidate the form 3-B which has been found valid otherwise. The petitioner has fulfilled the conditions of section 4-B (i) (b) of the U.P. Trade Tax Act at least in the spirit of law. Filing of required form is the only mode to prove the existence of certain facts which have been done and if such form is not a forged or fabricated document and there is no element of fraud or suppression of facts, the defect, if any, is more in the domain of procedural part. procedural law lays emphasis on the spirit of law and not on form. The approach in such fact situation of courts should be justice oriented and not to find some fault here or there.

22. The petition is on terra-firma. It succeeds and is allowed. The impugned order granting sanction is quashed.

23. No order as to costs.

(R.S.Ram(Maurya), J.) (Prakash Krishna, J.)

Order Date :- 12.4.2013

LBY