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Judgment
We have heard Sri R.K.S. Chauhan, learned counsel for the petitioner and Sri S.P. Kesarwani, learned Standing Counsel for the respondents.
The petitioner has challenged the impugned communication dated 23.12.1993 Annexure 5 to the writ petition and consequential demand dated 27.12.1993 Annexure 6 to the writ petition made by the Sales Tax Officer, Fatehpur.
The petitioner has a brick kiln which is registered with the Trade Tax Department. The petitioner gave an option under Section 7D of the U.P. Trade Tax Act for composition of his trade tax liability and that option was accepted vide Annexure C.A.1 on 13.9.1993.
It is alleged in paragraph 10 and 11 of the writ petition that for the relevant assessment year 199293 the petitioners brick kiln was lying closed and there was no production nor sale of bricks during the relevant period. However, the trade tax authorities are demanding trade tax from the petitioner for this period on the ground that he had opted for composition scheme under Section 7D. The allegations in paragraphs 10 and 11 of the writ petition are not specifically denied in paragraph 8 and 9 of the counter affidavit in so far as it relates to nonproduction of bricks or sales of the same. Hence the allegations in paragraph 10 and 11 of the writ petition had to be accepted as correct.
The question in this case is whether trade tax can be charged merely because the petitioner opted for composition scheme under Section 7D although in fact it did not make any production nor sale in the relevant period.
Learned Standing Counsel has relied on the Division Bench decision of this Court in Jai Sharma Int Udyog v. Deputy Collector (Collection) Sales Tax (1999) 116 STC 357, M/s. Java Bhatta Udvog v. State of UP.. Writ Petition No.858 of 1990 decided on 17.7.1990 and M/s. Sri Durga Brick Field v. State of U.P. 1991 UPTC 510. We have carefully perused the above decisions and we are in respectful disagreement with the same. In the aforesaid decisions it has been held that once the petitioner has opted for composition scheme he has to pay trade tax even if he has not made any sales. In our opinion sales tax (now known as Trade Tax) is payable when there is a sale. When there is no sale we cannot understand how sales tax (trade tax) can be charged.
It may be mentioned that Section 7D mentions that "assessing authority may agree to accept the composition money either in lump sum or at an agreed rate on the dealers, turn over in lieu of tax that may be payable by a dealer in respect of such goods or class of goods......."
Thus Section 7D is only a convenient mode of realization of trade tax and it has been made so that the dealer may not be harassed to go to the trade tax office again and again. Thus Section 7D provides for convenient alternative mode of realization of trade tax vide.
The word turnover has been defined in Section 2(i) of the U.P. Trade Tax Act as follows:
"turnover" means the aggregate amount for which goods are supplied or distributed by way of sale or are sold, by a dealer, either directly or through another, on his account or on account of others, whether for cash or deferred payment or other valuable consideration."
Thus the turnover is only payable when there are sales and when there are no sales there is no question of any turnover. Hence also in our opinion no trade tax can be demanded or realized from a dealer when he has not made any manufacture or sale.
It may be mentioned that as far back in State of Madras v. Gannon Dunkerley 1958 SC 560 it was held that to levy sales tax there must be a sale as defined in the Sales of goods Act. No doubt this definition of sale both in the Constitution and Sales Tax Act, has been changed and now it includes works contract, agreement to use etc. but still there must be some transaction, and if there is no transaction obviously no sales tax can be levied.
Learned Standing Counsel relied on the decision of the Supreme Court in Commissioner. Central Excise v. M/s Venus Castings (P) Ltd. JT 2000 (4) SC 77 which has affirmed the Division Bench decision of this Court in M/s Jalan Castings (P) Ltd, v. Commissioner. Central Excise 2000 (119) ELT531. The decision in Jalan Castings case (supra) involved the controversy as to whether once having opted for the composition scheme a dealer can turn around and ask for it regular assessment, and it was held that he cannot. This controversy is totally different from that which is involved in the present case. In the present case the question is whether there can be demand of trade tax when there is no production or sale at all.
In view of the above this matter requires to be reconsidered by a larger Bench of this Court, which may also reconsider the correctness of the aforesaid decisions of the division benches of this court.
Let the papers of this case be placed before Hon''ble the Chief Justice for constituting a larger Bench for reconsideration of the above Division Bench decisions.
Till the decision of the larger Bench the impugned demand dated 27.12.1993 shall remain stayed.
(Ordered accordingly)