Flowmore Limited vs State of U.P. and Another

Challenging the order dated 26th of March, 2009 passed by the Deputy Commissioner, Sector-2, Commercial Tax, Ghaziabad, rejecting form 3D filed by the petitioner and holding that the petitioner is not entitled for concessional rate of tax, the present writ petition has been filed. Raising a small controversy this petition has been filed. We may notice the facts in brief. The petitioner, a company, is registered under both the U.P. Trade Tax Act, 1948 as well as the Central Sales Tax Act, 1956.

Its account books were accepted by the assessing authority for the relevant assessment year 2001-2002. However, the assessing authority did not grant the benefit of concessional rate of tax as claimed, as the requisite form 3D could not be submitted by the petitioner before the assessing authority during the course of assessment proceedings. This issue was taken up by the petitioner in first appeal and thereafter, in second appeal before the Tribunal. The Tribunal by the order dated 17th of April, 2008 passed in Appeal No. 167 of 2005 for the assessment year 2001-02 permitted the petitioner to place the form 3D on record and restored the matter back to the assessing authority to take the said form 3D as additional evidence on record and pass a fresh order in the light of the observations made in the order of the Tribunal. Thereafter, the matter was taken up by the assessing authority who by the impugned order has rejected the said form on the short ground that the U.P. Jal Nigam generally is a working agency for other Departments. The assessing authority took the view that in view of the section 3G(2) of the U.P. Trade Tax Act, 1948 the petitioner is not entitled to get the benefit of the said form, consequently lower rate of tax.

Heard Sri Ashok Kumar, learned counsel for the petitioner and Sri C.B. Tripathi, learned special counsel for the respondents. The learned counsel for the petitioner submits that undoubtedly the U.P. Jal Nigam is a corporation within the meaning of the U.P. Water Sewerage Tax Act, 1975. Elaborating the argument, it was submitted that the observation made by the assessing authority in the impugned order is totally unwarranted, perverse and against the material on record. Elaborating the argument, he submits that the U.P. Jal Nigam has to carry on number of functions, i.e., laying down pipe lines and providing water facilities to the residents of a locality. The submission is that the goods in question were two vertical water pumps and in absence of any material, it was wrongly assumed by the assessing authority that same were resold by the Jal Nigam. In the alternative, it was submitted that the form 3D was furnished by the U.P. Jal Nigam to the petitioner, the selling dealer. The said form was issued by the assessing authority of U.P. Jal Nigam and if there is any fault it lies with the U.P. Jal Nigam for which the petitioner cannot be held liable. Reliance was placed on Auto Sales, Allahabad v. Commissioner of Sales Tax [1991] UPTC 338 (All) and Commissioner, Trade Tax Vs. Amba Prasad Jain and Co., .

In contra, the learned counsel for the respondents submits that the finding recorded by the assessing authority is essentially a finding of fact. He submits that it was upon the petitioner to prove that the goods sold by it to the U.P. Jal Nigam were not resold. The court was taken through the form 3D also.

Considered the respective submissions of the learned counsel for the parties and perused the record. We may examine of the scheme of U.P. Water Supply and Sewerage Act, 1975.

The various functions of Jal Nigam have been mentioned in section 14 thereof. Section 14(iv), (v), (vi) and (vii) of the U.P. Water Supply and Sewerage Act, 1975 are as follows:

(iv) to review and advise on the tariff, taxes and charges of water supply in the areas of Jal Sansthans and local bodies which have entered into an agreement with the Nigam u/s 46;

(v) to assess the requirement for materials and arrange for their procurement and utilisation;

(vi) to establish State standards for water supply and sewerage services; and

(vii) to perform all functions, not stated herein which were being performed by the Local Self-Government Engineering Department before the commencement of this Act.

Section 15(i), (v) and (viii) in addition to other powers of U.P. Jal Nigam provides as follows:

(i) to inspect all water supply and sewerage facilities in the State by whomsoever they are operated;

(ii) to (iv) . . .

(v) to lay down the schedule of fees for all services rendered by the Nigam to the State Government local bodies, institutions or individuals; and

(vi) to (vii) . . .

(viii) to approve tariffs for water supply and sewerage services applicable to respective local areas comprised within the jurisdiction of Jal Sansthans and such local bodies as have entered into an agreement with the Nigam u/s 46.

Chapter IV deals with vesting of properties, assets, liabilities and obligations and transfer of employees. It contains provisions for vesting and transfer of property to Nigam. Section 31 says that June 18, 1975, is the "appointed date". From the said "appointed date" all the properties and assets (including waterworks, buildings, laboratories, etc., etc.) which immediately before the appointed date were vested in the State Government for the purposes of the local self-Government, Engineering Department shall vest in and stand transferred to the Nigam and all the rights, liabilities and obligations of the State Government whether arising out of any contract or otherwise pertaining to the said Departments shall be the lights, liabilities and obligations of the Nigam. In other words, the aforesaid section provides for vesting of assets and liabilities of the State Government in respect of the aforesaid Department shall be vested on or after appointed date in the Nigam. It also contains the provision of transfer of employees to Nigam and Jal Sansthans. The Nigam will stand in the shoes of State Government for the purposes of the local self-Government, Engineering Department.

Chapter-V, contains section 40 which deals with the property, contract, finance, accounts and audits, says that the Nigam shall have its own fund to be called the Nigam Fund, which shall be deemed to be a "local fund" wherein all moneys received otherwise than by way of loans by or on behalf of the Nigam be credited. The State Government may give loans to the Nigam vide section 45. The Nigam shall prepare a statement of its accounts and will submit it to the State Government. The accounts of the Nigam shall be audited by auditor appointed by the State Government, vide section 50.

Section 31 of the Act dealing with the vesting and transfer of property to Nigam also indicates that the Nigam has got its separate existence. It possesses rights and liabilities independently after the appointed date of the State Government. Such employees, who were employees in the local self-Government, Engineering Department of the State Government have been transferred to the Nigam on and from the appointed date.

Functions and powers of U.P. Jal Nigam have been enumerated in sections 14 and 15 of the Act, 1975. It has been formed to provide the services of water supply and sewerage, which were being earlier supplied by the U.P. Municipalities, to the public. Jal Nigam has been established for the development and regulation of water supply and sewerage services and for matters connected therewith. The service of water supply and sewerage is governmental function and was earlier entrusted to the municipal authorities namely, Municipal Corporation, Municipalities and the District Board. The U.P. Jal Nigam has been given power to prepare, execute, promote and finance scheme for supply of water and for sewerage and sewage disposal, to render all necessary services in regard to water supply and sewerage to the State Government and local bodies, etc., like the Municipal Committees, the District Board, Gram Panchayat, Jal Nigam represents the units of Local Self Government and thus, fulfils the first ingredient.

The powers and functions of U.P. Jal Nigam are akin to the various powers and functions amongst others of the municipalities or district boards. It has already been demonstrated that Jal Nigam was established to improve the water supply and sewerage services in the State, which was being performed earlier by the municipal bodies. Due to rapid growth in the population and vast expansion of urbanization and fast development of science, it appears that the State Government though it fit to entrust the work of water supply and sewerage services to a specialized body (U.P. Jal Nigam), instead of leaving it in the hands of unspecialized persons, discharging the municipal functions.

A bare perusal of the form 3D would show that it requires a certificate by the purchasing dealer certifying that the goods other than electrical energy are meant for its own requirement and are not meant for resale or for use in manufacturing or packing of any goods. Undoubtedly, the said declaration is there in the 3D form. The assessing authority has not pointed out any error or defect in the said form. It is not a case of the Department that the said form is either not genuine or is fabricated one.

A bare perusal of the impugned order would show that the assessing authority has somehow rejected the claim of the petitioner by making an observation that generally the U.P. Jal Nigam carries on the works for other Departments. The said observation is not based on any material on record. Further, there is no finding in the impugned order that two vertical pumps sold by the petitioner were resold by the U.P. Jal Nigam.

Sri Tripathi, learned special counsel for the respondents, could not place any material before us to show that the Department possessed any material to show that the pumps have been resold. The assessing authority has not doubted the verification given by the U.P. Jal Nigam in the said form 3D.

We, therefore, find that the observation that Jal Nigam works for other Department generally is wholly perverse and is against the material on record.

In view of the above, the impugned order dated March 26, 2009 received on July 25, 2009 is hereby quashed and the authority concerned is directed to grant the benefit of form 3D No. 0010711 as filed in original before the respondent No. 2 and pass consequential order granting concessional rate of tax to the petitioner. The petition is allowed. But no order as to costs.