Lawat Jewellers vs Commissioner, Commercial Tax, U.P., Lucknow

Rajes Kumar, J.—This revision is against the order of the Tribunal dated August 6, 2010. The applicant was carrying on the business of purchases and sales of gold bullion. It appears that there was a compounding scheme for the gold bullion dealer u/s 7D of the U.P. Trade Tax Act, 1948 (called, "the Act", for short) for the assessment year 2006-07. For the assessment year 2007-08 the compounding scheme has been introduced vide Government Order (called "the G.O.", for brevity) dated December 5, 2007 for the period from April 1, 2007 to December 31, 2007. With effect from January 1, 2008 U.P. Value Added Tax Act has been introduced. In anticipation of the compounding scheme, the applicant deposited a sum of Rs. 1 crore by October 31, 2007 in three installments, prior to the issue of Government Order dated December 5, 2007. When the G.O. has been issued, the applicant applied for compounding scheme on a slab below Rs. 200 crores, on which the compounding money payable was Rs. 70 lacs. The total purchases for the aforesaid period was Rs. 1,77,26,59,276 and sales at Rs. 1,78,35,77,498. The total turnover was below Rs. 200 crores. The compounding application has been accepted by the assessing authority vide order dated March 17, 2009. However, the assessing authority has treated the entire amount of Rs. 1 crore deposited prior to December 5, 2007 as compounding amount and has refused to refund the sum of Rs. 30 lacs, which, according to the applicant, was in excess of the compounding money fixed at Rs. 70 lacs under the scheme.

Being aggrieved by the order of the assessing authority refusing to refund the excess amount of Rs. 30 lacs the applicant filed an appeal before the Additional Commissioner, Grade II (Appeals), Commercial Tax, Ghaziabad. The appeal has been allowed vide order dated August 11, 2009 and the assessing authority was directed to refund the amount.

Being aggrieved by the order of the Additional Commissioner (Appeals), the Commissioner, Trade Tax, filed an appeal before the Tribunal. The Tribunal by the impugned order allowed the appeal of the Commissioner, Trade Tax, and set aside the order dated August 11, 2009, passed by the Additional Commissioner, Grade II (Appeals), Commercial Tax, Ghaziabad. The Tribunal has held that there is no provision under the compounding scheme for the refund of the compound amount. It has been observed that the sum of Rs. 1 crore has been deposited as a compounding money under the compounding scheme and, therefore, the amount was not refundable.

The learned counsel for the applicant submitted that u/s 7D compounding tax is payable in lieu of the tax payable. Section 2(n) defines "tax" which includes the composition money u/s 7D also. Under the scheme issued by the G.O. dated December 5, 2007 for the slab turnover up to Rs. 200 crores, compounding money payable was Rs. 70 lacs. The applicant applied under the compounding scheme under the said slab, which has been accepted by the assessing authority. A sum of Rs. 1 crore has been deposited prior to the issue of G.O. dated December 5, 2007 in anticipation of the compounding scheme and also in anticipation that the turnover may exceed to Rs. 200 crores. He submitted that once the compounding application for the turnover slab of Rs. 200 crores has been accepted by the assessing authority, on which a sum of Rs. 70 lacs was only payable as compounding money, it was not open to the assessing authority to retain any amount over and above the compounding money which is not due under the scheme. Any excess amount deposited is liable to be refunded u/s 29 of the Act.

The learned standing counsel has relied upon the order of the Tribunal and the assessing authority.

I have considered the rival submissions and perused the impugned order. Section 7D provides a lump sum payment in the form of compounding money in lieu of tax payable. Section 2(n) defines "tax" which includes composition money. The applicant applied under the compounding scheme issued by the G.O. dated December 5, 2007 under the turnover slab of Rs. 200 crores. It was open to the assessing authority to accept the said application under the aforesaid slab or to reject it. In the present case the application has been accepted under the turnover slab of Rs. 200 crores. Under the compounding scheme for the turnover slab up to Rs. 200 crores the compounding money payable was Rs. 70 lacs only. Therefore, the assessing authority is not entitled to treat and accept any other amount over and above Rs. 70 lacs as compounding money under the scheme. The assessing authority as well as the Tribunal have erred in treating the entire deposit of Rs. 1 crore as compounding money after accepting the compounding application for the slab below Rs. 200 crores. The assessing authority is only entitled to retain the compounding money which is legally due. Any amount deposited in excess of the compounding money which is not due under the scheme is the excess amount of tax and is liable to be refunded u/s 29 of the Act. The assessing authority and the Tribunal have erred in refusing to refund the excess amount. In the result the revision is allowed. The order of the Tribunal dated August 6, 2010 is set aside and the order of the Additional Commissioner, Grade II (Appeals), Trade Tax, Ghaziabad, is restored and the assessing authority is directed to refund the sum of Rs. 30 lacs which is in excess of the compounding money due under the scheme along with interest as provided u/s 29(2) of the Act.