Swadeshi Polytex Limited vs Commissioner of Trade Tax, U. P., Lucknow

Rajes Kumar, J.—These are two revisions u/s 11 of the U. P. Trade Tax Act, 1948 (hereinafter referred to as "the Act") are directed against the order of the Tribunal dated June 11, 2003 for the assessment years 1994-95 and 1995-96 both under the Central Sales Tax Act, 1956. Heard Sri K. Saksena, learned counsel for the applicant and Sri B. K. Pandey, learned standing counsel.

The applicant was carrying on the business of polyester staple fibre and staple fibre waste. According to the learned counsel for the applicant for both the assessment years, the applicant had deposited the tax on the turn over of inter-State sales of stable fibre waste at four per cent as the rate of tax was not settled and ultimately settled by this Court. This court in the case of assessee itself, Swadeshi Polytex Limited v. CTT reported in [1995] NTN 538, has held that staple fibre waste is also staple fibre and liable to tax at two per cent and along with surcharge at 2.5 per cent. He further submitted that the tax has been calculated on the turnover in accordance with formula given in section 8A of the Central Sales Tax Act (hereinafter referred to as the "the Central Act") taking tax at the rate of two per cent only. Accordingly, at the time of assessment proceedings, the tax at 2.5 per cent had been admitted. The assessing authority had levied the tax at two per cent. The applicant claimed refund of the excess amount deposited towards the tax, which has been denied u/s 29A of the Act. According to the applicant tax had been paid on the net turnover determined as per the formula u/s 8A of the Central Act. Being aggrieved by the order of the assessing authority, the applicant filed two appeals before the Deputy Commissioner (Appeals). Both the appeals have been dismissed. The applicant further filed two appeals before the Tribunal. The Tribunal by the impugned order, has dismissed both the appeals. The case of the applicant was that it had not realised any amount from its customers and, therefore, the provisions of section 29A of the Act does not apply. It is further contended that the tax has been paid on the turnover determined under the statutory formula contemplated u/s 8A of the Central Act and merely because the tax payable was deducted from the amount realised from the customers towards the sale consideration to arrive to the net turnover, it cannot be presumed that the tax had been realised. The Tribunal has held that the applicant had not paid the tax on the turnover determined as per the formula given u/s 8A of the Central Act and claimed deduction of the amount from the amount realised from the customers shows that the tax has been realised from the customers. Applying the provisions of section 29A of the Act refund has been denied.

The learned counsel for the applicant submitted that no tax had been realised from the customers in the bill, which is not in dispute. The first appellate authority has sought report from the assessing officer about the realisation of tax on the bills and the assessing authority on the examination of all the bills reported that no tax had been charged on the bills. The tax had been paid at 2.5 per cent was payable on the net turnover determined u/s 8A of the Central Act. Section 8A of the Central Act does not provide levy of the tax on the tax and, therefore, the deduction of the amount of tax is contemplated from the sale consideration. The determination of the net turnover is statutory and it does not lead to the conclusion that the applicant had realised tax from the customers. He submitted that in any view of the matter, it cannot be inferred that the excess tax over and above two per cent has been realised and the net turnover has also been determined taking the two per cent tax. He further submitted that the presumption that the tax has been realised from the customer is based on no material.

Sri B. K. Pandey, learned standing counsel, relied upon the order of the Tribunal.

Having heard learned counsel for the parties, I have perused the order of the Tribunal and the rival submissions.

Section 8A of the Central Sales Tax Act and section 29A of the Act reads as follows :

Section 8A of the Central Sales Tax Act:

8A. Determination of turnover.--(1) In determining the turnover of a dealer for the purposes of this Act, the following deductions shall be made from the aggregate of the sale prices, namely :

(a) the amount arrived at by applying the following

formula rate of tax x aggregate of sale prices

100 +rate of tax

Provided that no deduction on the basis of the above formula shall be made if the amount by way of tax collected by a registered dealer, in accordance with the provisions of this Act, has been otherwise deducted from the aggregate of sale prices.

Explanation.--Whether the turnover of a dealer is taxable at different rates, the aforesaid formula shall be applied separately in respect of each part of the turnover liable to a different rate of tax;

(b) the sale price of all goods returned to the dealer by the purchases of such goods,--

(i) within a period of three months from the date of delivery of the goods, in the case of goods returned before the 14th day of May, 1966;

(ii) within a period of six months from the date of delivery of the goods, in the case of goods returned on or after the 14th day of May, 1966 :

Provided that satisfactory evidence of such return of goods and of refund or adjustment in account of the sale price thereof is produced before the authority competent to assess or, as the case may be, reassess the tax payable by the dealer under this Act; and

(c) such other deductions, as the Central Government may, having regard to the prevalent market conditions, facility of trade and interests of consumers, prescribe.

Section 29A of the U. P. Trade Tax Act:

S. 29A. Procedure for disbursement of amount wrongly realised by dealer as tax.--(1) Where any amount is realised from any person by any dealer, purporting to do so by way of realisation of tax on the sale or purchase of any goods, in contravention of the provisions of sub-section (2) of section 8A, such dealer shall deposit the entire amount so realised in such manner and within such period as may be prescribed.

(2) Any amount deposited by any dealer under sub-section (1) shall, to the extent it is not due as tax, be held by the State Government in trust for the person from whom it was realised by the dealer, or for his legal representatives, and the deposit shall discharge such dealer of the liability in respect thereof to the extent of the deposit.

(3) Where any amount is deposited by any dealer under sub-section (1), such amount or any part thereof shall, on a claim being made in that behalf be refunded in the manner prescribed, to the person from whom such dealer had actually realised such amount or part, or to his legal representative and to no other person :

Provided that no such claim shall be entertained after the expiry of three years from the date of the order of assessment or one year from the date of the final order on appeal, revision or reference, if any, in respect thereof, whichever is later.

Explanation.--The expression ''final order on appeal, revision or reference'', includes an order passed by the Supreme Court under article 32, article 132, article 133, article 136or article 137 or by the High Court under article 226 or article 227 of the Constitution.

I find substance in the argument of teamed counsel for the applicant. Section 8A(1) of the Central Act provides determination of the turnover for the purpose of the Act. By permitting a deduction from the aggregate of the sale price as per formula given therein, it appears that intent of this formula is that in case of sale consideration includes the amount of tax, the same may be excluded while arriving to the net turnover for the levy of tax so that there should not be a tax on tax. According to the applicant the tax has been paid at 2.5 per cent on the net turnover arrived on the basis of the said formula. The proviso to section 8A(1) of the Central Act is not applicable in the present case as there is no evidence that any tax by way of any amount has been deposited by the registered dealer in accordance with the provisions of this Act. There is no evidence on record that the tax has been realised by the applicant in the bills from the customers. The report has been sought in this regard by the first appellate authority from the assessing authority. The assessing authority after examination of the bills has categorically reported that no amount has been charged to tax in the bills separately. According to the applicant only two per cent tax has been taken as a rate of tax for the determination of net turnover under the formula as provided u/s 8A(1) of the Central Act. Therefore, if presumption may be drawn that any tax has been realised, the same can be liable two per cent and not four per cent by any stretch of imagination. Though such presumption may be doubtful in the facts and circumstances of the case.

Section 29A of the Act provides that the amount realised in contravention of the provisions of sub-section (2) of section 8A of the Act shall not be refunded except as provided for under sub-section (3) of section 29A of the Act. Section 8A(2) of the Act provides that dealer may recover an amount equivalent to the amount of trade tax on sale of goods payable from the person to whom the goods are sold by him. Clause (ii) of sub-section (4) of section 8A of the Act further provides that where a registered dealer realises trade tax on sale of goods from the purchasers the cash memos or the bills shall separately show the price of goods sold and the amount realised as tax.

From the perusal of the aforesaid provisions of section 29A of the Act read with section 8A of the Act, it appears that the amount realised as trade tax and shown separately in the cash memos or bills in excess of tax payable, shall be retained by the State and not refunded to the person who had realized it.

In the present case the applicant has not realised any tax in the bills of cash memos.

Therefore, neither the provisions of section 8A(2) of the Act applies nor there is any contravention of the said provisions and, therefore, section 29A of the Act has no application.

For the foregoing discussion, in view of the fact that there is no evidence that any tax has been realized what to say, the tax in excess of the tax due, any amount deposited cannot be refunded of the amount in excess of the tax due cannot be denied u/s 29A of the Act, which is made applicable under the Central Sales Tax Act. On the facts and circumstances, the assessing authority is directed to refund the amount which is in excess of the tax due. In the result, both the revisions fail and are accordingly, dismissed.