Holdings Ltd. Vs Commissioner of Trade Tax, Lucknow, U.P.
present appeal arises out of the judgment dated 10.12.2007 passed by the learned
Single Judge of the High Court of Allahabad (Lucknow Bench) whereby the learned
Single Judge has dismissed the tax revision filed by the Appellant under
section 11 of the U. P. Trade Tax Act (hereinafter referred to as "the Act")
impugning the judgment dated 14.8.2007 passed by the Trade Tax Tribunal, Lucknow
rejecting the second appeal of the appellant/assessee.
issues were raised before the Tribunal as well as the High Court with respect to
the liability of the appellant/assessee to pay tax which, in nutshell, are as follows:
- (i) That there is no transfer of rights of users by the assessee when he
realized rental charges for glass bottles and crates. (ii) The forums did not consider
the terms of the agreement/contract between the assessee and his selling
agents/consumers. (iii) The interest charge on the tax could not have been
charged under Section 8(1) as the case falls under Section 8(1B).
in the present appeal the issues Nos. (i) and (ii) were dropped by the appellant
as, in the intervening period, the above said two issues were finally settled by
the judgment of this court in the case of State of Orissa and another v.
Asiatic Gases Ltd. (2007) 5 SCC 766. In the said case this court held that the
previous decision of this Court in Aggarwal Bros. v. State of Haryana (1999) 9
SCC 182, is fully applicable to rentals charged in respect of the containers
for goods that cannot be sold without containers. This court held that the containers
constitute an integral part of the commodities in question and the container
together with the contents therein is a "composite personality" and
constitutes "goods" eligible to sales tax.
the only issue which requires consideration in the present appeal is whether
the appellant is liable to pay interest on the tax due under Section 8 (1) of
the Act i.e. @ 2 % per mensem from the date the tax was due or under Section 8
(1B) i.e. @ 1.5 % per mensum from the date of the assessment order and demand
High Court and the other forums below, for the reasons mentioned therein, have held
that the appellant is liable to pay interest on the delayed payment of tax under
section 8 (1) of the Act (i.e. @ 2 % per mensem from the date of filing of returns).
Whereas, it is the appellants case that the interest is payable as per section 8
(1B) of the Act (i.e. @ 1.5 % per mensum from the expiration of the date
mentioned in the assessment order which in the present case is March 15, 2002).
a short question is involved we need not mention the facts of the case in great
detail. In brief the facts leading to the filing of the present appeal are that
the appellant is engaged in the manufacturing and selling of the beverages and is
having bottling plants in the state of Uttar Pradesh. The dispute pertains to the
trade tax payable on its turnover of Rupees 8.54 crores in respect of rentals by
distributors of glass bottles and crates for assessment year 1999-2000. The appellant
disputed the liability to pay tax on such turnover as well as the interest, as according
to them no tax is payable on the rental of glass bottles and crates as the same
did not amount to a transfer of right to use the goods for value or consideration
under section 3-F of the Act. However, the said submission was negated by the
first and second appellate authority as well as, on revision, by the High Court.
As mentioned hereinabove, the challenge to the liability to pay tax was dropped
by the appellant in the light of the judgment passed by this Hon'ble court in Asiatic
Gases Ltd. case (supra).
heard the learned counsel appearing for both the parties and perused the record.
It was submitted by the learned senior counsel appearing for the Appellant that
as it was the bonafide belief of the appellant/assessee that they were not liable
to pay tax on the turnover realized as rental from the bottles and crates, therefore,
the tax should be charged only from the date of the assessment order and not from
the date of filing of the returns. It was further submitted that section 8 (1)
of the Act only becomes applicable when the assessee had admitted its tax
liability in its accounts or its return and as the appellant/assessee had disputed
the liability to pay tax and raised a bonafide dispute they would not be liable
to pay interest under Section 8 (1) of the Act. Resultantly, interest, if any, can
only be charged under Section B (1B) which covers the cases which does not fall
within the ambit of Section 8 (1) of the Act.
the abovesaid contentions were negated by the counsel appearing for the respondent
and it was submitted that after disclosing the turnover in its accounts a dealer
cannot run away from his liability to pay tax by raising false and frivolous
dispute. In case, if he does so then he will be liable to pay penal rate of interest
under section 8 (1) of the Act.
8 (1) of the act, prior to its amendment in 2002, is reproduced below: "8.
Payment and recovery of tax: (1) The tax admittedly payable shall be deposited within
the time prescribed or by the thirty-first day of August, 1975, whichever is later
failing which simple interest at the rate of 2 per cent per mensem shall become
due and be payable on the unpaid amount with effect from the day immediately following
the last date prescribed or till the date of payment of such amount, whichever is
later and nothing contained in section 7 shall prevent or have the effect of postponing
the liability to pay such interest. Explanation: - For the purposes of this sub-section,
the tax admittedly payable means the tax which is payable under this Act on the
turnover of sales or, as the case may be, the turnover or purchases, or of both,
as disclosed in the accounts maintained by the dealer, or admitted by him in
any return or proceeding under this Act, whichever is granted, or, if no accounts
were maintained then according to the estimate of the dealer and includes the amount
payable under Section 3B or sub-section (6) of section 4B."
explanation to the said subsection clearly defines the term "the tax admittedly
payable" and illustrates the situation in which the tax would be deemed to
be admittedly payable, the same are as follows: - (i) The tax which is payable under
this Act on the turnover of sales, as the case may be, the 7 turnover of
purchase, or both, as disclosed in the accounts maintained by the dealer. (ii) The
tax admitted by the dealers in any return or proceeding under this act,
whichever is greater. (iii) If no accounts were maintained, then according to the
estimate of the dealer and includes the amount payable under section 3-B or
subsection (6) of section 4-B.
is not in dispute in the present case that the appellant has themselves
mentioned in their accounts the turnover in respect of rentals by distributors of
glass bottles and crates. However, the appellant has disputed that the said turnover
is liable to tax under the Act.
question that emerged for adjudication before forum and Court below was that whether
the tax is payable under the Act on the turnover from rentals of glass bottles
and crates. The Court has answered the question in affirmative and confirmed
that on such turnovers the tax will be payable under the Act.
appellant had taken the chance to get a judicial verdict on the said issue.
Once it has been confirmed that the tax is payable under the Act, the same becomes
payable from the date when it was due and not from the date when the judicial verdict
was pronounced (unless and until, in a case, the court specifies a particular
date from which it shall be payable). Thus, once it has been confirmed by the
Court that the tax is payable under the Act it would be covered within the
definition of the term "the tax admittedly payable" as defined in the
explanation to section 8 (1) and, in case, the tax had not been paid then the same
becomes payable along with interest as mentioned in section 8 (1) of the Act.
of subsection (1B) of section 8 of the act will come into operation only if the
case is not covered under subsection (1) of section 8 of the Act. The opening
words of the said subsection (1B) states "if the tax, other than the tax referred
to in subsection 1, assessed by the assessing authority is not paid". The said
subsection is reproduced herein below for reference: - "Section 8(1B) - If
the tax, other than the tax referred to in sub-section (1), assessed by any
Assessing Authority is not paid within the period specified in the notice of assessment
and demand referred to in sub-section (1- A), simple interest at the rate of one
and half per cent per mensem on the unpaid amount calculated from the date of
expiration of the period specified in such notice shall become due and be
in the present case the tax becomes admittedly payable once it has been held that
the tax is payable under the Act, the interest would be payable in terms of subsection
(1) of section 8 of the Act and not in terms of subsection (1B) of Section 8 of
court in the case of Commissioner of Sales Tax v. Qureshi Crucible Centre, 1993
Supp (3) SCC 495 has held that where a dealer fails to pay tax at the correct rate
because he claimed not to know the revision in the rate, the dealer remains
liable to pay interest at a higher rate, penal rate under section 8 (1) from the
date when the tax became due and payable. In such a case, the dealer cannot
claim that he is liable only from the date of the assessment order fixing the correct
rate of tax. Similarly, in case where the dealer has taken a chance and it has been
held that the tax is payable under Act, the same becomes payable from the date when
it was due.
the present appeal dismissed but without any orders as to costs.
[Dr. Mukundakam Sharma]
[Anil R. Dave]