# Deepak Kumar v. State of U.P

- **Citation:** (2003) 1 ILRA 153
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2003-02-07
- **Case number:** Civil Misc. Writ Petition No. 387 of 2000
- **Bench:** M. Katju, Prakash Krishna
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/deepak-kumar-v-state-of-u-p-39465
- **Pages:** 5

## Headnote

U.P. Trade Tax Act- Section -8 c (3 A)
Power to issue direction- for taking
security in cash from the dealer before
issuing form 31- demand of cash security
more than the amount of tax liability-
held- arbitrary and illegal- direction
issued to the Commissioner to issue
fresh circular as per observation of the
Court.
Held - Para 22

The Commissioner while issuing the
circular under section 8 C (3A) can adopt
any reasonable and rational method so
that the cash security is demanded of an
amount which is reasonable having
nexus to the amount of tax which would
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154 INDIAN LAW REPORTS ALLAHABAD SERIES [2003
be payable. In this way the interest of
the State and that of the dealers would
be balanced.
Case law discussed:
1993 U.P.T.C. 833, 1993 UPTC 1371,1988
UPTC 218

## Text

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1All] Deepak Kumar V. State of U.P. 153
him into association with any known
criminal or expose him to moral, physical
or psychological danger or that his release
would defeat the ends of justice.
(2).......
(3).......

4. According to Sub Section (1) of
Section 12 any person, being juvenile
shall be released on bail with or without
surety. However, for refusal of the bail
there are only three grounds- firstly if the
release is likely to bring him into the
association with any known criminal.
Secondly, exposes him to moral, physical
or psychological danger and thirdly if his
release would defeat the ends of justice.

5. This Court has been repeatedly
directing that if the release is refused on
these grounds the court should record
finding as to whether any such ground
exists or not. It is not that the mere
quoting of few lines from this Act, the
bail should be refused. The impugned
order does not show any such ground
except that it is against law. Being against
law is no ground under Section 12 of the
Act whereas this Court by its order dated
15.11.2002 directed the Sessions Judge to
decide the bail application keeping in
view the provision of Section 12 of the
Act. The impugned order has been passed
in utter disregard of Section 12 of the Act
but it nowhere shows that the release
would defeat the ends of justice and
moreover there is also nothing to show as
to how the release would defeat the ends
of justice. No doubt the girl is minor but
at the same time the boy is also minor and
is detained in Children Home for the last
7-8 months. It appears that the Sessions
Court was bent upon refusing the bail
application and that is why ignored the
direction of this Court, which is not
proper for the Additional Sessions Judge
concerned.

6. The revision is therefore, allowed.
The revisionist shall be released on bail
on his furnishing two sureties and
personal bond to the satisfaction of the
Magistrate concerned.
--------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD FEBRUARY 7, 2003

BEFORE
THE HON'BLE M. KATJU, J.
THE HON'BLE PRAKASH KRISHNA, J.

Civil Misc. Writ Petition No. 387 of 2000

M/s
Girraj
Stone
Crusher
Private
Limited, Agra

...Petitioner
Versus
The Commissioner of Trade Tax and
another

 ...Respondents

Counsel for the Petitioner:
Sri Bharatji Agarwal
Sri Rakesh Ranjan Agarwal

Counsel for the Respondents:
S.C.

U.P. Trade Tax Act- Section -8 c (3 A)
Power to issue direction- for taking
security in cash from the dealer before
issuing form 31- demand of cash security
more than the amount of tax liability-
held- arbitrary and illegal- direction
issued to the Commissioner to issue
fresh circular as per observation of the
Court.
Held - Para 22

The Commissioner while issuing the
circular under section 8 C (3A) can adopt
any reasonable and rational method so
that the cash security is demanded of an
amount which is reasonable having
nexus to the amount of tax which would
http://www.allahabadhighcourt.nic.in
154 INDIAN LAW REPORTS ALLAHABAD SERIES [2003
be payable. In this way the interest of
the State and that of the dealers would
be balanced.
Case law discussed:
1993 U.P.T.C. 833, 1993 UPTC 1371,1988
UPTC 218

(Delivered by Hon'ble M. Katju, J.)

1.

This
writ
petition
and
connected/similar writ petitions are being
disposed of by a common judgment.

2. Heard Sri Bharatji Agarwal
learned Senior Advocate and Sri Rakesh
Ranjan
Agarwal,
Advocate
for
the
petitioner and learned standing counsel.

3. The petitioner has challenged the
impugned circular dated 26.6.99 issued by
the Commissioner, Trade Tax, U.P.
Annexure -4 to the writ petition by which
the cash security for issuing Form 31
under U.P. Trade Tax Rules for import of
stone ballast has been increased from
Rs.180/- to Rs.530/- per form.

4. The petitioner supplies stone
ballast to the Railways in accordance with
the Railways specifications. Copy of the
relevant extract of the contract dated
25.10.99 is Annexure-1 to the writ
petition. Under the U.P. Trade Tax Act
stone ballast is liable to pay trade tax at
7.5% under Notification dated 23.11.98.
The Railway is a Central Government
Department and is hence authorized under
the U.P. Trade Tax Act under section 3 G
to issue From III D to its supplier on the
purchase of material, and on the issue of
Form D the rate of tax is 5%.

5. The petitioner is purchasing stone
ballast from the State of Haryana &
Rajasthan. It is purchasing 300 cubic
meter
stone
ballast
for
Rs.1500/-
approximately including Central sales.
For the import of stone ballast into U.P.
the petitioner requires From 31 as
envisaged by Section 28 A of the U.P.
Trade Tax Act.

6. Section 8 C (3A) entitles the
Commissioner
Trade
Tax
to
issue
directions for issue of Form 31 to the
dealers after taking cash security. Section
8 C (3A) states -

"Notwithstanding anything contained
in Sub section (2) of sub section (3), the
Commissioner may, in respect of any
goods notified by the Government in this
behalf, by a joint order in writing, direct
that a cash security of such amount as
may be specified in such order shall be
required to be furnished by a dealer or
person requiring any of the forms
prescribed under this Act."

7. Under the aforesaid provision the
Commissioner Trade Tax had issued a
circular dated 27.3.91 for issue of Form
31 to the dealers of stone ballast after
taking Rs.180/- as advance security per
Form applicable to 300 cubic ft. True
copy of the circular is Annexure 2 to the
writ petition.

8. The petitioner is aggrieved by the
subsequent circular dated 26.6.99 by
which the cash security for stone ballast
has been increased from Rs.180/- to
Rs.530/- per form vide Annexure 4 to the
writ petition for import of 300 cubic ft.
stone ballast from outside the State. It is
alleged that the fixation of cash security at
Rs.530/- per form is wholly arbitrary and
has no reasonable nexus with the actual
tax liability under the U.P. Trade Tax Act.
http://www.allahabadhighcourt.nic.in
1All] M/s Girraj Stone Crusher Pvt.Ltd., Agra V. The Commissioner of Trade Tax, & anr. 155
9. In paragraph 14 of the petition it
is alleged that the rate of ballast is
Rs.215/- per cubic metre. At this rate, the
value of 300 cubic feet comes to
Rs.1826.42 paisa taking it to a round
figure at Rs.1850/-. The tax @ 7.5%
comes to Rs.138.75 . It is stated that one
cubic metre is equal to 35.31 cubic feet.
The petitioner is getting Form 3 D from
the Railway and the rate of tax is 5%. On
that basis the tax on Rs.1850/- comes to
Rs.95.50. If no Form 3-D is received the
rate of tax would be 7.5% and the tax
would be Rs.138.75.

10. It is alleged in paragraph 17 of
the writ petition that the tax liability
would not exceed Rs.180/-. Hence the
fixation of cash security at Rs.530/- per
form is wholly arbitrary.

11. Learned counsel for the
petitioner has submitted that cash security
is demanded to secure the interest of the
revenue for convenient realization of tax,
and hence the amount fixed as the cash
security should have a reasonable nexus
with the amount of tax payable. He has
submitted that the fixation of Rs.530/- as
cash security per form for the import of
300 cubic feet of stone ballast is wholly
arbitrary and unreasonable and without
any nexus to the tax liability. He has
further stated that freight should not have
been taken into consideration for fixation
of the cash security. He has submitted that
fixation of the cash security at such a high
figure is wholly arbitrary since it blocks a
huge amount of money of the dealers
unnecessarily, and deprives them of their
capital.

12. A counter affidavit has been
filed and we have perused the same. In
paragraph 4 of the same reference has
been made to several decisions of this
Court in which judicial notice has been
taken of the fact that there is a large scale
of evasion of Trade Tax (earlier known as
Sales Tax) and extensive malpractice
regarding import of certain commodities.
The validity of the Circulars of the
Commissioner Trade Tax has been upheld
vide Annexure CA-1 to Annexure CA-12.

13. We have carefully perused the
aforesaid decisions which have been
annexed to the counter affidavit. In
paragraph 11 of the counter affidavit it
has been stated that while determining the
tax payable after such import the sale
value of better quality stone ballast has
been
taken
into
consideration.
In
paragraph 25 of the counter affidavit it is
stated that value of cash security under
section 8 C (3A) is determined on the
basis of best quality of goods and also the
average freight incurred thereon plus
reasonable margin of profits. If in a given
case the security is found excessive the
same may be refunded or adjusted on
making the final assessment.

14. The validity of section 8C(3A)
has been upheld by this Court in M/s
Saurabh & Brothers, Sidharthnagar vs.
State of U.P. and others 1993, UPTC
833 and it has not been challenged before
us.
What
learned
counsel
for
the
petitioner has contended before us is that
the cash security should be determined on
the average quality of the goods and not
the best quality of goods.

15. In our opinion 'average quality
of goods' is a vague expression and will
only lead to all kinds of confusion and
unnecessary litigation. Hence we are not
inclined to direct that the cash security
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156 INDIAN LAW REPORTS ALLAHABAD SERIES [2003
should be fixed on the basis of average
quality of stone ballast.

16. However, we are certainly of the
opinion that the fixation of the cash
security on the basis of the price of the
highest quality of goods is arbitrary and
hence violative of Article 14 of the
Constitution. In Maneka Gandhi v. Union
of India AIR 1978 SC 597 the Supreme
Court held that arbitrariness violates
Article 14 of the Constitution. After that
landmark decision of the seven Judges
bench of the Supreme Court it is settled
that the test of reasonability pervades the
entire Constitution, and no authority can
act
arbitrarily.
Hence
although
the
Commissioner has power under section 8
C (3A) to direct that cash security should
be given for issuing Form 31, yet the
Commissioner
cannot
fix
the
cash
security at an arbitrary amount. Learned
counsel for the petitioner is correct when
he says that the cash security must have
reasonable nexus to the tax which may be
payable on the sale of the stone ballast. In
M/s J.P. Stone Co. V. State of U.P., 1993
UPTC 1371 a division bench of this Court
observed " The power conferred on the
Commissioner under Section 8C (3A)
must be exercised in a reasonable manner,
and the security amount which is fixed in
exercise of that power must have a nexus
with the object for which security is
demanded." The Court also observed"
The amount of security which may be
required to be paid by a dealer should be
reasonable and commensurate with the
tax that may be realized from him, and
should not be excessive."
17. It may be mentioned that Section
8C (3) mentions ' the amount of such
security or additional security shall also in
no case exceed the tax payable in
accordance with the estimate of the
assessing authority."

18. In our opinion, Section 8C (3)
and Section 8c (3A) should be read
together , and not in isolation. Hence it
follows that though it is not expressly
mentioned in the latter provision, as it is
in the former, that the cash security which
the Commissioner can fix should not
exceed the tax payable, it should have a
reasonable nexus with the same, as held in
the case of M/s J.P. Stone Co. (supra). In
the present case we find no such nexus.

19. No doubt if a higher amount of
cash security is demanded, which is
higher than the trade tax, the same is
liable to be refunded after the final
assessment, but we cannot be impervious
to the fact that once the Trade Tax
Department gets some money from the
dealers which it is not entitled to it takes a
long time to get a refund, and this blocks
the capital of a businessman. In business
it is essential that money should not be
blocked for a long time and it must be
kept in circulation.

20. To take a hypothetical case,
suppose the trade tax payable on a low
quality product is Rs.100/- per unit while
that payable on the similar product of
very high quality is Rs.500/- per unit (the
difference will be due to difference in
price) then surely it is unreasonable and
arbitrary to ask a dealer who is selling low
quality product to pay Rs.500/- for form
31 when the tax payable by him would
only be Rs.100/-.

21. In our opinion the appropriate
course of action therefore, would be for
the Commissioner to issue circular under
section 8C (3A) of the U.P. Trade Tax
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1All] Jitendra Singh V. District Judge, Etah and another 157
Act on rational and reasonable principles.
For example, the Commissioner can in his
circular grade the various varieties of
stone ballast which are known in the
market in various grades e.g. Grade-I for
the best quality, Grade-II for the next
best, Grade III for the next, etc. according
to the price of these various grades in the
market, and the cash security for Form 31
should be demanded accordingly. It is
inappropriate and arbitrary to demand
cash security only on the basis of the
highest grade or quality of stone ballast,
as has been done in the present case.

22. We make it clear that we are not
directing the Commissioner to issue his
circular in a particular manner. This Court
is not an expert in such matters and hence
such matters should be left to the
Commissioner to decide after consulting
experts. The Commissioner while issuing
the circular under section 8C (3A) can
adopt any reasonable and rational method
so that the cash security is demanded of
an amount which is reasonable having
nexus to the amount of tax which would
be payable. In this way the interest of the
State and that of the dealers would be
balanced.

23. In paragraph 13 of the counter
affidavit the price of the best quality stone
ballast is mentioned as Rs.660/- per cubic
metre, but no material has been stated in
the counter affidavit as to on what basis
this figure has been reached. The Railway
purchases the stone ballast at Rs.247/- per
cubic metre. It may also be mentioned
that the prices of commodities keep on
changing from time to time and hence this
factor
should
also
be
taken
into
consideration by the Commissioner when
issuing the circular (or circulars) as
suggested by us.
24. Moreover, in M/s Vinod Coal
Syndicate v. CST 1988 UPTC 218 it was
held by the Supreme Court that freight
charged separately is not part of the
turnover. The definition of turnover in
section 2 (i) Explanation II Clause (i)
excludes the cost of freight if separately
charged. Annexure-1 to the writ petition
clearly shows that freight has been
separately charged. Hence we direct the
Commissioner that when he issues the
circular under section 8C(3A) he should
fix the cash security on a basis which
excludes the freight wherever separately
charged.

25. In the circumstances the writ
petition
is
allowed.
The
impugned
Circular dated 26.6.99 is quashed. The
Commissioner Trade Tax UP is directed
to re-fix the rate of cash security for
issuance of Form 31 on stone ballast in
the light of the observations made above.
---------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 31.1.2002

BEFORE
THE HON'BLE A.K. YOG, J.
THE HON'BLE GHANSHYAM DAS, J.

Special Appeal No. 58 of 2003

Jitendra Singh

...Petitioner
Versus
District Judge, Etah and another

 ...Respondents

Counsel for the Appellant:
Sri V.K. Singh
Sri M.N. Singh

Counsel for the Respondents:
S.C.