# M/s Fabrico India (P) Ltd. Revisionist v. Commissioner of Commercial Tax, U.P., Lucknow

- **Citation:** (2019) 2 ILRA 1064
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-09-13
- **Case number:** Commercial Tax Revision No. 162 of 2009
- **Bench:** Saumitra Dayal Singh
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-fabrico-india-p-ltd-revisionist-v-commissioner-of-commercial-tax-u-p-lucknow-44558
- **Pages:** 5

## Headnote

A. U.P. Trade Tax Act, 1948-Section 4BB, 8-A(2)(b), 29- A(2)-Timing of the
claim
raised
is
inconsequential
-
Assessee must fulfill the conditions to
claim set off - The assessing authority
rejected the claim of the revisionistassessee,
made
in
the
course
of
assessment proceedings, for set off of
the tax paid on purchase of raw material.
The first appeal of the revisionist was
allowed.-Tribunal reversed the order -
Dismissing both the revisions, the High
Court held- It was permissible for the
assessee to raise the claim at the stage
of the assessment proceedings, however,
for such claim to arise and be allowed,
assessee must be shown to have fulfilled
the conditions for the set off being
claimed. (Para 9 & 14)

B. Notwithstanding full compliance made
by the assessee, in payment of tax on
purchase of raw material and charge of
tax on sale of tubular pipes, it lost the
right to claim the set off u/s 4-BB, upon
opting to charge full tax on the sale of
tubular pipes, instead of deducting the
tax paid on purchase of raw material
from the tax payable on the sale of
tubular pipes. (Para 11, 12, 13 & 14)
Revisions filed against order dated 07.01.2009,
passed by the Trade Tax Tribunal, Meerut.

Tax Revision dismissed (E-4)

Precedent distinguished: -

## Text

1064 INDIAN LAW REPORTS ALLAHABAD SERIES
(2019)10ILR A 1064

REVISIONAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 13.09.2019

BEFORE

THE HON'BLE SAUMITRA DAYAL SINGH, J.

Commercial Tax Revision No. 162 of 2009
&
Sales/Trade Tax Revision No. 163 of 2009

M/s Fabrico India (P) Ltd. ...Revisionist
Versus
Commissioner of Commercial Tax,
U.P., Lucknow ...Opposite Party

Counsel for the Revisionist:
Sri Rakesh Ranjan Agrawal, Sri Suyash
Agarwal, Ms. Pooja Srivastava

Counsel for the Opposite Party:
C.S.C.

A. U.P. Trade Tax Act, 1948-Section 4BB, 8-A(2)(b), 29- A(2)-Timing of the
claim
raised
is
inconsequential
-
Assessee must fulfill the conditions to
claim set off - The assessing authority
rejected the claim of the revisionistassessee,
made
in
the
course
of
assessment proceedings, for set off of
the tax paid on purchase of raw material.
The first appeal of the revisionist was
allowed.-Tribunal reversed the order -
Dismissing both the revisions, the High
Court held- It was permissible for the
assessee to raise the claim at the stage
of the assessment proceedings, however,
for such claim to arise and be allowed,
assessee must be shown to have fulfilled
the conditions for the set off being
claimed. (Para 9 & 14)

B. Notwithstanding full compliance made
by the assessee, in payment of tax on
purchase of raw material and charge of
tax on sale of tubular pipes, it lost the
right to claim the set off u/s 4-BB, upon
opting to charge full tax on the sale of
tubular pipes, instead of deducting the
tax paid on purchase of raw material
from the tax payable on the sale of
tubular pipes. (Para 11, 12, 13 & 14)
Revisions filed against order dated 07.01.2009,
passed by the Trade Tax Tribunal, Meerut.

Tax Revision dismissed (E-4)

Precedent distinguished: -

1. M/s Sohan Lal Babu Ram Vs Commissioner
of Sales Tax, U.P., Lucknow & ors., (1981)
STD 121 (Para 7)
2. M/s Indian Oil Corpn., Agra Vs St. of U.P. &
anr., (1981) UPTC 1248 (Para 7)
3. Commissioner of Sales Tax, U.P., Lucknow
Vs M/s G.R. Tibrewal & Co., Kanpur, 1982
UPTC 241 (Para 7)
(Delivered by Hon'ble Saumitra Dayal
Singh, J.)

1. These revisions have been filed
by the applicant-assessee against the
common order passed by the Trade Tax
Tribunal, Meerut, dated 7.1.2009, passed
in second appeal nos. 273/2003 for A.Y.
1999-2000 (U.P.) and 274/2003 for A.Y.
1999-2000 (Central). By that order, the
Tribunal has allowed the appeals filed by
the revenue and held the assesssee not
entitled to benefit of set off under Section
4-BB of the U.P. Trade Tax Act, 1948
(hereinafter referred to as 'the Act').

2. During assessment years in
question, the assessee had manufactured
tubular
poles
claiming
benefit
of
notification no. 2339 dated 22.10.1996,
read with notification no. 1223 dated
22.5.1998. In the course of the assessment
proceedings, the assessee claimed set off
of tax paid on purchase of raw materials
2 All. M/s Fabrico India (P) Ltd. Vs Commissioner of Commercial Tax, U.P., Lucknow 1065
used in the manufacture of tubular poles.
The assessing officer rejected the claim
on the reasoning that the assessee had not
raised any such claim in its return and,
therefore, it was not permissible to grant
the same at the stage of assessment. The
first appeal filed by the assessee was
allowed by the Joint Commissioner
(Appeal), by his order dated 19.2.2003, on
the reasoning that under the aforesaid
notifications, there was no restraint place
in law that such set off may be claimed at
the stage of filing of return and not later.
Insofar as the assessee had not violated
the law in charging the tax on the sale of
tubular poles, it was held entitled to the
set off, as claimed. Upon revenue's
appeal, the Tribunal has allowed the same
on the reasoning that the scheme of set off
cannot be permitted to be used as a handle
to retain an amount by the selling dealer,
for his personal gain. Insofar as the
assessee had made excess realization of
2%, the State was held entitled to retain
the same as trustee.

3. Heard Sri Rakesh Ranjan
Agrawal, Senior Advocate, assisted by
Ms. Pooja Srivastava, learned counsel for
the
applicant-assesee
and
Sri
B.K.
Pandey, learned Standing Counsel for the
revenue.

4. The revisions have been pressed
on the following questions of law:

"(i) Whether the facts and
circumstances of the case, the Tribunal
was correct to hold that the assessing
authority was justified in forfeiting the
amount of the tax under Section 29-A(2)
of the Act despite the applicant was
entitled to adjustment of tax paid on the
purchase of raw material u/s 4-BB of the
Act.

(ii) Whether the Tribunal having
not reversed the finding of the appellate
authority that the provisions of Section 8A(2)(b) of the Act having not violated, the
amount refund can not be forfeited under
Section 29-A(2) of the Act.

(iii)
Whether
the
Tribunal
having not considered that with raw
material purchased after paying the
purchase tax was consumed in the
manufacture of tubular poles that is
notified goods being Iron & Steel as per
notification No. 1223 dated 22.05.1998,
the assessing was right in denying the set
off under Section 4-BB of the Act since it
was not claimed in the return but was
claimed at the time of the assessment."

5. Learned Senior Counsel would
submit, the reasoning of the assessing
authority
was
completely
erroneous,
inasmuch as, there is no stipulation either
under the Act, or under the relevant
notifications, whereby the claim for set
off must necessarily be made at the stage
of filing the return. On the other hand, the
first appellate authority had correctly
allowed the same as the assessee had not
flouted, either the provisions of the Act,
or the scheme in either paying 2% tax on
purchase of raw materials, or in charging
4% tax on the sale of tubular poles.
According to him, since the law stipulated
that the amount of tax paid on raw
material be set off against the tax paid on
sale of tubular poles, the set off ought to
have been granted in the course of
assessment proceedings.

6. Further, it has been submitted, the
Tribunal has completely misdirected itself
i reaching the conclusion that, in the garb
of claiming set off, the assessee could not
be allowed to retain any tax charged for
its personal gain. In fact, the Tribunal has
1066 INDIAN LAW REPORTS ALLAHABAD SERIES
not given any reason to reverse the
finding recorded by the first appellate
authority.

7. Reliance has been placed on the
division bench decisions of this Court in
M/s
Sohan
Lal
Babu
Ram
Vs.
Commissioner of Sales Tax, U.P.,
Lucknow & Ors., (1981 STD 121); M/s
Indian Oil Corporation, Agra Vs. State
of Uttar Pradesh & Anr., (1981 UPTC
1248) and; decision of a learned single
judge of this Court in Commissioner of
Sales Tax, U.P., Lucknow Vs. M/s G.R.
Tibrewal and Co., Kanpur, (1982
UPTC
241),
to
submit
that
mere
admission of tax liability may not
disentitle the assessee from raising a
claim of set off.

8. Opposing the revision, learned
Standing Counsel would submit, at the
relevant time, the assessee did not claim
set off and instead he paid full tax on the
purchase of raw materials and charged
full tax on sale of tubular poles. Having
done that, the assessee clearly opted out
of the set off scheme, which in any case,
did
not
have
mandatory
force.
Alternatively, it has been submitted that
the dispute being canvassed by the
assessee is purely academic, inasmuch as,
there is no provision for the refund of the
tax paid on purchase of raw materials.
Having charged full tax on the sale of
tubular poles, the assessee cannot claim
any refund or adjustment of that amount
against any other liability that may be
standing against it.

9. Having heard learned counsel for
the parties and having perused the record,
in the first place, though it is true that the
claim for set off may not have been
rejected only because the same had not
been raised in the return filed by the
assessee
and
theoretically,
it
was
permissible for the assessee to raise that
claim
at
the
stage
of
assessment
proceedings, however, for such claim to
arise and be allowed, the assessee must be
shown to have fulfilled the conditions for
the set off being claimed.

10. The set off of tax paid on raw
material and packing material used in the
manufacture of notified goods is provided
under Section 4-BB of the Act. It reads as
below:

"4-BB. Set off of tax paid on
raw material and packing material in
certain cases.

Where tax has been paid on the
purchase or sale of raw material or
packing material inside the State and such
raw material or packing material has
been used in manufacture or packing of
such goods as are notified by the State
Government in this behalf and such goods
are sold in the State or in the course of
inter State trade or commerce, the amount
of tax paid on the purchase or sale or the
raw material or packing material shall,
subject to such conditions and restrictions
as
may
be
specified
in
the
said
notification, be deducted from the tax
payable on the sale of such goods-

(a) inside the State, to the extent
the tax has been paid on the purchase or
sale of raw material or packing material
from which the goods sold inside the State
were manufactured or packed;

(b) in the course of inter State
trade or commerce, to the extent the tax
has been paid on the purchase or sale of
raw material or packing material, from
which the goods sold in the course of inter
State
trade
or
commerce
were
manufactured or packed:
2 All. M/s Fabrico India (P) Ltd. Vs Commissioner of Commercial Tax, U.P., Lucknow 1067
Provided that the amount of tax to be
deducted under clause (a) or clause (b)
shall not exceed the amount of tax
payable separately under this Act or the
Central Sales Tax Act, 1956."

11. Thus, in the first place, the set
off is available with respect to the tax paid
on purchase of raw materials used in the
manufacture of notified goods. Second,
such set off is to be availed by making
deduction of that amount from the tax
payable on the sale of notified goods. The
tax on sale of tubular poles would have
become payable at the time of sale of
those goods by the assessee and, in any
case, at the stage of filing of the
monthly/quarterly return, as the case may
have been. Therefore, to take the benefit
of Section 4-BB of the Act, plainly, the
assessee was required to make that
deduction, at that stage, and not later.
Then, looking at the notification no. 2339
dated 22.10.1996, read with notification
no. 1223 dated 22.5.1998, under the
conditions for grant of benefit of set off, it
was clearly stipulated by way of condition
no. 3 that it was permissible to the
manufacture (of notified goods) to claim
such deduction, by way of an option to
the payment of full tax on sale of such
goods. It was not compulsary for that
manufacturer to necessarily avail set off.

12. Thus, a co-joint reading of the
provisions of Section 4-BB of the Act
and the notifications leaves no doubt,
for the set off to be claimed by the
assesee, the deduction of tax paid or
purchase of raw material had to be made
at it's end at the time of making sale of
notified goods i.e. tubular poles. Once
the assessee failed to make such
deductions, at that stage, no subsequent
claim in that regard may have been
raised, either at the stage of filing annual
return or during the course of the
assessment
proceedings.
Only
other
situation in which such a claim may have
then arisen, could have been if the
assessee had always claimed that it had
not charged tax on the sale of tubular
poles but paid that amount from its own
pocket. Clearly, that case does not exist in
the present case.

13. Therefore, the reasoning given
by the Tribunal apart, it does not appear
possible to contemplate a situation where
a claim of set off may have been raised by
the assessee after it had failed to make a
deduction of tax payable on the sale of
tubular poles and it had charged full tax
@ 4% on sale of tubular poles.

14. In view of the above, the
question of law no. 1 is answered thus -
notwithstanding full compliance made by
the assessee, in payment of tax on
purchase of raw material and charge of
tax on sale of tubular pipes, it lost the
right to claim the set off under Section 4BB of the Act upon opting to charge full
tax on sale of tubular pipes, instead of
deducting the tax paid on purchase of raw
material from the tax payable on the sale
of tubular pipes. The subsequent events of
the timing of the claim raised during
assessment
proceedings
remained
inconsequential as the scheme of set off
was optional and the assessee must be
held to have necessarily opted out of it by
choosing to charge full tax on sale of
tubular pipes.

15. Both the revisions lack merit and
are accordingly dismissed, for reasons
different from those recorded by the
Tribunal.
----------
1068 INDIAN LAW REPORTS ALLAHABAD SERIES
(2019)10ILR A 1068

ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 18.09.2019

BEFORE

THE HON'BLE BHARATI SAPRU, J.
THE HON'BLE ROHIT RANJAN AGARWAL, J.

Writ Tax No. 336 of 2019

M/s Notional Chemical & Dyes Co.
 ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Aloke Kumar

Counsel for the Respondents:
C.S.C.

A. U.P. Value Added Tax Act, 2008Section 29(7) - Schedule 2, Part-C -
Order authorizing reassessment, only on
the basis of audit objection cannot be
sustained - Notice for reassessment
issued - Original assessment order was
passed after scrutiny of the records and
no turnover was assessed to tax at lower
rate - Allowing the petition, the High
Court held - Reassessment cannot be
made on the same material by the same
authority, if there is any change of
opinion, only on the basis of audit
objection. (Para 10)

Writ petition challenges orders dated 07.03.2019,
passed by Additional Commissioner, Grade-I,
Commercial Tax, Varanasi Zone - I, Varanasi, for
assessment year 2010- 11.

Writ Petition allowed (E-4)

Precedent followed: -

1. M/s Vikrant Tyres Ltd. Vs St. of U.P. & ors.,
(2005) UPTC 501 (Para 5)
2. St. of U.P. Vs M/s Aryawart Chawal Udyog &
ors., (2017) UPTC 262 (Para 6)
3. Varun Beverages Ltd. Vs St. of U.P. & 2
ors., (2016) 62 NTN DX 324 (Para 7)
4. M/s Sterling India Vs St. of U.P. & 3 ors.
(2017) UPTC 379 (Para 7)
(Delivered by Hon'ble Rohit Ranjan
Agarwal, J.)

1. Heard Sri Aloke Kumar, learned
counsel for the petitioner and Sri C. B.
Tripathi, learned Special counsel for the
respondents-State.

2. Present petition has been filed
assailing the order dated 07.03.2019
passed by Additional Commissioner,
Grade-I,
Commercial
Tax,
Varanasi
Zone-I, Varanasi under Section 29(7) for
reassessment for assessment year 2010-11
and notice dated 07.03.2019 issued by
Joint Commissioner, (Corporate Circle),
Commercial
Tax,
Varanasi
Zone-I,
Varanasi which had been issued in
consequence of the order of authorisation.

3. According to petitioner the
dispute
relates
to
reassessment
of
assessment year 2010-11. Petitioner is
registered proprietorship firm, and is
involved in manufacture and sale of
chemicals. According to petitioner the
chemicals manufactured are commonly
known as prepared driers and the same
find place at Serial No. 134 of Part-C of
Schedule 2 of Value Added Tax (in short
'VAT Act'). The said prepared driers are
taxable at the rate of 4% from 01.01.2008.
According to petitioner, the petitioner
firm was assessed for assessment year
2008-09 and assessment order was passed
on 22.10.2011, accepting the sale and tax
at 4%. It was on 24.07.2013 that
respondent no. 3 had issued a notice to