# M/s Jaya Bhatta Udyog v. State of U.P

- **Citation:** (2006) 1 ILRA 283
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2006-01-13
- **Case number:** Civil Misc. Writ Petition No.252 of 1994
- **Bench:** R.K. Agrawal, Prakash Krishna, K.N. Ojha
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-jaya-bhatta-udyog-v-state-of-u-p-40661
- **Pages:** 12

## Headnote

Sri R.K.S. Chauhan
Sri Navin Sinha

Counsel for the Respondents;
Sri S.M.A. Qazmi
Sri K.M. Sahai
Sri S.P. Kesarwani
S.C.

U.P. Sales Tax (Now Trade Tax Act)
1948-Section
7-D-composite
schemelaunched by the State Govt.-investing
option from all brick kiln owners-either
to pay Tax on actual sale or purchase or
to option for giving tax in lump sum
amount-once option given-can not be
permitted to turn around or resile from
liability
on
the
ground
no
any
manufacturing activity done during the
relevant year-held-law laid down by
Division Bench in M/s Jaya Bhatta udyog
followed by other Division Bench in M/s
Durga Brick field and Jai Sharma Int
Udyog-are correct law.

Held: Para 39 & 42

The
amount
payable
under
the
composition scheme is not relatable to
any actual turnover but depends upon
the agreement under the scheme at the
option of the dealer. The dealer having
once
exercised
its
option,
cannot,
therefore, be permitted to turn around
and resile from its liability merely on the
ground that had had no turnover or had
not done any manufacturing activity
during the relevant year.

In view of the foregoing discussions, we
are of the considered opinion that the
Division Bench in the case of M/s Jaya
Bhatta
Udyog
(supra)
subsequently
followed by other Division Benches in the
case of M/s Sri Durga Brick Field and Jai
Sharma Int Udyog (supra) lay down the
correct law.
Case law discussed:
1965 (2) SCR-45
AIR 1958 SC-560
AIR 1975 SC-1121
1996 (5) SCC-740
1996 (4) SCC-704
1997 (2) SCC-183
J.T. 2000 (4) SC-77
2001 (10) ELT 513 (SC)
2000 (119) ELT 531
1980 UPTC 64-FB
W.P. No.858/90 decided on 17.7.90
1991 UPTC-510
1999 (116) 585
AIR 1983 SC-2414
2002 (3) SCC-175
2004 (9) SC-19

## Text

1 All] M/s Bhadauria Gram Sewa Sansthan V. Asstt. Commissioner and others
283
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 13.01.2006

BEFORE
THE HON'BLE R.K. AGRAWAL, J.
THE HON'BLE PRAKASH KRISHNA, J.
THE HON'BLE K.N. OJHA, J.

Civil Misc. Writ Petition No.252 of 1994

M/s Bhadauria Gram Sewa Sansthan,
Fatehpur

...Petitioner
Versus
Assistant
Commissioner,
Sales
Tax,
Allahabad Division, Allahabad and others

...Respondents

Counsel for the Petitioner:
Sri R.K.S. Chauhan
Sri Navin Sinha

Counsel for the Respondents;
Sri S.M.A. Qazmi
Sri K.M. Sahai
Sri S.P. Kesarwani
S.C.

U.P. Sales Tax (Now Trade Tax Act)
1948-Section
7-D-composite
schemelaunched by the State Govt.-investing
option from all brick kiln owners-either
to pay Tax on actual sale or purchase or
to option for giving tax in lump sum
amount-once option given-can not be
permitted to turn around or resile from
liability
on
the
ground
no
any
manufacturing activity done during the
relevant year-held-law laid down by
Division Bench in M/s Jaya Bhatta udyog
followed by other Division Bench in M/s
Durga Brick field and Jai Sharma Int
Udyog-are correct law.

Held: Para 39 & 42

The
amount
payable
under
the
composition scheme is not relatable to
any actual turnover but depends upon
the agreement under the scheme at the
option of the dealer. The dealer having
once
exercised
its
option,
cannot,
therefore, be permitted to turn around
and resile from its liability merely on the
ground that had had no turnover or had
not done any manufacturing activity
during the relevant year.

In view of the foregoing discussions, we
are of the considered opinion that the
Division Bench in the case of M/s Jaya
Bhatta
Udyog
(supra)
subsequently
followed by other Division Benches in the
case of M/s Sri Durga Brick Field and Jai
Sharma Int Udyog (supra) lay down the
correct law.
Case law discussed:
1965 (2) SCR-45
AIR 1958 SC-560
AIR 1975 SC-1121
1996 (5) SCC-740
1996 (4) SCC-704
1997 (2) SCC-183
J.T. 2000 (4) SC-77
2001 (10) ELT 513 (SC)
2000 (119) ELT 531
1980 UPTC 64-FB
W.P. No.858/90 decided on 17.7.90
1991 UPTC-510
1999 (116) 585
AIR 1983 SC-2414
2002 (3) SCC-175
2004 (9) SC-19

(Delivered by Hon'ble R.K. Agrawal, J.)

1. Disagreeing and also doubting the
correctness of the law laid down by a coordinate Bench of this Court in the case of
M/s Jaya Bhatta Udyog v. State of U.P.
(Civil Misc. Writ Petition No.858 of
1990, decided on 17.7.1990), followed
subsequently by two Division Benches in
the case of M/s Sri Durga Brick Field v.
State of U.P., 1991 UPTC 510, and Jai
Sharma Int Udyog v. Deputy Collector
(Collection), Sales Tax, (1999) 116 STC
357, wherein this Court has held that once
a person elects to pay the sales tax in
lump sum under the scheme announced
284 INDIAN LAW REPORTS ALLAHABAD SERIES [2006
under Section 7-D of the U.P. Sales Tax
Act, 1948 (hereinafter referred to as "the
Act"), he could not be permitted to turn
around and contend that he was not liable
to pay the amount, agreed to be paid by
him, because his turnover turned out to be
either nil or that it was not adequate on
account of various factors, a Division
Bench had referred the matter to be
considered by a larger Bench of this
Court. The Full Bench has, therefore,
been
constituted
to
reconsider
the
correctness of the aforesaid judgments
rendered by the Division Bench.

2. While referring the matter for
reconsideration by the larger Bench, the
Division
Bench
has
expressed
its
disagreement in the following words :-

"We have carefully perused the
above decisions and we are in respectful
disagreement with the same. In the
aforesaid decisions it has been held that
once
the
petitioner
has
opted
for
composition scheme he has to pay Trade
Tax even if he has not made any sales. In
our opinion sales tax (now known as
Trade Tax) is payable when there is a
sale. When there is no sale we cannot
understand how sales tax (Trade Tax) can
be charged.

3. It may be mentioned that Section
7-D mentions that "assessing authority
may agree to accept the composition
money either in lump sum or at an agreed
rate on the dealers turnover in lieu of tax
that may be payable by a dealer in respect
of such goods or class of goods...."

4. Thus Section 7-D is only a
convenient mode of realization of Trade
Tax and it has been made so that the
dealer may not be harassed to go to the
Trade Tax office again and again. Thus
Section 7-D provides for convenient
alternative mode of realization of Trade
Tax.

5. The word turnover has been
defined in Section 2(i) of the U.P.Trade
Tax Act as follows:-

"turnover"
means
the
aggregate
amount for which goods are supplied or
distributed by way of sale or are sold, by a
dealer, either directly or through another,
on his account or on account of others,
whether for cash or deferred payment or
other valuabe consideration."

6. Thus the turnover is only payable
when there are sales and when there are
no sales there is no question of any
turnover. Hence also in our opinion no
Trade Tax can be demanded or realised
from a dealer when he has not made any
manufacture or sale.

It may be mentioned that as far back
in State of Madras v. Gannon Dunkerley,
AIR 1958 SC 560, it was held that to levy
sales tax there must be a sale as defined in
the Sales of Goods Act. No doubt this
definition of sale both in the Constitution
and Sales Tax Acts has been changed and
now it includes works contract, agreement
to use, etc. but still there must be some
transaction, and if there is no transaction
obviously no sales tax can be levied.

7. Learned Standing Counsel relied
on the decision of the Supreme Court in
Commissioner, Central Excise vs. M/s
Venus Castings (P) Ltd. JT 2000 (4) SC
77 which has affirmed the Division Bench
decision of this Court in M/s Jalan
Castings (P) Ltd. vs. Commissioner,
Central Excise 2000 (119) ELT 531. The
1 All] M/s Bhadauria Gram Sewa Sansthan V. Asstt. Commissioner and others
285
decision in Jalan Castings' case (supra)
involved the controversy as to whether
once having opted for the composition
scheme a dealer can turn around and ask
for a regular assessment, and it was held
that he cannot. This controversy is totally
different from that which is involved in
the present case. In the present case the
question is whether there can be demand
of Trade Tax when there is no production
or sale at all."

Facts of the case:

8. In the year 1993, the petitioner,
M/s Bhadauria Gram Sewa Sansthan,
Fatehpur, it is alleged, took over a brick
kiln which was functioning in the name
and style of Bhadauria Brick Field, for
manufacturing bricks in the name and
style of the petitioner. It applied for grant
of
registration
with
the
sales
tax
department on 21.2.1993. The Sales Tax
Officer, Fatehpur, vide order dated
21.3.1993,
registered
the
petitioner
society as a dealer under the Act with
effect from 1.4.1993. The registration was
effective for a period of three assessment
years, i.e., 1993-94, 1994-95 and 199596. The Government of Uttar Pradesh
announced a scheme, commonly known
as Composition Scheme, under the
provisions of Section 7-D of the Act
under which an option was given to all
brick kiln owners to either pay the tax
assessed on their actual sales or purchase
or to give an option to pay the tax in one
lump sum. Under the said scheme, the
brick season was from 1.10.1992 to
30.9.1993. The amount payable by the
brick kiln owners who have opted under
the
said
Scheme,
was
known
as
SAMADHAN DHANRASHI or the
composition
amount.
It
was
fixed
according to the capacity determined in
terms of PAYA or columns. The
petitioner's brick kiln had 19 PAYA. It
opted for payment of tax under the
composition scheme and deposited a sum
of Rs.8,600/- on 19.3.1993, being 20% of
the total composition money. According
to the petitioner, it could not run the brick
kiln during the brick season 1992-93, i.e.,
from
1.10.1992
to
30.9.1993
and,
therefore,
informed
the
sales
tax
authorities to make survey and physical
verification so that the petitioner may not
be saddled with the liability for payment
of
the
composition
money.
This
information is alleged to have been given
on 16.4.1993 to the Sales Tax Officer,
Fatehpur, who surveyed the petitioner's
brick kiln on 8.9.1993 and found that the
chimney is broken and on the basis of the
statements given by the local persons,
came to the conclusion that in the first
season of the Assessment Year 1993-94,
no burning has been done in the brick kiln
by the petitioner. The matter was referred
to
the
Deputy
Commissioner
(Administration), Sales Tax, Allahabad
who, vide order dated 23.12.1993, did not
accept the plea of the petitioner that it is
not liable to pay any amount towards the
composition money on the ground that the
brick kiln did not function as, according
to the Deputy Commissioner, once an
application has been submitted under
Section 7-D of the Act exercising the
option to pay the amount in lump sum, it
cannot be withdrawn for any reason
whatsoever. As the petitioner had failed to
deposit the balance amount due under the
composition scheme, the Sales Tax
Officer, Fatehpur, vide notice dated
22.9.1993, directed the petitioner to
deposit the balance amount of Rs.34,400/-
alongwith interest due thereon as also
penalty of Rs.2,000/.
286 INDIAN LAW REPORTS ALLAHABAD SERIES [2006
Relief sought :

9. The demand of the balance
amount of composition fee alongwith
interest and penalty as also the order
dated 23.12.1993 passed by the Deputy
Commissioner
(Administration),
Sales
Tax, Allahabad have been challenged by
the petitioner in the present writ petition.

Provision of law :

Section 7-D of the Act runs as
under:-

"7-D. Composition of tax liability -
Notwithstanding anything contained in
this Act, but subject to directions of the
State
Government,
the
Assessing
Authority
may
agree
to
accept
a
composition money either in lump sum or
at any agreed rate on his turnover in lieu
of tax that may be payable by a dealer in
respect of such goods or class of goods
and for such period as may be agreed
upon:

Provided that any change in the rate
of tax which may come into force after
the date of such agreement shall have
effect of making a proportionate change
in the lump sum on the rate agreed upon
in relation to that part of the period of
assessment during which the changed rate
remains in force.

Explanation. - For the purposes of this
section the Assessing Authority includes
an officer not below the rank of Trade
Tax Officer, Grade II, posted at a check
post."

Law laid down in the cases referred for
reconsideration :

M/s Jaya Bhatta Udyog's case:

10. In the case of M/s Jaya Bhatta
Udyog, a Division Bench of this Court
has held that Section 7-D of the Act is
very clear. It enables the dealer to pay the
sales tax in lump sum in lieu of the tax.
For that purpose, the dealer executes an
agreement undertaking to pay the sales
tax in lump sum and the liability arising
under such agreement is not related to
actual turnover of the petitioner. The
petitioner having elected to pay the sales
tax in lump sum, could not be permitted
to turn around and contend that he was
not liable to pay the amount agreed to be
paid by him because his turnover turned
out to be either nil or that it was not
adequate on account of various factors.
This Court has further held that there is
another reason why it is not persuaded to
interfere. Clause 16 of the agreement
specifically provided that it would not be
open to the dealer to pay a reduced
amount or to resile therefrom as that
clause clearly contemplated that once a
dealer agreed to pay the tax in lump sum,
they cannot insist on payment of the tax
on the basis of actual turnover and the
dealer's rights are, in the opinion of the
Court, regulated entirely by the terms of
the agreement.

M/s Sri Durga Brick Field's case :

11. In the case of M/s Sri Durga
Brick Field, another Division Bench of
this Court has relied upon the opinion
expressed in the case of M/s Jaya Bhatta
Udyog.

Jai Sharma Int Udyog's case :

12. In the aforesaid case, a Division
Bench of this Court was considering the
1 All] M/s Bhadauria Gram Sewa Sansthan V. Asstt. Commissioner and others
287
question as to whether where a dealer has
opted to pay the tax in terms of the
Scheme under Section 7-D of the Act, can
he be permitted to resile from the same
subsequently for one reason or the other
including that he had no turnover that
could have been brought to tax. This
Court has referred in extenso the law laid
down in the case of M/s Jaya Bhatta
Udyog (supra) and has held that the
petitioner therein is not entitled to any
relief from this Court.

13.

As
already
mentioned
hereinbefore, the Division Bench had
disagreed
with
the
aforesaid
three
Division Benches on the ground that the
sales tax, now known as Trade Tax, is
payable when there is a sale and when
there is no sale, the court wondered as to
how the sales tax (trade tax) could be
charged. According to the Division
Bench, Section 7-D is only a convenient
mode of realisation of the sales tax and it
has been made so that the dealer may not
be harassed to go to the Trade Tax office
again and again and the tax is only
payable when there are sales and when
there are no sales, there is no question of
any turnover and, therefore, in its opinion,
no Trade Tax can be demanded or
realised from a dealer when he has not
made any manufacture or sale. The
Division Bench had distinguished the
decision of the Apex Court in the case of
M/s Venus Castings (supra) on the
ground that the controversy involved
therein as to whether once having opted
for the composition scheme, a dealer can
turn around and ask for a regular
assessment, and it was held that he could
not whereas, in the present case, the
question is whether there can be demand
of Trade Tax when there is no production
or sale at all.
14. We have heard Sri Navin Sinha,
learned Senior counsel, assisted by Sri
R.K.S.Chauhan,
on
behalf
of
the
petitioner, Sri S.M.A.Qazmi, learned
Chief Standing Counsel, assisted by Sri
K.M.Sahai and Sri S.P. Kesarwani,
learned Standing Counsels, appearing for
the respondents.

Rival Submissions :

15. Sri Navin Sinha, learned Senior
Counsel,
has
submitted
that,
under
Section 7-D of the Act, the amount to be
paid is in lieu of the amount of tax that
may be payable by a dealer in respect of
such goods or class of goods and for such
period, as may be agreed upon. Laying
emphasis on the words ''in lieu of', he
submitted that if there was no liability for
payment of tax, as there was no
production or sale during the relevant
period, the petitioner cannot be saddled
with the liability for payment of the
amount agreed by it as the liability to pay
the said amount was in place of the
amount of tax payable on actual sales.

16. He further submitted that to levy
the sales tax, there must be a sale as
defined in the Sale of Goods Act and
unless there are some transaction, and if
there is no transaction, obviously no sales
tax can be levied. He, thus, submitted that
the decisions rendered in the case of M/s
Jaya Bhatta Udyog, M/s Sri Durga
Brick Field and Jai Sharma Int Udyog
(supra) do not lay down the correct law
and require to be overruled. According to
him, as the petitioner had not done any
production and sale of bricks during the
brick season 1992-93 (1.10.1992 to
30.9.1993), the petitioner was not liable to
pay any tax and consequently, the
composition money. In fact, it was
288 INDIAN LAW REPORTS ALLAHABAD SERIES [2006
entitled for the refund of Rs.8,600/-
deposited by it at the time of making the
application. In support of his aforesaid
submissions, he has relied upon the
following decisions and dictionary:-

(i) Black's Law Dictionary, V Edition,
page 708;
(ii) Hindustan Construction Co. Ltd.
v. Income Tax Officer (Companies
Circle)
Bombay
and
another,
(1965) 2 SCR 41;
(iii) State
of
Madras
v.
Gannon
Dunkerley & Co. (Madras) Ltd.,
AIR 1958 SC 560.

17. Sri S.M.A.Qazmi, learned Chief
Standing Counsel, submitted that under
the terms of the Scheme, which was
announced for the brick season 1992-93
(1.10.1992 to 30.9.1993), the petitioner
had made the application. It had also
deposited a sum of Rs.8,600/- towards the
first
instalment
while
making
the
application. Referring to clauses 7 and 19
of the said Scheme, he submitted that the
petitioner cannot withdraw or resile once
it had made the application exercising the
option under Section 7-D of the Act and
further,
clause
19
of
the
Scheme
specifically provided that there would be
no reduction in the composition money
even if the brick kiln owner starts the
firing late, does not start the firing or does
not do any business for any reason
whatsoever. He further submitted that a
writ petition is not an appropriate remedy
for impeaching contractual obligation and
it is not open to the petitioner to get over a
contract by challenging some of the
clauses of the contract as the petitioner
had made the application with open eyes.

18. He further submitted that the
method of taxation provided by Section 7D of the Act is optional and the person
who has opted the said alternate method
of taxation, cannot be permitted to
complain against the said provision.
According to him, where two alternate
procedures have been made available and
an assessee has opted for one, it cannot
claim the benefit for other.

19. According to Sri Qazmi, once
the petitioner had voluntarily made the
application for payment of a lump sum
amount in lieu of tax payable by it, it
cannot resile or seek remission either in
full or in particular or deny its liability for
payment of the amount on any ground
whatsoever, including the plea of nonproduction or no sale during the brick
season. He, therefore, submitted that this
Court in the case of M/s Jaya Bhatta
Udyog
which
has
been
reiterated
subsequently in the case of M/s Sri Durga
Brick Field and Jai Shamra Int Udyog,
has correctly laid down the law and it
does not require any reconsideration. In
support of his various pleas, he has relied
upon the following decisions:-

(i) Har Shanker and others v. The
Deputy
Excise
and
Taxation
Commissioner and others, AIR
1975 SC 1121;
(ii) State of Orissa and others v.
Narain Prasad and others, (1996) 5
SCC 740;
(iii) Bharathi Knitting Co. v. DHL
Worldwide
Express
Courier,
(1996) 4 SCC 704;
(iv) State of Kerala and another v.
Builders Association of India and
others, (1997) 2 SCC 183;
(v) Commissioner, Central Excise vs.
M/s Venus Castings (P) Ltd., JT
2000 (4) SC 77;
1 All] M/s Bhadauria Gram Sewa Sansthan V. Asstt. Commissioner and others
289
(vi) Union of India v. Supreme Steels
and General Mills, 2001 (133) ELT
513 (SC);
(vii) Jalan
Castings
(P)
Ltd.
v.
Commissioner,
Central
Excise,
2000 (119) ELT 531 (Alld.);
(viii) Satish Prakash Ajay Kumar v.
Assistant
Sugar
Commissioner,
Saharanpur
and
others,
1980
UPTC 64 (FB);
(ix) M/s Jaya Bhatta Udyog v. State of
U.P. (Civil Misc. Writ Petition
No.858
of
1990,
decided
on
17.7.1990);
(x) M/s Sri Durga Brick Field v. State
of U.P., 1991 UPTC 510;
(xi) Jai Sharma Int Udyog v. Deputy
Collector (Collection), Sales Tax,
(1999) 116 STC 357; and
(xii) M/s Mycon Construction Ltd. v.
State of Karnataka and another,
2002 UPTC 585 (SC).

20. Sri Navin Sinha, learned Senior
counsel, in reply, submitted that the
agreement
cannot
go
beyond
the
provisions of the Act. According to him,
there cannot be any estoppel against a
statute. In support of his submission, he
has relied upon the following decisions :-

(i) Ahmedabad Urban Development
Authority
v.
Sharadkumar
Jayantikumar
Pasawalla
and
others, AIR 1992 SC 2038;
(ii) Bengal
Iron
Corporation
and
another
v.
Commercial
Tax
Officer and others, AIR 1993 SC
2414;
(iii) Inder Sain Mittal v. Housing
Board, Haryana and others, (2002)
3 SCC 175; and
(iv) M.D.Army
Welfare
Housing
Organisation v. Sumangal Services
Pvt. Ltd., (2004) 9 SCC 619.
Cases cited at the bar :

21. In the Black's Law Dictionary, V
Edition, page 708, the following meaning
has been given to the words ''in lieu of' :-

"in lieu of /in lyuw ev/, Instead of;
in place of; in substitution of."

22. In the case of Hindustan
Construction Co. Ltd., the Apex Court
has referred to the meaning ascribed to
the expression ''in lieu of' in the case of
Stubbs
v.
Director
of
Public
Prosecutions, 24 QBD 577, wherein it
was held that where a liability has to be
discharged by A in lieu of B, there must
be a binding obligation on B to do it,
before A can be charged with it.
Considering the provision of Section 49E
of the Indian Income Tax Act, 1922,
which provided for set off of the amount
to be refunded in lieu of the payment of
refund, the Apex Court has held that the
expression ''in lieu of' connotes that the
payment is outstanding, i.e., there is a
subsisting obligation on the Income Tax
Officer to pay and if a claim of refund is
barred by a final order, it cannot be said
that there is a subsisting obligation to
make the payment.

23. In the case of Gannon
Dunkerley & Co. (Madras) Ltd. (supra),
the Apex Court has held that the
expression "sale of goods" in Entry 48 is a
nomen juris, the essential ingredients
being an agreement to sell movables for a
price
and
property
passing
therein
pursuant to that agreement. In a building
contract which is entire and indivisible
there is no sale of goods, and it is not
within the competence of the Provincial
Legislature under Entry 48 to impose a
tax on the supply of the materials used in
290 INDIAN LAW REPORTS ALLAHABAD SERIES [2006
such contract treating it as a sale. Hence
the provisions of the Madras General
Sales Tax Act which impose a tax on such
materials as if there is a sale of them are
ultra vires.

24. In the cases of Har Shanker
and others and Narain Prasad and
others (supra), the Apex Court has held
that the writ petition is not an appropriate
remedy
for
impeaching
contractual
obligations voluntarily incurred.

25. In the case of Bharathi Knitting
Co. (supra), the Apex Court has held that
when a person signs a document which
contains
certain
contractual
terms,
normally parties are bound by such
contract and it is for the party to establish
exception in a suit. When a party to the
contract disputes the binding nature of the
signed documents, it is for him to prove
the terms in the contract or circumstances
in which he came to sign the document,
need to be established and in appropriate
case where there is an acute dispute of
facts, necessarily the Tribunal has to refer
the parties to original Civil Court
established under the Code of Civil
Procedure or the State law, to have the
claim decided between the parties but
when there is a specific term in the
contract, the parties are bound by the term
in the contract.

26. In the case of Builders
Association of India (supra), the Apex
Court while considering the constitutional
validity of Sections 7 (7) and 7 (7-A) and
5(1)(iv) of the Kerala General Sales Tax
Act, 1963, which provided for payment of
tax in lump sum in place of actual amount
of tax, has held that the alternate method
of taxation provided by sub-section (7) or
(7-A) of Section 7 is optional. It is wholly
at the choice or pleasure of the contractor
and the contractor who has opted to the
said alternate method of taxation, cannot
complain. It has further held that having
voluntarily and within the full knowledge
of the features of the alternate method of
taxation, opted to be governed by it, a
contractor cannot be heard to question the
validity of the relevant sub-sections or the
Rules. The impugned sub-sections have
been evolved for convenient, hassle free
method of assessment of tax, just as the
system of levy of entertainment tax on the
gross collection capacity of the cinema
theatre and by opting to this alternate
method, the contractor saves himself the
botheration of book keeping, assessment,
appeals and all that it means. It has also
held that it is not necessary to enquire and
determine the extent or value of goods
which have been transferred in the course
of execution of a works contract, the rate
applicable to them and so on. It is only an
alternative method of ascertaining the tax
payable which may be availed of by a
contractor if he thinks it advantageous to
him. The Constitution does not preclude
the Legislature from evolving such
alternate, simplified and hassle free
method of assessment of tax payable
making it optional for the assessee.

27. Similar view has been taken by
the Apex Court in the case of M/s Mycon
Construction Ltd. (supra). The Apex
Court has repelled the submission that
while evolving a simplified method of
payment of tax such is the case in the
instant case, the law cannot give an option
to the assessee which is in the teeth of
constitutional provision. It has held that
this argument does not survive in view of
the principles laid down by the Apex
Court in the case of Builders Association
of India (supra).
1 All] M/s Bhadauria Gram Sewa Sansthan V. Asstt. Commissioner and others
291
28. In the case of M/s Venus
Castings (P) Ltd. (supra), the Apex Court
while considering the provision of Section
3A(4) of the Central excise Act, 1944 and
Rule 96ZO(3) of the Central Excise
Rules, which envisaged the composition
method of payment of duty, has held that
they provided two alternative procedure
to be adopted at the option of the assessee
and they do not clash with each other. The
manufacture if they have availed of the
procedure under Rule 96ZO(3) at their
option, cannot claim the benefit of
determination of production capacity
under Section 3A(4) of the Act, which is
specifically excluded.

29. In the case of Jalan Castings
(P) Ltd. (supra), this Court has held that
where an assessee has himself asked for a
lump sum method of assessment and this
was agreed to by the Department, then the
assessee cannot go back and claim that he
should be assessed by the normal mode as
the assessee cannot blow hot and cold at
the same time. The decision of this Court
has been approved by the Apex Court in
the case of Venus Castings (P) Ltd.
(supra).

30. The same view was taken by the
Apex Court in the case of Supreme
Steels and General Mills (supra). In the
aforesaid case, it has been held by the
Apex Court that it was absolutely optional
for the manufacturer to opt for payment of
excise duty in accordance with sub-rule
(3) of Rule 96ZO on the basis of total
finished capacity installed as provided
thereunder and the manufacturer cannot
opt twice during one financial year first
choosing to pay in accordance with subrule (3) of Rule 96ZO and thereafter to
switch over to actual production basis
under Section 3A(4) of the Central Excise
Act, 1944 in case it is less than the duty
payable under sub-rule (3) of Rule 96ZO.
The said sub-rule is quite clear that the
option under it is available subject to the
condition that once having opted it, the
benefit, if any, under sub-section (4) of
Section 3A of the Central Excise Act,
1944 shall not be available.

31. In the case of Satish Prakash
Ajay Kumar (supra), a Full Bench of this
Court while interpreting the provisions of
Section 3(1)(b) of the U.P. Sugarcane
Purchase Tax Act, 1961 and Rule 13 of
the Rules framed thereunder, has held that
the said Act and the Rules do not
contemplate exemption from the liability
for payment of tax by the owner of a unit
who has opted for the assumed basis
merely because he has, either by choice or
on account of some mechanical defect,
been unable to work some of the crushers
composing his unit for any length of time
during a particular assessment year.

32. The decisions of this Court in
the cases of M/s Jaya Bhatta Udyog,
M/s Sri Durga Brick Field and Jai
Sharma Int Udyog (supra), relied upon
by the State respondent, have already
been dealt with under the heading Law
laid down in the cases referred for
reconsideration
and
are
not
being
discussed again.

33. In the case of Ahmedabad
Urban Development Authority (supra),
the Apex Court has held that in the
absence of an express provision, a
delegated authority cannot impose tax or
fee and the delegated authority must act
strictly within the parameters of the
authority delegated to it under the Act and
it will not be proper to bring the theory of
implied intent or the concept of incidental
292 INDIAN LAW REPORTS ALLAHABAD SERIES [2006
or ancillary power in the matter of
exercise of fiscal powers.

34. In the cases of Bengal Iron
Corporation, Inder Sain Mittal and
M.D.Army
Welfare
Housing
Organisation (supra), the Apex Court
has held that there can be no estoppel
against the statute.

Discussion :

35. Having given our anxious
considerations to the various submissions
made by the learned counsel for the
parties, we find that Section 7-D which
provides for composition of tax liability,
starts with a non-obstante clause. A plain
reading of Section 7-D of the Act shows
that an option has been given to a dealer
who is covered by a scheme issued by the
State Government from time to time to
opt for payment of lump sum amount in
lieu of the amount of tax. It excludes the
applicability of other provisions of the
Act which deals with the assessment and
payment of tax. A non-obstante clause, as
observed by the Apex Court in the case of
State of Bihar v. Bihar M.S.K.K.
Mahasangh and others, AIR 2005 SC
1605, is generally appended to a section
with a view to give the enacting part of
the section, in case of a conflict, an
overriding effect over the provision in the
same or other Act mentioned in the nonobstante clause. It is equivalent to saying
that in spite of the provisions or Act
mentioned in the non-obstante clause, the
provision following it will have its full
operation or the provisions embraced in
the non-obstante clause will not be an
impediment for the operation of the
enactment or the provision in which the
non-obstante clause occurs. The payment
of compounded tax is a convenient, hassle
free and a simple method of assessment.
A dealer who has opted for payment of
lump sum amount in lieu of tax, is not
required to file monthly or quarterly
return of its turnover. It has to pay a fixed
sum of money as tax as agreed upon by
the department. It is the choice of a dealer
to opt for compounded payment of tax
and if the said choice is in accordance
with the scheme and is ultimately
accepted by the authority concerned, it
becomes an agreed amount of tax. The
department as also the dealer are bound
by the said agreement. A dealer who has
opted to pay the tax in lump sum under
Section 7-D of the Act after it has been
accepted by the department, any demand
for that period is not relatable to the actual
turnover but the sum agreed upon. In
other words, the department as well as the
dealer both know the amount payable and
receivable
by
each
other.
The
determination of lump sum amount in lieu
of tax displaces the requirement of regular
assessment
proceeding
and
the
quantification of tax liability is by
agreement as per the term of the scheme
which would bind both the parties. The
object of introducing such a scheme under
a taxing statute is well established as so
many advantages are attached to such
scheme besides being hassle free to the
dealer.
It
also
avoids
unnecessary
litigation. The department in its turn
receives a fixed amount of tax without
undertaking the assessment work and,
thus, saves a lot of time. It also facilitates
the speedy recovery of tax.

36. In the case of Venkateshwara
Theatre v. State of Andhra Pradesh,
AIR 1993 SC 1947, the Apex Court while
considering the scheme announced by the
Government
of
Andhra
Pradesh,
providing that instead of payment of
1 All] M/s Bhadauria Gram Sewa Sansthan V. Asstt. Commissioner and others
293
entertainment tax on the basis of actual
number of cinema goers, the proprietor of
a cinema hall may opt to pay a
consolidated levy on the basis of gross
collection capacity per show, has held that
the compound payment of entertainment
tax is a more convenient mode of levy of
the tax inasmuch as it dispenses with the
need of verification or to enquire into the
number of person admitted to each show
and to verify the correctness or otherwise
of the returns submitted by the proprietor
containing
the
number
of
persons
admitted to each show and the amount of
tax collected. The aforesaid decision has
been followed by the Apex Court in the
case of Builders Association of India
(supra) wherein the Apex Court has held
that the object of levy of compound
payment of tax is not to increase the
revenue. The legislature provides the
alternate method of taxation with a view
to realise the tax with least discomfort to
the assessee. It is only a convenient mode
of realisation of tax. It also ensures the
fixed amount of payment of tax to the
Government irrespective of the fact that
the business of the assessee earned profit
or not. Similar view has been taken by the
Apex Court in the case of M/s Mycon
Construction Ltd., M/s Venus Castngs
(P) Ltd. and Supreme Steels and
General Mills (supra).

37. A Full Bench of this Court in the
case of Satish Prakash Ajai Kumar
(supra) while considering the provision of
Section 3 (1)(b) of the U.P.Sugarcane
Purchase Tax Act, 1961 and Rule 13 of
the Rules framed thereunder, has held that
they do not contemplate any exemption
from the liability for payment of tax by
the owner of a unit who has opted for
payment of tax on assumed basis merely
because he has, by chance or on account
of some mechanical defect, been unable
to work some of the crushers in his unit.

38. Clause 19 of the scheme under
which the petitioner had applied for
composition, specifically provided that if
the firing is started late or is not
commenced or, for any other reason, the
amount of composition money would
neither be reduced nor changed. Thus,
from the provision of Section 7-D of the
Act as also the scheme announced
thereunder, we are of the considered
opinion that the liability for payment of
tax is dependent upon the agreement
entered into by the parties and the amount
so agreed would continue to be payable
by the dealer notwithstanding the fact that
the dealer has neither manufactured nor
sold any bricks during the period for
which it had opted for the composition
under Section 7-D of the Act.

39. The amount payable under the
composition scheme is not relatable to
any actual turnover but depends upon the
agreement under the scheme at the option
of the dealer. The dealer having once
exercised its option, cannot, therefore, be
permitted to turn around and resile from
its liability merely on the ground that had
had no turnover or had not done any
manufacturing activity during the relevant
year.

40. So far as the decisions and the
dictionary meaning of the words "in lieu
of" relied upon by Sri Navin Sinha,
learned Senior Counsel, are concerned,
we may mention that it is of no help to the
petitioner inasmuch as here the amount of
tax is being demanded in terms of the
composition scheme which the petitioner
had opted.
294 INDIAN LAW REPORTS ALLAHABAD SERIES [2006
41. There cannot be any dispute that
there cannot be any estoppel against a
statute. However, where the demand is
being made under the terms of the
contract which specifically provides that
there would be no reduction or change in
the composition money even if the firing
has not been done in brick kiln or it has
been started late or for any other reason,
the petitioner is bound by the said clause
and he cannot be permitted to challenge
the same in view of the law laid down by
the Apex Court in the case of Har
Shanker and others, Narain Prasad and
others and Bharathi Knitting Co.
(supra). As we have already come to the
conclusion that the liability to pay the
composition money is not relatable to
actual sales at all, the principle laid down
by the Apex Court in the case of Gannon
Dunkerley & Co. (Madras) Ltd. (supra)
will not be attracted.

Conclusion :

42. In view of the foregoing
discussions, we are of the considered
opinion that the Division Bench in the
case of M/s Jaya Bhatta Udyog (supra)
subsequently followed by other Division
Benches in the case of M/s Sri Durga
Brick Field and Jai Sharma Int Udyog
(supra) lay down the correct law.

Let the matter be placed before the
appropriate Bench for further orders.
Opinion given accordingly.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 09.01.2006

BEFORE
THE HON'BLE S.N. SRIVASTAVA, J.

Civil Misc. Writ Petition No.75895 of 2005

M/s. Kesar Enterprises Limited

...Petitioner
Versus
Deputy
Director
of
Consolidation,
Bareilly and others
 ...Respondents

Counsel for the Petitioner:
Sri V.K. Singh
Sri M.N. Singh
Sri Mahesh Narain Singh

Counsel for the Respondents:
Sri G.S.D. Mishra
S.C.

Practice
of
Procedure-Defective
vakalatnama-appeal before-S.O.C. filed
jointly
by
47
persons-but
the
vakalatnama signed by only one personwhether the Appellate Authority ought to
have give some reasonable time to
remove the defect? Held 'yes' in view of
law laid down by the Apex court
repeated in S.L.P. No.22578 of 2002,
Udai Shakar Trivar vs. Ram Kalunwar
Prasad Singh.

Held: Para 5 and 6

In view of he law laid down by the Apex
court, this Court is of the view that that
some reasonable time may be granted to
the appellants in the appeal pending
before the Appellate authority to remove
the defect.

Accordingly, appellants in the Appeal
pending before the Appellate authority
are directed to remove the defect in the
Appeal within three weeks' from the
date of production of a certified copy of
this order. In case defect in the appeal is