# M/S Uflex Limited v. State Of U.P. & Ors

- **Citation:** (2016) 8 ILRA 976
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2016-08-10
- **Bench:** Sudhir Agarwal, Kaushal Jayendra Thaker
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-uflex-limited-v-state-of-u-p-ors-44292
- **Pages:** 20

## Text

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976 INDIAN LAW REPORTS ALLAHABAD SERIES

(2016) 8 ILRA 976
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 10.08.2016

BEFORE

THE HON'BLE SUDHIR AGARWAL, J.
THE HON'BLE KAUSHAL JAYENDRA THAKER, J.

Writ Tax No.- 1448 Of 2009
&
Connected With Other Cases

M/S Uflex Limited ...Petitioner
 Versus
State Of U.P. & Ors. ...Respondents

Counsel for Petitioner:
Bharat Ji Agrawal (Senior Advocate), Piyush Agrawal, Rahul Agrawal, S.D. Singh (Senior Advocate), Nishant
Mishra, Diptiman Singh, Nikhil Agarwal

Counsel for Respondents:
C.B. Tripathi, learned Standing Counsel

U.P. Value Added Tax Act, 2008 -- Section 42(4) & (5) -- U.P. VAT Rules, 2008 -- Rule 70(5) --
Vires Challenged -- Petitioners, industrial units holding eligibility certificates under Section 4-A of the U.P.
Trade Tax Act, 1948 for exemption from tax, challenged Section 42(4) and (5) of the Act, 2008 as substituted
by the Amendment Act, 2008, and Rule 70(5) of the Rules, 2008 as substituted by the First Amendment Rules,
2009. Amended scheme requiring deposit of net tax along with return, followed by refund, is neither illegal
nor arbitrary nor beyond legislative competence -- Section 42(4) and (5) as amended are not ultra vires.
(Para 1)

Change of Exemption Scheme -- From Upfront Exemption to Deposit-and-Refund --
Retrospective
Operation
--
Under
the
erstwhile
scheme,
eligible
units
enjoyed
upfront
exemption/deferment of tax -- By Amendment Ordinance, 2008 and subsequent Amendment Act, 2008,
effective from 01.01.2008, the scheme was altered so that units must first deposit net tax with the return and
thereafter claim refund -- Rule 70(5), framed only on 30.01.2009, prescribed deposit deadlines for tax periods
between January 2008 and June 2008, i.e., periods that had already elapsed with returns already filed under
the earlier scheme before the new procedure was even notified. Compliance with the amended Rule 70(5) for
the already-elapsed period of January 2008 to June 2008 was rendered practically and legally impossible,
since the prescribed manner of compliance itself came into existence only on 30.01.2009, after the deadlines it
imposed had already expired. (Para 2)

Doctrine of Impossibility -- Lex Non Cogit Ad Impossibilia -- Applicability -- The maxims lex non
cogit ad impossibilia and impotentia excusat legem apply -- The law does not compel performance of an
impossibility; where a statute creates a duty and the party is disabled from performing it without default of his
own and has no remedy over it, the law excuses him -- Principle affirmed by the Supreme Court. (Para 3)
8 All. M/S Uflex Limited Vs State Of U.P. & Ors.
977
Rule 70(5) of U.P. VAT Rules, 2008 (as substituted, 2009) -- Struck Down -- Article 14 -- Rule
framing authority, despite the amended Section 42(4)(d) requiring compliance 'in the prescribed manner',
remained inactive for over five to six months and notified Rule 70(5) only on 30.01.2009, by when the
deadlines it prescribed (July 2008 to December 2008 for deposit relating to January-June 2008 tax periods)
had already lapsed. Sub-rule (5) of Rule 70, as substituted by the U.P. VAT (First Amendment) Rules, 2009, is
irrational, arbitrary, illegal and unreasonable, being violative of Article 14 of the Constitution, and is struck
down -- Consequently, sub-rules (7) to (11) of Rule 70, insofar as they relate to net tax for January 2008 to
June 2008, become inoperative for want of a valid sub-rule (5) to found them, until a valid provision is
framed. (Para 4)

Impugned Notices and Orders -- Quashed -- Interim Directions for Deposit and Refund --
Impugned notices and orders demanding interest/penalty for delayed deposit for the period January 2008 to
June 2008 quashed -- To mitigate further litigation, petitioners permitted to deposit requisite tax along with
return within two months, if not already deposited, whereupon such deposit shall be treated as due
compliance under Section 42(4)(d) as amended, and refund proceedings to follow under Section 42(5) --
Failure to comply within two months renders provisions of Rule 42(7) to (11) operative with due consequences
-- Writ petitions partly allowed with no order as to costs. (Para 5)

Case Law Discussed

1. Cochin State Power and Light Corporation Ltd. Vs. State of Kerala, AIR 1965 SC 1688

2. Special Reference No. 1 of 1974 (Re: Presidential Poll), 1974 (2) SCC 33

3. State of Rajasthan Vs. Shamsher Singh, AIR 1985 SC 1082

4. Rajesh D. Darbar Vs. Narsing Rao Krishnaji Kulkarni & Others, (2003) 7 SCC 219

5. Ram Chandra Singh Vs. Sabitri Devi & Others, 2003 (8) SCC 319

6. Industrial Financial Corporation of India Ltd. Vs. Cannanore Spinning & Weaving Mills Ltd., AIR 2002 SC
1841

7. Special Reference No. 1 of 2002, AIR 2003 SC 1987

8. Board of Control for Cricket in India Vs. Netaji Cricket Club, AIR 2005 SC 592

9. HUDA and Another Vs. Dr. Babeswar Kanhar, 2005 (1) SCC 191 : AIR 2005 SC 1491

10. Maharashtra State Board of Secondary Education Vs. Paritosh Bhupesh Kumar Sheth, AIR 1984 SC 1543

(Delivered by Hon'ble Sudhir Agarwal, J.
&
Hon'ble Kaushal Jayendra Thaker, J.)

1. Heard Sri Bharat Ji Agrawal, learned Senior Counsel assisted by Sri Piyush Agrawal and
Rahul Agrawal; Sri S.D.Singh, Senior Advocate assisted by Nishant Mishra and Diptiman Singh
for the petitioners and Sri C.B. Tripathi, learned Standing Counsel for respondents.
978 INDIAN LAW REPORTS ALLAHABAD SERIES

2. Petitioners have filed these writ petitions under Article 226 of Constitution of India
challenging vires of Section 42(4) and 42(5) of U.P. Value Added Tax Act, 2008 (hereinafter
referred to as the 'Act, 2008') as substituted vide U.P. VAT (Amendment) Ordinance, 2008 which
came to be substituted by U.P. VAT (Amendment) Act, 2008 i.e. U.P. Act No. 11 of 2008
(hereinafter referred to as the 'Amendment Act, 2008'). Some of the petitioners have also
challenged validity of Rule 70(5) of U.P. Value Added Tax Rules, 2008 (hereinafter referred to as
the 'Rules, 2008') as stands substituted by U.P. VAT (First Amendment) Rules, 2009.

3. In writ petition no. 1448 of 2009, writ of certiorari for quashing order dated 05.06.2009
passed by Joint Commissioner, Corporate Circle, Commercial Tax, Noida has also been prayed
whereby respondent 3 has found that in view of amended provision, petitioner was supposed to
deposit admitted tax of January 2008 to March 2008 by 20th October 2008 but it has been
deposited late i.e. on 18.12.2008, 24.12.2008 and 31.12.2008. Hence petitioner is liable to pay
interest on the aforesaid delayed payment. Respondent no. 3 has held petitioner liable to pay
penalty under Section 54(1)(1) at the rate of 20 per cent of tax paid that is Rs. 10,62,929/- in respect
to Provincial Tax and Rs. 19,06,785/- in respect to Central Tax.

4. Petition No. 1449 of 2009 (hereinafter referred to as the 'Second Petition') also deals with
a similar order dated 06.06.2009 of penalty under Section 54(1)(1) for alleged delayed payment of
due tax for the month of April 2008 which according to respondent 3 was liable to be deposited up
to 20.11.2008 but was actually deposited in December 2008, therefore, in respect to Provincial Tax
it has demanded penalty of Rs. 25,35,230/- and in respect of Central Tax amount of penalty
imposed is Rs. 33,97,959/-.

5. Petition No. 1450 of 2009 (hereinafter referred to as the 'Third Petition') relates to similar
order dated 06.06.2009 for alleged delayed payment of due tax for the month of May 2008 which
was payable by petitioner up to 20.12.2008 but deposited on 31.12.2008 and in January and
February 2009 Penalty for Provincial Tax under Section 54(1)(1) has been imposed at Rs.
23,52,870/- and in respect to Central Tax it is Rs. 43,03,582/-.

6. In Writ Petition No. 870 of 2009 notice dated 25.02.2009 issued by Joint Commissioner
has been challenged since it has informed petitioner M/s. ACC Ltd. that it has withheld net tax
payable for the period January 2008 to June 2008 whereupon it will have to pay interest under
Section 33(2) of Act, 2008.

7. In Writ Petition No. 1680 of 2008 Joint Commissioner has issued notice dated
21.07.2008 which has also been challenged whereupon petitioner M/s. H-One India Pvt. Ltd. has
been directed to deposit tax of January 2008 to June 2008 by 25.07.2008.

8. Similar notices requiring payment of tax which was not paid under exemption benefit
have been challenged in the remaining three writ petitions for different periods upto June 2008.
8 All. M/S Uflex Limited Vs State Of U.P. & Ors.
979
9. With the agreement of learned counsel for the parties, for the purpose of pleadings, we
have taken writ petition no. 1448 of 2009 as the leading case. The facts in brief giving rise to the
dispute in question are stated as under:

10. Petitioner M/S Uflex Limited is a Company incorporated under Companies Act, 1956
(hereinafter referred to as the 'Act, 1956'). It established a new unit pursuant to the representation
made by State Government in the notification dated 31.03.1995, allowing certain tax exemptions.
Petitioner's unit was established for manufacture of printed and unprinted multi layer laminated
metal and non metal plastic films etc. It has its unit established at Plot No. A-1, Sector-60 and D-1
to 15, 16 Sector 59, New Okhla Industrial Development Authority (hereinafter referred to as the
'NOIDA'). Since petitioner satisfied all the requirements of tax exemption, it was granted eligibility
certificate under Section 4-A of U.P. Trade Tax Act, 1948 (hereinafter referred to as the 'Act,
1948') for a period of 15 years or to the extent of Rs. 959,51,76,417/- which ever is earlier. The
exemption was granted w.e.f. 16.02.1995.

11. In normal circumstances, petitioner was entitled to avail aforesaid exemption up to
15.02.2010 or till the amount of exemption of tax reaches to the extent of Rs. 959,51,76,417/-,
which ever is earlier.

12. The facts in all other writ petitions are similar, inasmuch as, all the petitioners have
been granted eligibility certificate entitled for exemption and for the period of dispute i.e. from
January 2008 to June 2008 it is admitted by respondents that exemption benefit was available to all
the petitioners.

13. It so happened that Act, 1948 was repealed and a new Act i.e. Act, 2008 came to be
enacted by Provincial Legislation w.e.f. 01.01.2008. Initially U.P. Value Added Tax Ordinance,
2007 was promulgated on December 20th 2007 and it was made effective from 01.01.2008. Section
42 of Ordinance provided that any industrial unit which was availing tax exemption or reduction in
rate of tax under Section 4-A of Act, 1948 on 01.01.2008 and to whom facility of exemption was
granted, shall continue to avail tax deferment in accordance with Section 42 of Ordinance. Section
42 of Ordinance is reproduced as under:

"(1) Notwithstanding anything contained in this Ordinance any industrial unit
availing tax exemption or reduction in the rate of tax on the date of commencement of this
Ordinance or an industrial unit which is granted the facility of exemption or reduction in the rate
of tax under the erstwhile Act shall be treated as a unit availing tax deferment.

A unit availing tax deferment under the erstwhile Act on the commencement of
this Ordinance or a unit, which is granted benefit of tax deferment under the erstwhile Act, shall
continue to avail the said facility subject to such conditions as may be specified.
980 INDIAN LAW REPORTS ALLAHABAD SERIES

(2) The unit availing the tax deferment as specified in sub-section (1) or a unit
availing deferment facility under the erstwhile Act shall be eligible to issue tax invoices and to
claim input tax credit subject to provisions of section 13 of this Ordinance.

(3) The period of eligibility, the method of debiting eligibility amount, the
repayment and any other benefits for all units availing tax deferment shall be in such manner as
may be prescribed."

(Emphasis added)

14. In exercise of powers under Section 79 read with Section 74, State Government framed
rules i.e. Rules, 2008 and rule 70 thereof provided that a dealer holding eligibility certificate
granted before commencement of Ordinance (later Act, 2008) shall be entitled for tax deferment for
the extent and period mentioned in eligibility certificate, for balance amount and for the remaining
period, as the case may be.

15. Subsequently, State Legislature in its wisdom decided to allow tax exemption to
eligible unit by way of refund of tax in the next month after the same is deposited in preceding
month along with return. As a consequence thereof U.P. Value Added Tax (Amendment)
Ordinance, 2008 (U.P. Ordinance No. 3 of 2008) (hereinafter referred to as the 'Amendment
Ordinance, 2008') was enacted vide notification dated 16.07.2008 by which Section 42 was
substituted w.e.f. 01.01.2008. Relevant Section 42 (4), (5), (6) and (7) are reproduced as under:

"42-- Treatment of industrial units availing exemption or reduction in the rate of
tax under erstwhile Act -

..............

(4) The industrial unit availing benefit of exemption from, or reduction in the rate
of, tax on the turnover of sales before the date of commencement of this Act or an industrial unit
which is granted the facility of exemption from, or reduction in the rate of, tax on or after such
commencement, on the turnover of sales under the erstwhile Act or the Central Sales Tax Act, 1956,
shall be entitled for exemption by way of refund of net tax paid along with the return of tax
period in prescribed manner and on fulfilling the conditions that,-

(a) the unit shall hold valid registration certificate issued under this Act or under
the Central Sales Tax Act, 1956

(b) the unit shall have a valid Certificate of Entitlement issued by the
Commissioner,

(c) the amount of refund shall not be more than an amount equal to net tax paid for
relevant tax period,
8 All. M/S Uflex Limited Vs State Of U.P. & Ors.
981
(d) the net tax payable has been deposited along with return of tax period in
prescribed manner,

(e) the refund shall be subject to the provisions of section 40 except that the amount
shall not be adjusted against the admitted tax liability,

(f) the facility of refund shall cease on the day when the amount or the period
mentioned in the Certificate of Entitlement, whichever is earlier,

(g) the tax payable on the turnover of sales of goods mentioned in the Certificate of
Entitlement and which is manufactured in the industrial unit shall be deducted from the total
amount mentioned or described in the Certificate of Entitlement,

(h) the industrial unit has not misused the facility of exemption from or reduction in
the rate of tax in any manner.

Explanation : The expression net amount of tax payable means -

(i) the differential amount of tax payable under this Act on the sale of taxable
goods other than non-vat goods, manufactured in the unit and input tax credit available to the
extent or proportionate to taxable goods other than non-vat goods sold; in case of an industrial unit
availing facility of exemption from tax under the erstwhile Act and the Central Sales Tax Act, 1956.

(ii) the partial amount of net tax computed under clause (i) above, in proportion to
the rate of tax available for exemption to the rate of tax payable under the erstwhile Act, in case of
an industrial unit availing benefit of reduction in the rate of tax

(5) (a) The amount found refundable shall be refunded within a period of 30 days
from the last date of the month in which dealer files the return of relevant tax period along with
the proof of deposit of net tax payable.

(b) The amount of refund shall be made in such manner as may be prescribed.

(c) The industrial unit failing to deposit the net tax admittedly payable within
prescribed time and in prescribed manner or deposits it after due date, the amount of interest
leviable and penalty imposed if any, shall be adjusted and only the balance amount shall be
refunded.

(6) (a) The total amount of the refund shall be limited to the extent of the
differential amount of the total eligible amount available for exemption or reduction in the rate of
tax and the amount availed in exemption or reduction in the rate of tax before the commencement
of this Act.
982 INDIAN LAW REPORTS ALLAHABAD SERIES

(b) The total period of the refund shall not exceed difference of the total period
available for exemption or reduction in the rate of tax and the period exhausted before the
commencement of this Act.

(7) If any amount is found refundable and is not refunded within the prescribed
time, the industrial unit shall be entitled to simple interest at the rate of twelve percent per annum
from the last date prescribed for refund. The amount of interest shall be refunded in such manner
as may be prescribed."

(Emphasis added)

16. The aforesaid amendment of Section 42 by substitution was given effect from
01.01.2008. Amended Section 42(1) provided that no industrial unit availing benefit of exemption
or of reduction in the rate of tax or granted benefit of tax from exemption or reduction in the rate of
tax under Act, 1948 and Central Sales Tax Act, 1956 shall be permitted to avail benefit of
exemption or reduction in the rate of tax on the turn over of sale and purchase or both, as the case
may be, on or after the commencement of Act, 2008. Sub Section (3) however, provided such units
availing benefit of exemption etc. to apply Government for issue of a certificate for entitlement in
prescribed form and in prescribed manner.

17. Petitioners filed applications for grant of certificate of entitlement as contemplated
under Section 42(3) which was granted by Commissioner, Commercial Taxes, U.P. (hereinafter
referred to as the 'CCT'). The certificate of entitlement was granted to all the petitioners on
different dates but for the purpose of record, it may be stated that petitioner M/s. Uflex Ltd. CCT
was granted certificate of entitlement dated 07.11.2008 wherein period of entitlement for exemption
mentioned is 01.01.2008 to 15.02.2010. Certificate further mention amount of entitlement of refund
as Rs. 721,08,88,090.94.

18. For the purpose of availing entitlement for exemption under Act, 2008 as amended by
Amendment Ordinance, 2008, a unit would have to deposit net tax payable along with return of tax
period in prescribed manner. Sub section (4) of Section 42 provided that thereafter unit would be
entitled for exemption by way of refund of net tax paid along with return of tax period.

19. The manner of submission of tax return is contained in Section 24 of Act, 2008 and
relevant part of Section 24 reads as under:

"24. Submission of tax returns--(1)Every taxable dealer including a dealer from
whom any amount of tax has been deducted at source under section 34, shall, for such tax period
and within such time, as may be prescribed, submit tax return of his self assessed turnover and
tax, in such form and verified in such manner as may be prescribed, but the assessing authority
may in its discretion and for reasons to be recorded, extend the date for submission of the return
by any dealer or class of dealers:
8 All. M/S Uflex Limited Vs State Of U.P. & Ors.
983
Provided that every taxable dealer, including a dealer who claims input tax
credit, shall also submit along with tax return a list of-

(i) purchases of goods made from registered dealer in respect of which the dealer
has received tax invoices;

(ii) sales of goods made to registered dealers in respect of which the dealer has
issued tax invoices; and

(iii) sale made to dealers to whom sale invoices have been issued in the names of
such dealers, containing such particulars as may be prescribed:

(2)Before submitting the tax return under sub-section (1), the dealer shall, in the
manner prescribed, deposit the net amount of tax payable shown in such tax return alongwith
amount, if any, realized in excess of amount of tax due under this Act from purchasers of goods
during the tax period.

(3)Every person or dealer to whom provisions of section 34 apply, shall, in respect
of dealers from whom any amount of tax has been deducted, submit such statement within such time
as may be prescribed.

(4)Where as a consequence of the date for the submission of return being
extended under subsection (1) on the application of the dealer, the deposit of tax under subsection (2) is deferred, there shall be payable simple interest at the rate of one and quarter
percent per men sum on such deposit for the period commencing on the last date prescribed for
submission of the tax return and ending with the date of deposit of such amount.

(5) If any dealer discovers any omission or other error in any tax return
submitted by him, he may, at any time before the expiry of the time prescribed for submitting the
next tax return, submit a revised tax return. If the revised tax return shows a greater amount of tax
to be due than was shown in the original return, the dealer shall also deposit separately the
difference of tax due and the interest payable under sub-section (4) as if the time for submitting the
original tax return had been extended on the application of the dealer to the date of submission of
the revised tax return. If, the revised tax return shows lesser amount of tax to be due than was
shown in the original tax return the dealer may adjust the excess amount towards the tax due for
the subsequent tax periods.

................."

20. Under Rule 45 return has to be filed for each calendar month of assessment year and
every month shall be treated as tax period. The relevant part of Rule 45 reads as under :
984 INDIAN LAW REPORTS ALLAHABAD SERIES

Rule 45. Submission of returns - (1) In cases of dealers mentioned in the following
clauses, tax periods referred to in section 24, shall be as given in each such clause :-

(a) in case of a dealer who becomes liable for payment of tax for the first time in
any assessment year, tax periods shall be as under:

(i) first tax period for such assessment year shall commence on the date on which
the dealer has become liable for payment of tax and shall end with the last day of the calendar
month in which the dealer has become liable for payment of tax;

(ii) after expiry of first tax period, each calendar month, of the assessment year in
which the dealer has become liable for payment of tax, shall be a tax period;

......................

(2) Except as provided in sub rule (10) of this rule, every dealer liable to pay tax,
shall, before expiry of a period of twenty days, commencing on the day following the day on which
a tax period has expired, submit to his assessing authority tax return for each tax period in Form
XXIV along with detailed information, according to code numbers notified by the State Government
from time to time, in respect of each category of goods in which he carries on business:

Provided that a dealer, whose aggregate of turnover, referred to in sub-rule (1),
for any assessment year, is likely to exceed twenty-five lakh rupees or whose such aggregate for the
assessment year or part of the assessment year, as the case may be, immediately preceding such
assessment year, has exceeded twenty-five lakh rupees, shall, before expiry of a period of twenty
days after the last day of each calendar month of a quarter referred to in clause (b) of subrule (1),
deposit amount of net tax payable by him and Treasury Challan of such deposit shall be submitted
to the assessing authority and shall submit to his assessing authority tax return within twenty days
after expiry of the quarter along with proof of deposit of net amount of tax payable by him.

(4) Before submitting the return under sub-rule (2) for a tax period, the dealer
shall in the manner laid down in these rules, deposit the net amount of tax payable by him under
the Act as disclosed in the return and shall submit to the assessing authority, along with the return
a copy of the treasury challan in Form I:

Provided that where a Government department wants to deposit the tax by book
transfer, such department shall, before submitting such return, prepare a bill, in triplicate, for the
net amount of tax payable, endorse it to the assessing authority in accordance with the financial
rules on the subject and two copies thereof with such return. One of the copies shall be retained by
the assessing authority and the other copy shall be sent to the Accountant General, Uttar Pradesh
for crediting the amount to the account of the Commercial Tax Department.
8 All. M/S Uflex Limited Vs State Of U.P. & Ors.
985
Provided further that the net tax payable upto 20th March for the tax period ending
on 31st March of an assessment year, shall be deposited and Treasury Challan of such deposit
shall be submitted to the assessing authority upto 25th March of that year.

(5) The amount deducted under sub-section (1) or sub-section (7) of section 34 ,
shall be deposited into the Government Treasury by the person making such deduction before the
expiry of period of twenty days commencing on the day following the last day of the month in which
deduction is made.

(6) Every person, responsible for making tax deduction under any provision of
section 34, shall, for each quarter ending with thirtieth June, thirtieth September, thirty-first
December and thirty-first of March of each assessment year, submit the statement in Form XXV
containing following particulars:

...................

(8) Dealers having more than one place of business shall include the turnover of
all branches of his business in Uttar Pradesh in the return submitted for the principal place of
business and shall send intimation thereof to each Assessing Authority concerned.

(9) Upon expiry of the assessment year, every person liable to deduct amount of
tax at source under provisions of section 34, shall submit to the Assessing Authority having
jurisdiction over the principal place of business of such person, a statement in Form XXVII on or
before October 31, for the preceding assessment year,

Provided that the assessing authority may, on request of the person concerned and
for adequate reasons to be recorded in writing, extend the time for filing such statement for a
period not exceeding ninety days.

...............

21. Thus, even after grant of certificate of entitlement, an industry availing benefit of tax
exemption would have got benefit only when first it has to deposit net tax along with return and
thereafter such deposited tax shall be refunded.

22. Amendment Ordinance, 2008 came to be substituted by U.P. Act No. 19 of 2008
published on 29.08.2008 and came into force w.e.f. 01.01.2008.

23. So far as section 42 is concerned, it is in this backdrop, dispute which has arisen relates
to the period of January 2008 to June 2008 for which time to file return and deposit of tax had
already expired and it was not practically feasible to comply with the requirements of Section 42 as
amended.
986 INDIAN LAW REPORTS ALLAHABAD SERIES

24. Thereafter, Rule 70 was also amended by Amendment Rules, 2009 vide notification
dated 30.01.2009 which came into force from the date of publication in gazette. Rule 70 as it
existed earlier and stood after amendment by notification dated 30.01.2009 is reproduced as under:

Column-I
Existing rule

Column-II
Rule as hereby substituted

(1) Subject to other provisions of this
rule, dealers holding eligibility certificate,
granted before, on or after the date of
commencement of the Act, shall be
eligible for tax deferment, referred to in
section 42 to the extent and for the period,
whichever expires earlier, as under:

(a)(i) In case of an industrial
unit referred to in first paragraph of subsection (1), to the extent of the difference
of the amount of exemption from tax
mentioned in the eligibility certificate and
the aggregate of amounts of exemption
from payment of tax that has been
availed, either under the Uttar Pradesh
Trade Tax Act, 1948 or under the Central
Sales Tax Act, 1956, before the date of
the commencement of the Act; and

(ii) In case of an industrial unit referred to
in second paragraph of sub-section (1) of
section 42 of the Act, to the extent of
balance amount as on the date of
commencement of the Act liable for
deferment.

(b) For the remaining period of exemption
from tax as on the date of the
commencement of this Act, out of the
maximum period mentioned in the
eligibility certificate.

(2) Facility of deferment shall be
available in respect of net amount of
tax payable under the Act.
(1) Industrial unit availing or granted the
facility of exemption or reduction in the rate
of tax under erstwhile Act, may apply to the
Commissioner for issue of certificate of
entitlement duly filled and signed by the
person authorized under sub-rule (6) of rule
32, in form XLV up to 31st August 2008 or
within thirty days from the date of publication
of this rule whichever is later.

(2) A copy of the application along with
enclosures, if any, shall be served to the
assessing authority and certified copy of such
receipt shall be annexed to the application.

(3) The assessing authority shall, after
examining relevant record and after giving the
dealer a reasonable opportunity of being heard
if necessary, send to the Commissioner a
report in form XLVI within a period of thirty
days from the date of receipt of the
application.

(4) If the Commissioner is satisfied that
information furnished is correct and complete
and report of the assessing authority confirms
the particulars of the application, he shall
issue the certificate of entitlement in form
XLVII within sixty days of the receipt of
the application.

(5) If the net tax payable for tax periods
commencing on January2008 and ending with
30th June 2008,has not been deposited along
with return of the tax period the same shall be
deposited in following time schedule:-
8 All. M/S Uflex Limited Vs State Of U.P. & Ors.
987

Explanation: Net amount of tax payable
means-

(a) In case of an industrial unit availing
facility of exemption under the Uttar
Pradesh Trade Tax Act, 1948 and Central
Sales Tax Act, 1956 shall be the
differential amount of tax payable under
the Act on the sale of taxable goods other
than non-vat goods, manufactured in the
unit and input tax credit available to the
extent or proportionate to taxable goods
other than non-vat goods sold.

(b) In case of an industrial unit availing
reduction in the rate of tax, the net tax
payable will be the partial amount of net
tax computed as described in sub-clause
(a) of this explanation in proportion to the
rate of tax available for exemption to the
rate of tax payable under the

Uttar Pradesh Trade Tax Act, 1948 as if
the Uttar Pradesh Trade Tax Act, 1948
had not been repealed.

(3) Facility of tax deferment shall be
available under the Uttar Pradesh Value
Added Tax Act, 2008 and the Central
Sales Tax Act, 1956.

(4) Aggregate of amounts of tax, payment
of which is deferred for each assessment
year under the Uttar Pradesh Value
Added Tax Act, 2008 and the Central
Sales Tax Act, 1956, shall be debited
against the differential amount referred to
in sub-clause (i) or sub-clause (ii) of
clause(a) of sub-rule (1), as may be
applicable.

(5) Payment of tax, for which facility of
S.N.

Tax
period
ending on

Date
up
to
which net tax
has
to
be
deposited

1

31.03.2008

20.08.2008

2

29.02.2008

20.09.2008

3

31.03.2008

20.10.2008

4

30.04.2008

20.11.2008

5

31.05.2008

20.12.2008

6

30.06.2008

31.07.2008

(6) The net tax payable for the tax period
after the tax period ending on 30th June
2008 shall be deposited along with return of
the relevant tax period.

(7) If an industrial unit fails to deposit the
net tax payable for the period and within
the time prescribed under sub-rule (5) of
this rule, the unit shall be liable to pay the
interest provided under subsection (2) of
section 33 of the Act and penalty, if any, in
accordance with the provisions of section 54
of the Act
(8) The amount of refund or interest if any,
under section 42 of the Act shall be made in
accordance with the provisions of the rules 50
and 51.
(9) Aggregate of amounts of tax payable
under the Act and the Central Sales Tax Act,
1956, shall be debited from the amount
mentioned in the certificate of entitlement.
(10) Payment of tax, for which facility of
deferment is available, for any assessment
year, shall be deferred for a period of five
years and such period of five years shall
988 INDIAN LAW REPORTS ALLAHABAD SERIES

deferment is available, for any assessment
year, shall be deferred for a period of five
years and such period of five years shall
commence on the date immediately
following the last date prescribed for
submission of tax return of the last tax
period of such assessment year.

(6) The dealer availing the facility of
deferment of net tax payable under the
Act shall file statement of computation of
net
tax
payable,
total
amount
of
eligibility, amount availed up to last
month, amount availed in the month and
balance at the end of the month, along
with the return of the tax period.

commence on the date immediately following
the last date prescribed for submission of tax
return of the last tax period of such assessment
year.
(11) The dealer availing the facility of
deferment or refund of net tax payable under
the Act shall file statement of computation of
net tax payable, total amount of eligibility,
amount availed up to last month, amount
availed in the month and balance at the end of
the month, along with the return of the tax
period in form XLVIII

(Emphasis added)

25. This substituted Rule 70(5) though came into force on 30.01.2009 but requires
industrial units availing exemption/ concession to deposit tax payable during the period of January
2008 to May 2008 by 20.08.2008 to 20.12.2008, but for the period of June 2008 by 31st July 2008.
Sub Rule 7 further provides, if an industrial unit failed to pay tax as prescribed under sub Rule (5),
unit shall be liable to pay interest under Section 33(2) and penalty under Section 54.

26. The short and crucial issue raised in these writ petitions is that compliance of deposit of
net tax to which petitioners were entitled for exemption with regard to period of January 2008 to
June 2008 was practically impossible for the reason that Section 42 for the first time making such
different procedure came to be enacted on 16.07.2008 and relevant rule came to be enacted on
30.01.2009 by which date time for deposit of tax along with return had already elapsed. The
submission is that petitioners and other similarly placed industries could have never imagined or
dreamt that in future legislature will change scheme for entitlement of tax benefit for remaining
period/ amount in a totally different manner i.e. first amount of tax along with return would be
deposited and thereafter refund would be claimed. Before enactment of Ordinance of 16.07.2008,
petitioners had strictly and honestly followed requirement of statute as it was. Even the requirement
of amended provision is not objectionable to petitioners but impossibility in the manner of
compliance required by legislature renders the said provisions illogical, irrational and arbitrary. It is
also contended that in case the provisions are not irrational or arbitrary yet for observance and
compliance a reasonable opportunity has to be given to concerned industries like petitioners and
therefore, the aforesaid provisions need to be read down in a manner so that intention of legislature
become practicable and is capable of compliance. A provision has to be read as to make entire
8 All. M/S Uflex Limited Vs State Of U.P. & Ors.
989
things workable and functional, compliance for the period, already expired before actual
amendment is just improbable and impossible.

27. The learned Standing Counsel when confronted with the situation could not dispute that
with respect to period of January 2008 to June 2008 apparently an industry could not have complied
with provisions since returns had already been filed and time to file return and deposit tax as per
amended statute has already expired. He also could not dispute that even time frame mentioned in
sub Rule (5) of Rule 70 having already expired, no one could have complied the same and
necessarily all the industries availing tax exemption would attract a liability of interest and penalty
under Rule 70(6) and (7) though have not committed anything wrong or illegal. He however,
submitted that provision by itself is not irrational and arbitrary but can always be read in a manner
so as to render it functional, practicable and compliable.

28. We have heard learned counsel for the parties, perused the authorities and relevant
statutes.

29. The amended scheme of deposit of net amount of tax to which petitioners industries
were entitled for exemption alongwith return per-se is neither illegal nor arbitrary nor violates any
constitutional provision nor the legislature lacks competence in changing its policy and amending
statute. Therefore, Section 42(4) and (5) as enacted by amendment Act, 2008 cannot be said to be
ultra-vires. We find no force in the submission that Section 42(4) and (5) as amended by
Amendment Act, 2008 are bad for any reason whatsoever, and have no hesitation in us holding the
same. However, the question is whether compliance of Section 42(4)(d) of Act, 2008 as amended
by Amendment Act, 2008 read with Rule 70(5) as amended by U.P. VAT (First Amendment)
Rules, 2009 requires petitioners or any person similarly situated, to do something which is
practicably possible. A provision compliance whereof is improbable, irrational, in that view of the
matter is Rule 70(5) of U.P. VAT (First Amendment) Rules, 2009 is invalid, irrational and
unreasonable.

30. Section 42(4)(d) as amended by Amendment Act, 2008 seeks compliance in the
"prescribed manner". Under existing Act, 2008, and Rules 2008, there was no provision with regard
to deposit of tax, by industrial units having certificate of entitlement for exemption of tax along
with return, therefore, no procedure or scheme was prescribed till Rule 70 was amended by U.P.
VAT (First Amendment) Rules, 2009. The amended Rule 70 provides the manner in which net tax
payable along with return shall be paid and thus for the first time requirement of Section 42(4)(d) as
amended by Amendment Act, 2008 satisfied 'prescribed manner' only on 30.01.2009 and not before
that.

31. Now, rule framing authority in its wisdom requires deposit of tax and filing of return
for January 2008 by September 2008, March 2008 by October 2008, April 2008 by November
2008, May 2008 by December 2008 and for the month of June 2008 since amendment by
Ordinance was made by notification dated 16.07.2008, therefore, time was prescribed upto
31.07.2008. Unfortunately, rule framing authority completely missed and erred in failing to
990 INDIAN LAW REPORTS ALLAHABAD SERIES

appreciate that the period by which compliance under amended Rule 70(5) was required, has long
expired before actual framing of Rule 70(5) vide U.P. Value Added Tax (First Amendment) Rules,
2009 which came to be published by notification dated 30.01.2009.

32.