# The Commissioner, Commercial Tax Revisionist v. M/S Mahesh & Co., Lucknow

- **Citation:** (2020) 2 ILRA 1406
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2020-01-24
- **Case number:** Trade Tax Revision No. 198 of 2010
- **Bench:** Alok Mathur, Alok Mathur
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/the-commissioner-commercial-tax-revisionist-v-m-s-mahesh-co-lucknow-45491
- **Pages:** 8

## Text

1406 INDIAN LAW REPORTS ALLAHABAD SERIES
(2020)02ILR A1406

REVISIONAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 24.01.2020

BEFORE
THE HON'BLE ALOK MATHUR, J.

Trade Tax Revision No. 198 of 2010

The Commissioner, Commercial Tax
 ...Revisionist
Versus
M/S Mahesh & Co., Lucknow
 ...Opposite Party

Counsel for the Revisionist:
Standing Counsel

Counsel for the Respondents:
P.K. Sinha
.................................

Held: Para-

Case Law discussed:

(Delivered by Hon'ble Alok Mathur, J.

1. Heard Sri Rohit Nandan Shukla,
learned
Standing
counsel
for
the
revisionist, who has instant revision as
well as Sri P. K. Sinha appearing for the
respondent.

2. The State has preferred this
revision against the order of Commercial
Tax Tribunal dated 15th November, 2007
whereby the Tribunal has allowed the
appeal preferred by the revisionist.

3. Following questions of law has
been pressed by the revisionist:-

"(i)Whether the Tribunal was
justified in providing the benefit of
exemption of tax to the Respondent
contrary to the findings arrived at by the
Assessing Authority and that too without
considering the adverse material found
during survey dated 4/5th July, 2001 ?

(ii) Whether the Learned Trade
Tribunal was justified in waiving of the
interest which was liable under Section
8(1) on the admitted sale turn over like
admitted tax?

(iii) Whether the judgment and
order passed by the Tribunal is justified
ignoring the facts set out in the assessment
order which was passed strictly in
accordance facts available on records as
also the provisions of the Trade Tax Rules
?"

4. It has been submitted by counsel
for the revisionist that the respondent
/Dealer is engaged in business of betel
nuts,
catechu,
tea,
Ilaichi,
General
merchant etc. A survey was conducted by
the Central Excise Department with regard
to the business place of M/s Harsingar
Gutaka Pvt. Ltd. and M/s Gopal Grinding
Industries on 4th and 5th July, 2001 and
on the inspection it was found that the
owner of the firm M/s Mahesh & Co.(The
respondent/Firm) is also the Director of
M/s
Harshringar
Gutka
and
the
respondent/firm supplied the raw material,
betel nuts, catechu etc. to M/s Harshringar
Gutka Pvt. Ltd. The stock of the
respondent/firm was in Satnam Cold
Storage and on on inspection 200 bags of
betel nuts was found related with M/s
Mahesh and Co.

5. The grinding works of the goods
sent by M/s Mahesh & Co. was being done
by M/s Gopal Grinding Industries and in
the
said
Gopal
Grinding
Industries
difference in stock was found. On the basis
of material collected during aforesaid
inspection the assessing authority rejected
2 All. The Commissioner, Commercial Tax Vs. M/S Mahesh & Co., Lucknow
1407
the books of accounts and determined tax
of Rs.1,18,27,701.00 on the sale turnover
of Rs.15,20,000/- vide assessment order
dated 4.2.2006. While passing the order
the assessing authority recorded that there
was huge difference in the stock by the
respondent
and
further
that
Gopal
Grinding Industries did not show any
purchase or sale itself but the said
purchase of betel nut was certainly done
with collusion with M/s Mahesh & Co.
and Harshringar Gutka Pvt. Ltd. as has
been borne out from the report submitted
by Central Excise department during the
physical verification. It was recorded that
in the assessment order that there was
discrepancies in respect of 1000 kilograms
of betel nuts in the accounts of M/s Gopal
Grinding Industries which has been borne
out from the statement.

6. As against the assessment order
the respondent preferred first appeal under
Section 9 of U.P. Trade Tax Act 1948
before the Joint Commissioner (Appeal)-2,
Trade Tax, Lucknow and the appeal was
dismissed by means of order dated
23.8.2006.

7. The first appellate authority
concurred with the findings of the
assessing authority and rejected the
contentions of the respondent holding that
evasion of tax has been established during
the course of survey conducted on
4/5.7.2001 and the said tax evasion has
been done by the respondent firm in
collusion with M/s Harshringar Gutka Pvt.
Ltd. and further he was not satisfied with
the explanation given with regard to cash
transaction of Rs.12,20,000.00. It also
stated that form 3 B has been obtained
after 2 years, therefore, the same are not
valid for the assessment year in question.
It was further observed that the sale has
been made by the respondent-firm after
purchase of goods from unregistered firm
and gave cogent reasons for imposing the
tax and concurred with the reasons given
by the assessing authority and confirmed
for imposing tax on respondents.

8. Being aggrieved by the order
passed by first appellate authority dated
23.8.2006 the respondent preferred second
appeal
before
the
Commercial
Tax
Tribunal. The Tribunal by means of order
dated 15.11.2007 has partially allowed the
appeal. The Tribunal in the impugned
judgment has considered the fact that the
owner of the respondent firm is also the
Director of M/s Harshringar Gutka Co.
and on the basis of the allegations of
collusion with regard to evasion of tax
with Gopal Grinding Industries and further
that the respondent firm has continuously
supplied betel nuts without entering the
same in the books of accounts. The
Tribunal did not accept and the findings of
assessing authority as well as first
assessing
authority
while
partially
allowing the appeal of the assesse.

9. The Tribunal observed that only
on the basis of conjectures and surmises
the assessment been done and the
revisionist has been assessed to tax with
regard to goods which were dispatched
form Gopal Grinding Industries

10. The second issue which was
considered by the Tribunal was with
regard to the interests levied on the tax
while rejecting form 3 B. In this regard the
Tribunal observed that the respondent had
submitted Form 3 B dated 5th March,
2004
while
the
transactions
were
conducted for the assessment year 20002001. The said form 3 B being beyond two
years were not liable to be accepted and,
1408 INDIAN LAW REPORTS ALLAHABAD SERIES
therefore, benefit of Form 3B was not
admissible to the respondent.

11. They further held that according
to Section 8 the interest amount could not
be levied upon the respondent as disputed
amount would amount "admitted tax" and
the said amount not being admitted tax no
interest was liable to be paid according to
Explanation of Section 8 of U.P. Trade
Tax Act. 1948.

12. To deal with the question with
regard to addition made by the assessing
authority it will be relevant to consider the
reasons stated by the assessing authority in
his order dated 4.2.2006. It has been
observed that information was received by
the department from Central Excise
Department which had conducted the
inspection with regard to M/s Harshringar
Gutka Pvt. Ltd. which is a sister concern
of M/s Gopal Grindings Industries, M/s
Mahesh and Company and M/s Satnam
Cold Storage from where the documents
were examined by Deputy Commissioner
(SIT) Sales Tax, Region B, Lucknow.

13. It has been stated that during the
inspection it was found that Shri Mahesh
is the Director of M/s Mahesh and
Company as well as M/s Harshringar
Gutka Pvt. Ltd where he is working as
Managing Director. M/s Mahesh and
Company supplied raw material for
preparation of end product by M/s
Harshringar Gutka Pvt. Ltd. It was
discovered that raw material which is
being supplied by M/s Harshringar Gutka
Pvt. Lt. were sent through M/s Gopal
Grinding Industries, Daliganj, Lucknow.

14. During the investigation the stock
allegedly sent by M/s Mahesh and
Company to the Gopal Grinding Industries
was not found but it was discovered that it
found its way to Satnam Cold Storage
which premises were found locked at the
time of inspection.

15. It was also found that there was
difference in raw material being supplied
by M/s Gopal Grinding Industries to M/s.
Harshringar Gutka Pvt. Ltd. and difference
in the two it was presumed was being sold
to unregistered dealers with intention to
evade tax. It was also presumed that
unexplained cash to the tune of Rs.
12,20,000/- was utilized for purchase and
sale from unregistered dealers which was
also brought to tax.

16.

Learned
counsel
for
the
respondent submitted that he has been
maintaining regular book of accounts and
has been paying taxes accordingly. He has
challenged the assessment made by the
assessing authority solely on the ground
that the report submitted by the Excise
Department on an inspection made of Ms/
Gopal
Grinding
Industries.
He
has
vehemently
urged
that
M/s
Gopal
Grinding Industries is a separate firm and
is is not connected to the opposite parties
and the amount of Rs.12,20,000/- found in
cash book was with regard to transactions
between various parties who were duly
recorded and was in no way connected
with sale and purchase of Gutka or any of
its ingredients.

17. The Revenue could not justify
the nexus between the unaccount fund and
cash book and the transaction between
various firms with regard to purchase and
sale of various ingredients of gutka and,
therefore, the first appellate authority came
to the conclusion that opposite parties
cannot be held to be liable for evasion of
taxes and also that the amount found in
2 All. The Commissioner, Commercial Tax Vs. M/S Mahesh & Co., Lucknow
1409
cash book could not related to the
transactions conducted by the opposite
parties, therefore, set aside the order of
assessing authority in this regard.

18. The first appellate authority
concurred with the findings of the
assessing authority and rejected the
findings of respondents. Considering the
aforesaid facts the Tribunal in the second
appeal concluded that books of accounts of
the respondent has been rejected without
any reasonable basis. During inquiry no
adverse material was found in the premises
of the respondent. Just because certain
material dispatched from Gopal Grinding
Industries to Harshringar Gutka Pvt. was
not tracable in the said premises adverse
inference has been recorded without there
being any material to support such
findings. Only reasons for rejecting the
books of accounts is the cash entry for
12,20,000/- for which explanation has
been given by the respondent that the
Tribunal in the aforesaid circumstances
were satisfied with the explanation given
by the respondent, therefore, decided the
second appeal in favour of the respondent
and against the Revenue in this regard.

19. Considering the submissions of
both the parties it emerges that only
because there was some difference in stock
with regard to inspection conducted by
Excise Department in the premises of
Gopal Grinding Industries additions were
made while assessing the respondent.

20. The second ground for revision
that Rs.12,20,000/- was found in the cash
book which according to the assessing
authority was linked to the transactions of
sale and purchase of raw material in
manufacturing
of
Gutka,
while
the
assessee was able to satisfy the Tribunal
that the amount found in cash register was
not related to the sale and purchase
transactions and that there was no evasion
of tax by the respondent. The Tribunal in
this regard has considered the entire
material and gave reasons for coming to
the said conclusion.

21. The State, on the other hand,
while assailing the said finding of the
Tribunal had only reiterated the findings
spelt out in the order passed by the
assessing authority as well as the first
appellate authority and no fact could be
placed before it which could persuade us
from giving a finding different from the
finding recorded by the Tribunal. In this
regard, I do not find any infirmity with the
orders of the Tribunal and the question
number (i) is answered against the
revisionist and in favour of the assessee.

22. The Tribunal has accepted the
reasoning given by the assessee that the
amount
of
cash
of
Rs.12,20,000/-
discovered was not utilized towards the
sale or purchase of raw material and also
that the Assessing Authority could not
found any discrepancy in the cash book
and various documents and accounts
maintained
by
the
assessee
and,
therefore, the rejection of book of
accounts was against the provisions of
law. It has also been observed by the
Tribunal that from the cash book
maintained by the assessee transaction
from the date 3.7.2000 to 15.11.2000 the
cash of Rs.12,20,000/- found could not
be said to be related to any transaction
and nor the said transaction has been
pointed out in the assessing order and,
therefore, no adverse interference in this
case can be made against the assessee
and, therefore, the additions made were
set aside.
1410 INDIAN LAW REPORTS ALLAHABAD SERIES

23. No fact could be placed by the
State which can persuade this Court to
take a view different from the view
recorded by the Tribunal and, therefore,
this question is answered in favour of the
assessee as against the the respondent.

24. The second question relates to
the additions made by the Assessing
Officer while rejecting Form 3 Kha as
from 3.1.1991 to 5.3.2004 which are not
valid for the assessment year 2000-01. The
Assessing Officer has levied interest
payable on the admitted sale turnover as if
it was admitted tax. The Tribunal while
allowing the appeal of the assessee has
upheld the imposition of tax but waived
off all the interest imposed on the said tax.
It is the case of the assessee that the
turnover in the return was not admitted
and, therefore, interest under Section 8
could not have been levied.

25. In the present case, Form 3 Kha
was not valid for the assessment year in
question and, therefore, the tax was rightly
levied upon the sale transaction. In the
case of M/s. Hindustan Aluminium
Corporation Ltd. Vs. Commissioner of
Sales Tax and Commissioner of Sales
Tax v. M/s. Hindustan Aluminium
Corporation, reported in 1996 U.P.T.C.
795 the word "tax admittedly payable has
been considered in detail, which is quoted
hereinbelow:-

"As regards the last contention
of the learned Standing Counsel Section 8
of the Act, as I have mentioned earlier
Section 8 of the Act uses an expression 'tax
admittedly payable' and then it uses the
item on which the interest shall become
due and to be payable i.e. 'upaid amount'
and then under expression 'such amount'
the use of these expression indicate that as
regards tax admittedly payable and the
said amount of tax is not deposited within
the time prescribed of any part of that
amount remain unpaid then on that unpaid
account till the date of payment of such
amount interest shall become due and
payable. It means the expression 'tax'
admittedly payable' refers to the amount of
tax admittedly payable according to the
dealer i.e. the amount of tax calculated on
his turnover by the dealer on the basis of
the entry admitted by him to be applicable
over the admitted turnover of the dealer
and this section indicates that out of the
amount of tax admittedly payable if the
same either in part or in whole is not
deposited in time the liability of interest
will arise in regard to the amount. This
leads once to the only conclusion that any
amount of tax in regard to which there is a
dispute be it on account of the dispute
particular
and
dispute
regarding
applicability of the entry and the rate of
other wie under law the interest will not be
payable. No where this section discloses
any such thing as bonafide or malafide
dispute and therefore, the question of bona
fide and mala fide is irrelevant. If there
has been a dispute as in the present case
with reference to the applicability of the
entry under which the item in question was
covered which dispute had been decided
by the Supreme Court finally as mentioned
earlier after debate, the dispute did exist
and therefore, the dealer could be
subjected to imposition of interest. It is
another thing that the matter of precaution
dealer might have realized the tax but that
is not relevant at this juncture because the
section does not provide any such thing as
bona fide dispute. This had been the view
taken by the Supreme Court as well as in
the case of Commissioner Sales Tax v.
M/s.Qureshi
Cruciblc
Centre,
1993
U.P.T.C. 901(8): A.I.R. 1994. S.C. 25,
2 All. The Commissioner, Commercial Tax Vs. M/S Mahesh & Co., Lucknow
1411
after having referred to the observations of
the learned Single Judge of our High
Court in the revision which reads as
under:
'There have been no finding by the
Tribunal that the assessee acted mala fide
in not depositing the tax at the rate 7 per
cent. The demand of interest was not
justified.'

Their Lordships observed:

"We are unable to see any
relevance of the mala fides in the case,
Section 8 (1) does not say that the nonpayment should be mala fide. This is also
not a case where the rate of tax applicable
was in dispute or disputed by the dealers.
This is simply a case where the dealer
calculated the tax at an inapplicable rate.
He did not and could not plead ignorance
of the change in rate of tax selected two
years earlier. In the circumstances, the
concept of such mala fide was not relevant
in the context."

26. Section 8 of the U.P. Trade Tax
Act is quoted hereinbelow:

"8. Payment and recovery of tax:

(1) The tax admittedly payable
shall be deposited within the time
prescribed or by the thirty-first day of
August, 1975, whichever is later failing
which simple interest at the rate of 2 per
cent per mensem shall become due and be
payable on the unpaid amount with effect
from the day immediately following the
last date prescribed or till the date of
payment of such amount, whichever is
later and nothing contained in Section 7
shall prevent or have the effect of
postponing the liability to pay such
interest.

Explanation:- For the purposes
of this sub-section, the tax admittedly
payable means the tax which is payable
under this Act on the turnover of sales or,
as the case may be, the turnover or
purchases, or of both, as disclosed in the
accounts maintained by the dealer, or
admitted by him in any return or
proceeding under this Act, whichever is
granted
or,
if
no
accounts
were
maintained then according to the estimate
of the dealer and includes the amount
payable under Section 3B or sub-section
(6) of section 4B."

11. The explanation to the said
sub-section clearly defines the term " the
tax admittedly payable" and illustrates the
situation in which the tax would be
deemed to be admittedly payable, the same
are as follows:-

(i) The tax which is payable
under this Act on the turnover of sales, as
the case may be, the turnover of purchase,
or both, as disclosed in the accounts
maintained by the dealer.

(ii) The tax admitted by the
dealers in any return or proceedings under
this act, whichever is greater.

(iii)
If
no
accounts
were
maintained, then according to the estimate
of the dealer and included the amount
payable under section 3-B or subsection
(6) of section 4-B."

27. It is not in dispute in the present
case that the assessee himself mentioned
certificate in their accounts the turnover to
claim benefit of Section 3 Kha, which
according to the provisions of the Act
were on the face of it not valid and this did
not require any deep examination of the
issue.

28. Section 4-B of the U.P. Trade
Tax Act, 1948 provides special relief to
certain manufacturers. The said section
opens with a non-obstante clause and has
precedence over sections 3, 3A, 3AAAA
1412 INDIAN LAW REPORTS ALLAHABAD SERIES
and 3D of the Act. The State legislature
has provided special relief to certain
manufacturers upon the fulfillment of the
conditions
mentioned
therein
for
manufacture
of
specified
goods.
A
manufacturer holding the recognition
certificate shall be liable to pay tax at the
concessional rate or be wholly or partially
exempted from tax on the purchase of raw
material or packing material, as may be
notified in the gazette of the State
Government in that behalf. Clause (b) of
section 4B (1) gives relief to a selling
dealer to such manufacturers holding
recognition certificate on furnishing by the
selling dealer the prescribed form which is
form 3-B.

29. The Rule 25-B is the relevant
rule which prescribes the document 3-B
the requisite form to be furnished by such
manufacturer to its selling dealer to avail
the benefit of concessional rate of tax or
tax at nil rate, as the case may be. Rule 25B is reproduced hereinbelow:-

"Rule 25-B. Authority from
which
Declaration
Forms
may
be
obtained; use custody and maintenance of
records of such Forms and matters
incidental thereto.

(1) Where a dealer holding a
recognition certificate purchases any
goods referred to in clause (b) of subsection (1) of section 4-B, for use as raw
material for the purpose of manufacture of
any notified goods, he shall, if he wishes to
avail of the concession referred to therein,
furnish to the selling dealer a certificate in
Form
III-B
(hereinafter
called
a
"Declaration Form").

.....

(3) If the trade tax officer is
satisfied that the demand that for blank
declaration Form referred in sub-rule (1)
is genuine and reasonable, he may issue
such number of forms a he deems fit...... A
form issued by the Trade Tax Officer in a
financial year shall be valid for the
transaction of purchase or sale made
during the financial year as also made
during two financial year immediately
preceding and succeeding that finnancial
year:"

30. It is pertinent to mention at this
stage that the assessing authority in its
order dated 4.2.2006 considered the facts
with respect to filing of Form 3-B. It is
mentioned that the respondent dealer filed
the 44 number of Form 3-B against the
sale of Rs.1,68, 82, 230/- and on
investigation of the said 44 Forms, it is
found that the same were issued on
5.3.2004 from the department hence these
all the 44 forms were not valid for the
financial year 2000-01 and were valid for
financial year 2001-02. Hence, the tax at
the rate of 10 per cent has been levied with
respect to sale against which form 3-B
were found invalid.

31. It is found that the respondent
dealer himself filed the invalid Form 3 -B,
contrary to provisions of the Act. It was
well
within
the
knowledge
of
the
respondent dealer that 44 Form 3-B were
not valid for the financial year 2000-01
and the respondent dealer is liable to pay
the tax at full rate i. e. at the rate of 10 per
cent but despite the fact, respondent dealer
did not deposit the tax at full rate i.e at the
rate of 10 per cent and deposited the tax at
concessional rate at the rate of 2.5 per cent
and deliberately claimed the exemption
which was not admissible to him.

32. Hon'ble Supreme Court in
Pepsico
India
Holdings
Ltd.
Vs.
Commissioner of Trade Tax, Lucknow on
2 All. Triveni Engineering & Industries Ltd., Naini Allahabad Vs. Commissioner Commercial Tax, U.P., Lucknow 1413
5th April, 2011 in Civil Appeal No.2926
of 2011 arising out of SLP (C) No.10522
of 2008 set at rest the dispute as under:-

"14.The appellant had taken the
chance to get a judicial verdict on the said
issue. Once it has been confirmed that the
tax is payable under the Act, the same
becomes payable from the date when it
was due and not from th date when the
judicial verdict was pronounced (unless
and until, in a case, the court specifies a
particular date from which it shall be
payable). Thus, once it has been confirmed
by the Court that the tax is payable under
the Act it would be covered within the
definition of the term "the tax admittedly
payable" as defined in the explanation to
section 8(1) and, in case, the tax had not
been paid then the same becomes payable
along with interest as mentioned in section
8(1)of the Act.

......

16. As in the present case the tax
becomes admittedly payable once it has
been held that the tax is payable under the
Act, the interest would be payable in terms
of sub-section (1) of section 8 of the Act
and not in terms of sub-section (1B) of
Section 8 of the Act.

17. This court in the case of
Commissioner of Sales Tax v. Qureshi
Crucible Centre, 1993 Supp (3) SCC 495
has held that where a dealer fails to pay
tax at the correct rate because he claimed
not to know the revision in the rate, the
dealer remains liable to pay interest at a
higher rate, penal rate under section 8(1)
from the date when the tax became due
and payable. In such a case, the dealer
cannot claim that he is liable only from the
date of the assessment order fixing the
correct rate of tax.

Similarly, in case where the
dealer has taken a chance and it has been
held that the tax is payable under Act, the
same becomes payable from the date when
it was due."

33. On applying aforesaid principles
to the facts of the present case, the
Tribunal has wrongly granted relief to the
assessee
by
deleting
interest.
After
rejection of Form 3-b the amount of
interest levied on admitted tax was liable
to be paid by the assessee and the order of
the Assessing Officer in this regard is in
conformity with the statutory schemes as
well as the judgments quoted hereinabove.
The order of the Tribunal in this regard is
set aside and the question of law No.(ii) is
answered in favour of the revenue as
against the assessee.

34. The revision is accordingly
partly allowed.
----------
(2020)02ILR A1413

REVISIONAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 18.01.2020

BEFORE
THE HON'BLE ALOK MATHUR, J.

Sales/Trade Tax Revision No. 211 of 2006

Triveni Engineering & Industries Ltd
Naini Allahabad ...Revisionist
Versus
Commissioner Trade Tax, U.P., Lucknow
 ...Opposite Party

Counsel for the Revisionist:
Sri Kunwar Saksena, Sri Nishant Mishra

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

A. Trade/Sales Tax - Rectification of
mistakes - Section 22 - U.P. Trade Tax
Act, 1948 - application should necessarily