Allahabad High Court: Registered Dealer Cannot Withhold Excess Tax Realized From Purchasing Dealer

Allahabad High Court: Registered Dealer Cannot Withhold Excess Tax Realized From Purchasing Dealer

It cannot take refuge under the Uttar Pradesh Trade Tax Act, 1948

The Allahabad High Court has held that a registered dealer cannot withhold the tax from a purchasing dealer only because he deposited an excess amount of tax during the transaction.

The bench comprising Justice Piyush Agrawal added that he could not escape the liability of depositing the tax under the Uttar Pradesh Trade Tax Act, 1948 because a refund was due from assessment proceedings.

The Court stated, “The amount realized under the Act, must be deposited. If the amount is in excess, it will be refunded to the person from whom the amount was realized. The revisionist cannot get the benefit of a refund while passing the assessment order.”

The Case

A penalty was imposed on the revisionist-assessee under Section 15A(1)(a) of the Act. The Kanpur bench of the tax tribunal rejected the second appeal filed by the UP State Spinning Mills Company Limited (assessee) against the imposition of penalty. Thereafter, the revisionist approached the high Court.

Section 15A empowers the assessing authority (AA) to impose a penalty on the assessee in certain cases. Section 15A(1)(qq) provides a penalty where the assessee “realizes any amount as trade tax on sale or purchase of goods or in lieu of the tax by giving it a different name or color in contravention of the provisions of sub-section (2) of Section 8A.”

The assessee argued that as per its assessment order, it was entitled to a refund of Rs.21,658.50. In lieu of the refund, the tax realized by it was not deposited.

On the other hand, the revenue department submitted that the AA of the assessee informed the revisionist's AA about the separate charge of 4.4 percent of trade tax by the revisionist, paid by the assessee. Since the revisionist did not deposit the tax from the assessee, the penalty proceedings were valid.

The judge observed the finding that the revisionist realized that the trade tax at the rate of 4.4 percent from the spinning mill was never challenged.

While dismissing the tax revision, the bench held that only because the refund was due to the assessee in assessment proceedings, it did not mean that it was not obligated to deposit the trade tax from the purchasing dealer; it should deposit the statutory tax.