M/S SARDAR MOTORS CIVIL LINES FAIZABAD THROU ITS PARTNER V. COMMISSIONER OF COMMERCIAL TAX U.P.LUCKNOW

STRE/186/2012

AI Insights

The case revolves around M/S Sardar Motors, an authorized dealer of Vikram Three Wheelers, who faced a reassessment under the Trade Tax Act after a Supreme Court judgment in Mohd. Ekram Khan and Sons Vs. Commissioner, U.P., Lucknow, which changed the taxability of transactions involving replaced spare parts during warranty periods. Initially, Sardar Motors was exempted from tax for such transactions, but following the Supreme Court's decision, the tax authorities reopened the assessment for the year 1999-2000, leading to additional tax demands. Sardar Motors contested this reassessment, arguing that it was arbitrary and not supported by the necessary legal grounds, as the original assessment had been concluded based on the law as it stood at the time.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 762770 (HC-LUCKNOW)
• Appeal Type: Others
• Pronouncement Date: 01-08-2024
• Assessment Year: misc
• Other Referred Cases: Mohd. Ekram Khan and Sons Vs. Commissioner, U.P., Lucknow, Rathi Industries Limited Vs. State of U.P. and another, M/s Samsung India Electronics Pvt. Ltd. Vs. State of U.P. & Ors, Dy. Commissioner of Income Tax Vs. Simplex Concrete Piles (India) Limited
• Laws Referred To: Trade Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: C S C
• Assessee Lawyers: PRADEEP AGRAWAL
• Keywords: Assessment Reopening; Credit note; Exemption; Spare parts; Trade Tax; Warranty
• Section: 21(2)

Judgement Text

"Neutral Citation No. - 2024:AHC-LKO:52744 Court No. - 7 Case :- SALES/TRADE TAX REVISION No. - 186 of 2012 Revisionist :- M/S Sardar Motors Civil Lines Faizabad Throu Its Partner Opposite Party :- Commissioner Of Commercial Tax U.P.Lucknow Counsel for Revisionist :- Pradeep Agrawal Counsel for Opposite Party :- C.S.C. Hon'ble Alok Mathur,J. 1. Heard Sri Pradeep Agarwal, learned counsel for revisionist as well as learned Standing Counsel for respondents. 2. It has been submitted by learned counsel for revisionist that revisionist is an authorized dealer of Vikram Three Wheelers Scooters manufactured by M/s Scooters India Ltd. but does not carry job work of fabrication and mounting of bodies on Three Wheeler Chassis of Vikram. It has further been stated that during the Assessment year 1999-2000, the revisionist made tax paid purchasers of Vikram Three Wheeler manufactured by M/s Scooters India Ltd. and also paid tax on the purchase of Vikram bodies from M/s Hindustan Steel Industries, Lucknow. 3. It is stated that both the aforesaid purchases were tax paid purchases in the State of U.P. and form 3-A was used for purchase of Three Wheeler Chassis or the bodies. The assessment for the year 1999-2000 was completed vide order dated 04.01.2002 and the turnovers of Vikram Three Wheelers and the bodies were duly considered by the assessing authority who after examination of records has recorded a specific findings and granted exemption to the revisionist in this regard. 4. After the assessment was completed on 04.01.2002 a notice was received from Additional Commissioner-I, Trade Tax, Gorakhpur dated 08.12.2005 invoking Sub-Section 2 of Section 21 of the Trade Tax Act requiring the revisionist to show cause as to why the assessment be not reopened with regard to the fact that the revisionist has manufactured three wheeler by mounting the bodies of chassis of three wheeler. The revisionist duly responded to the aforesaid notice on 26.11.2005 and controverted all the facts as stated therein and submitted that the assessing authorities have duly considered all the aspect of the matter before finalizing the assessment against the revisionist and it was not a case falling under Section 21(2) of the Act necessitating reopening of the assessment. 5. Subsequently, the Additional Commissioner-I, Trade Tax, Gorakhpur granted his approval on 03.12.2005 pursuant to which fresh assessment was carried out. While carrying out the fresh assessment, the sale of spare parts of tractor on which the exemption was previously granted by the Assessing Authority was also subjected to tax since they were replaced during the period of warranty and considering the judgment of the Supreme Court in the case of Mohd. Ekram Khan and Sons Vs. Commissioner, U.P., Lucknow, 2004 (6) SCC 183 decided on 21.07.2004, it was held that the petitioner has received credit note in lieu of spare parts which were replaced during the period of warranty and accordingly it was a 'sale' on which the said transaction would be liable to assessment. 6. The revisionist being aggrieved by the aforesaid proceedings initiated under Section 21(2) of the Trade Tax Act had filed an appeal before the first appellate authority which was rejected by means of order dated 26.05.2007 and the second appeal before the Commercial Tax Tribunal was also rejected by means of order dated 20.09.2012. Both the authorities had duly considered the judgment of the Supreme Court in the case of Mohd. Ekram Khan(Supra) and held that considering the fact that the petitioner had received a credit note in lieu of spare parts which were replaced during the period of warranty, he was liable to be assessed for tax and accordingly upheld the second assessment order pursuant to the order passed under Section 21(2) of the Act. 7. Learned counsel for revisionist has submitted that the very re-initiation of proceedings under Section 21(2) is arbitrary and beyond the ambit of Section 21 inasmuch as the words \"reason to believe\" convey that there must be some rational basis for the assessing authority to form the believe that the whole or any part of the turnover of a dealer has, for any reason, escaped assessment to tax for some year. If there are, in fact, some reasonable grounds for the assessing authority to believe that the whole or any part of the turnover of a dealer has escaped assessment, it can take action under the said section. Reasonable grounds necessarily postulate that they must be germane to the formation of the belief regarding escaped assessment. If the ground are of an extraneous character, the same would not warrant initiation of proceedings under section 21(2). In support of his submissions, he has relied upon the judgment of this Court in the case of Rathi Industries Limited Vs. State of U.P. and another (Writ Tax No. 1310 of 2005). 8. Learned counsel for petitioner has further submitted that the assessment cannot be reopened in light of the judgment of the Supreme Court where some new proposition has been laid down necessitating imposition of the tax on the assessing. He submits that assessment proceedings were concluded on 04.01.2002 while judgment in the case of Mohd. Ikram Khan was delivered only on 21.07.2004 after lapse of more than two and a half years after completion of the assessment and the judgment in itself would not be a valid ground for reopening the assessment. He submits that all the aspect of the matter were duly considered by the Assessing Authority while finalizing the assessment and the judgment in any case would be applicable prospectively and merely on the basis of judgment invocation of provision of Section 21(2) by the respondents is arbitrary. 9. Learned Standing Counsel on the other hand has opposed the writ petition. He has submitted that the question as to whether tax which have been changed during the period of warranty was being considered by the Supreme Court with regard to a matter which has arisen from the State of U.P. and was concluded by the Supreme Court in the case of Mohd. Ekram Khan(Supra) where it was clearly held that in concluding paragraph No. - I where spare parts are removed for which the credit note is received from the manufacturer, the same transaction would amount to a sale for which assessee would be liable to pay tax under U.P. Trade Tax Act. 10. He submits that there is no infirmity committed either by the Assessing Authority or the first appellate authority or Tribunal and prayed for dismissal of the revision. 11. I have heard learned counsel for parties and perused the record. 12. The question which deserves to be considered in the present case as raised by the revisionist is as to whether the authority erred in reopening the assessment on the ground that in the judgment of Mohd. Ikram Khan the transaction in question was held to be amenable to tax. It is clear that at the time when the original assessment order was passed, it was duly considered by the Assessing Authority that the petitioner had replaced the spare parts of the vehicle during the period of warranty and such replacement of spare parts during the aforesaid period, the assessee was not liable to tax and consequently granted the exemption. 13. This legal ground was clearly reversed by the Supreme Court in the facts of the present case and the transaction where the revisionist had been given a credit note from the manufacturer for replacing spare parts during the period of warranty came within the ambit of sale and amenable to tax. The question herein as to whether the said assessment could have been reopened in light of the aforesaid judgment. This aspect of the matter has been duly considered by this Court in the case of M/s Samsung India Electronics Pvt. Ltd. Vs. State of U.P. & Ors, 2017 UPTC 63 in paragraph Nos 11, 14 & 15 has held as under:- \"11. Further, a subsequent judgment cannot be used to reopen assessments or disturb past assessments which have been concluded. [See Para 7, Austin Engineering V. JCIT (2009) 312 ITR 70 (Guj.) Para 4 and 5, Bear Shoes 2011 (331) ITR 435 (Mad.), B.J. Services Co. Middle East Ltd. v. Deputy Director (2011) 339 ITR 169 (Uttarakhand), Sesa Goa V. JCIT 2007 (294) ITR 101 (Bom.), Geo Miller and Co. 2004 (134) Taxmann 552 (Cal)]. Reliance is also placed on the decision of the Hon'ble Supreme Court in MEPCO Industries V. CIT, (2010) 1 SCC 434, where the CIT on the basis of a subsequent decision of the Supreme Court sought to rectify his earlier order. The Hon'ble Court held that this would amount to a change of opinion. 14. Impugned notices are bad and against principles enunciated by Apex Court in afore quoted decisions. This renders the notices and orders bad and have been passed in colourable exercise of powers and are without jurisdiction. 15. This writ petition has to be allowed with cost as law is well settled that assessment once having become final should not have been reopened on the basis of judgment of the Apex Court.\" 14, Similarly the Supreme Court in the case of Dy. Commissioner of Income Tax Vs. Simplex Concrete Piles (India) Limited, 2012 (25) Taxmann.com 283 (SC) has held as under: \"3. We see no error in the observation made by the Division Bench of the High Court in the impugned judgement that once limitation period of four years provided under Section 147/149(1A) of the Income Tax Act, 1961 (for short, Rs. The Act') expires then the question of reopening by the Department does not arise. In any event, at the relevant time, when the assessment order got completed, the law as declared by the jurisdictional High Court, was that the civil construction work carried out by the assessee would be entitled to the benefit of Section 80HH of the Act, which view was squarely reversed in the case of CIT Vs. N.C. Budharaja & CO. (1993) 204 ITR 412/70 Taxman 312 (SC). The subsequent reversal of the legal position by the judgement of the Supreme Court does not authorize the Department to reopen the assessment, which stood closed on the basis of the law, as it stood at the relevant time.\" 15. In view of the above cited verdict and the principle enunciated therein, the reopening of proceedings of completed assessment in question is rendered bad and colourable exercise of power and without jurisdiction. It is also clear that once the assessment has become final, it should not be reopened on the basis of subsequent judgment of the Supreme Court. In view of the aforesaid facts and circumstances of the case, this Court is of the view that further reassessment have been initiated on the basis of subsequent judgment of the Apex Court which cannot be used to reopen assessment or disturbed to pass assessment which have been concluded. The department cannot be authorized to reopen assessment, which stood closed on the basis of law as and it stood at the relevant time. 16. In view of the above the writ petition is allowed. The impugned order dated 20.09.2012 is set aside. (Alok Mathur, J.) Order Date :- 1.8.2024 Ravi/ Digitally signed by :- RAVI SHANKAR SRIVASTAV High Court of Judicature at Allahabad, Lucknow Bench "