Supreme Court Upholds Revenue in U.P. Sales Tax Act Successive Dealer and Appeal Maintainability Dispute. Importer Constitutes First Successive Dealer Under Section 3A, and 'Tax Admitted' Under Proviso to Section 9(1) Means Tax Admitted Before Assessing Authority.

Case Note & Summary

The case arose from a Division Bench judgment of the Allahabad High Court in sales tax references and writ petitions under the Uttar Pradesh Sales Tax Act, 1948. The assessee, a registered dealer carrying on business in hydrogenated oil, washing soap, and import and distribution of vanaspati as agent of Malwa Vanaspati and Chemical Company Ltd., Indore, was assessed for the assessment year 1957-58. It filed a return disclosing a turnover of Rs. 1,66,387.03 and paid Rs. 1,060.30 towards tax. Before the assessing authority, it admitted a tax liability of Rs. 10,339.19, which it had collected from purchasers. The Sales Tax Officer, after making enquiries and granting 30 adjournments, concluded that the total turnover was Rs. 58,06,132.30 and determined tax liability at Rs. 3,62,691.62 under Section 3A of the Act by best judgment assessment, as the assessee was absent on the final hearing date of 24 March 1962 and assessment would have been time-barred. The assessee filed an appeal within 30 days but deposited only Rs. 1,600. The appellate authority initially entertained the appeal, but upon objection by the Sales Tax Officer, dismissed it as not maintainable for non-compliance with the proviso to Section 9, which required payment of the amount of tax admitted by the appellant to be due. At the assessee's instance, questions were referred to the High Court. During the pendency of the reference, the assessee filed writ petitions under Articles 226 and 227 of the Constitution challenging the validity of the notification issued under Section 3A and the recovery proceedings. The High Court dismissed the writ petitions and held that the appeal was properly dismissed. The assessee then appealed to the Supreme Court by special leave. The Supreme Court considered two main legal issues. First, whether an importer can be considered a successive dealer under Section 3A of the U.P. Sales Tax Act so as to be subject to single point levy, and consequently whether the notification under Section 3A was ultra vires. Second, whether the dismissal of the appeal for non-payment of the admitted tax under the proviso to Section 9(1) was legal, specifically what the expression 'tax admitted' meant. The appellant argued that an importer is not one of the successive dealers contemplated by Section 3A because the series of sales by successive dealers begins only after import; therefore the notification was ultra vires. It also contended that the appeal was illegally dismissed because the relevant tax admitted for Section 9(1) was the tax admitted in the memorandum of appeal, not the amount admitted before the assessing authority, and it had deposited Rs. 1,600, which it said was the admitted tax in appeal. The Supreme Court examined Sections 3(1), 3A(1), and 9(1) of the U.P. Sales Tax Act, 1948, along with Rules 12 and 41(2). It held that Section 3 provides for general multipoint tax, while Section 3A creates an exception allowing single point levy on selected goods. An importer is a dealer and the first dealer in the State; the chain of successive dealers begins from the first dealer and goes to the last dealer, so any dealer in the chain is a successive dealer and the series does not begin in the middle. The Court approved the Allahabad High Court decision in Ram Kumar Rajendra Swaroop v. Commissioner of Sales Tax. On the second issue, the Court noted that the assessee had admitted liability of Rs. 10,339.19 before the assessing authority and had collected that amount from purchasers. Under Rule 41(2) read with Rule 12, the assessee was bound to deposit the tax due according to its return. The Court interpreted 'tax admitted' in the proviso to Section 9(1) as tax admitted before the assessing authority, not the appellate authority. If interpreted otherwise, the provision would be rendered otiose or a dead letter. The Court overruled Chanshyam Dass Balmukand v. State of U.P. and United Timber & Cashew Products (P) Ltd. v. Sales Tax Officer, which had taken a contrary view. Consequently, the Supreme Court dismissed the appeals, affirming the High Court's decision. The notification under Section 3A was held valid, and the dismissal of the appeal for non-payment of the admitted tax was held proper.

Headnote

Issue of Consideration

Final Decision

Appeals dismissed. The Supreme Court upheld the High Court's decision that the appeal was properly dismissed. It held that an importer is a successive dealer under Section 3A, the notification issued under Section 3A was valid, and the expression 'tax admitted' in the proviso to Section 9(1) means tax admitted before the assessing authority, not the appellate authority. Consequently, the assessee's failure to deposit the admitted tax of Rs. 10,339.19 made the appeal not maintainable.

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