ELMECH ENGINEERS Vs. STATE OF UP

JUDGEMENT

(1.) Heard Sri Ashok Kumar, for the petitioner, Sri C.B. Tripathi, Special Counsel for State of U.P., for the respondents. Writ Tax No. 38 of 2006 has been filed for quashing the notice dated December 8, 2005 issued by the Deputy Commissioner of Trade Tax (respondent 3) under section 21(2) of the U.P. Trade Tax Act, 1948 (hereinafter referred to as "the Act") for reassessment for the assessment year 2001-02 and for mandamus directing respondent 3 not to proceed with the reassessment proceeding in pursuance of the aforesaid notice and to pass any order. In Writ Tax No. 39 of 2006 similar notice for reassessment for the assessment year 2002-03 and reassessment proceeding has been challenged. Since in both the cases common questions of law and fact are involved between the same parties as such both the writ petitions were consolidated and heard together and are decided by a common judgment. In this judgment we are noticing the facts of Writ Tax No. 38 of 2006.

(2.) The petitioner was a partnership firm and engaged in the business of execution of works contract. During the assessment year 2001-02, the petitioner has executed the works contract of installation of diesel generating sets and supply of the spare parts to Bharat Sanchar Nigam Ltd. according to its specifications. The petitioner filed its trade tax return, which was assessed by the assessing officer, by the order dated October 16, 2004, in which the assessing officer has treated the work of the petitioner as "works contract" and assessed the trade tax liability under section 3F of the Act, read with rule 44B of the Trade Tax Rules excluding the price of the generating sets and the spare parts used by the petitioner in execution of the works contract. The petitioner was not satisfied with some part of the assessment order, as such an appeal, (i.e., Appeal No. 1334 of 2004) was filed from the aforesaid order, before the Joint Commissioner (Appeals), Trade Tax, Kanpur, which was pending. During pendency of the appeal, the assessing officer initiated proceedings for reassessment under section 21(2) of the Act and forwarded the papers for sanction of the reassessment proceedings. On which the Additional Commissioner, Grade I, Trade Tax (respondent 2) issued a notice dated August 4, 2005 to the petitioner calling his explanation/reply. The petitioner submitted his reply to the aforesaid notice on September 7, 2005, however, respondent 2 by order dated September 27, 2005 granted sanction for reassessment. In pursuance of the order dated September 27, 2005, the assessing officer issued notice dated December 8, 2005 for reassessment for assessment year 2001-02. The petitioner has challenged the reassessment proceedings on the ground that all the necessary facts had been disclosed by the petitioner and considered by the assessing officer, in the assessment order in which he had found that the business of the petitioner was of works contract and as such he had not levied trade tax on the price of the materials used by the petitioner in execution of the works contract, according to the provisions of section 3F of the Act; reassessment proceedings is nothing but the change of the opinion of the assessing officer; the matter was still pending before the appellate authority as such reassessment proceedings could not have been started; judgment of the apex court in State of Andhra Pradesh v. Kone Elevators (India) Ltd., 2005 140 STC 22, relied upon in the notice for reassessment, is not applicable in the case of the petitioner. There was neither concealment of any fact on the part of the petitioner nor ignorance/negligence on the part of the assessing officer and there was no escaped assessment as such reassessment proceeding was illegal.

(3.) In the counter-affidavit filed on behalf of the respondents, it has been stated that during the assessment year 2001-02, the petitioner received payment of Rs. 6,11,01,227 for supply of generator sets to Bharat Sanchar Nigam Ltd. In the balance sheet, commissioning expenses of Rs. 10,82,101 was shown. The price of the generator sets purchased by the petitioner was shown as Rs. 5,89,93,249.96. Thus it is evident that the dominant object of the contract was to supply the generator set and not for installation of generator sets. Its installation was an incidental work. However the assessment order was passed accepting the transaction as works contract and price of the generator sets escaped assessment. The generator sets were movable property and its installation under the contract comes within the meaning of "sale" as defined under the Act. As the price of the generator sets escaped assessment, as such, proceedings for reassessment have been started under section 21 of the Act.