SYSTEMATIC CONSCOM LTD Vs. STATE OF U P

JUDGEMENT

(1.) THE petitioners herein are civil and electrical contractors. During the relevant assessment years, 2005- 2006, they have executed the works contract of civil and electrical nature. THE petitioners are liable to tax on the value of the goods involved in the execution of works contract under Section 3-F of the U.P. Trade Tax Act (hereinafter referred to as "the Act"). THE State Government in exercise of powers under Section 7-D of the Act has issued compounding scheme in respect of civil and electrical contracts for the assessment years, 2005-2006. Under such scheme in respect of civil contract, the tax was payable at the rate of one per cent on the total receipt after allowing deduction of the value of the goods supplied by the contractee and at the rate of two per cent in the case of electrical contract.

(2.) BY Act No. 9 of 2005 w.e.f. 1.5.2005, Section 3-H of the Act has been introduced levying State Development Tax at the rate not exceeding one percent of the taxable turnover as the State Government may by notification specify on the dealers whose aggregate turnover as referred to in sub- section (2) of Section 3, exceeds fifty lakh rupees. The Commissioner of Trade Tax has issued circular dated 4.6.2007 to all officers concerned stating therein that in case of civil and electrical contracts under the compounding scheme one per cent State Development Tax is also leviable.

(3.) SRI Bharat Ji Agrawal, learned Senior Advocate submitted that under Section 7-D of the Act composition money is payable in lieu of the tax payable. The tax payable under Section 7-D of the Act means all taxes under the Act including the State Development Tax. He submitted that under the compounding scheme issued by the State Government in exercise of powers under Section 7-D of the Act the composition amount stated therein, is only payable. He submitted that Section 7-D of the Act start with the word "notwithstanding" i.e. obstantive clause, has an overriding effect over all the sections of the Act. He submitted that the compounding scheme has been introduced as an alternative method of assessment in place of regular assessment and, therefore, once the composition amount is fixed under the scheme and the assessing authority by accepting the application of the dealer agreed to accept the said amount, the assessing authority is debarred to demand any other amount including the State Development Tax. He submitted that under the proviso to Section 7-D of the Act, it is open to the State Government to amend the scheme on the change of rate of tax. He submitted that levy of State Development Tax under Section 3-H of the Act does not amount to change of rate of tax inasmuch as the State Government has not amended the scheme enhancing the composition money. He submitted that subsequent circular dated 24th January, 2006 clarifies that the State Development Tax would not be levied in case of compounding scheme. He submitted that in the case of M/s. Bhadauria Gram Sewa Sansthan v. Assistant Commissioner, Sales Tax and others, 2006 UPTC 538, the Full Bench of this Court has held that once the assessee accepts to pay the composition amount under the scheme of Section 7- D of the Act it is not open to the assessee to withdraw and seek for the regular assessment.