Pepsico India Holdings Ltd vs Commissioner Of Trade Tax,Lucknow

Pepsico India Holdings Ltd. .... Appellant

Versus

Commissioner of Trade Tax, Lucknow, U.P. ...Respondent

JUDGMENT

Dr. Mukundakam Sharma, J.

1. Leave granted.

2. The present appeal arises out of the judgment dated

10.12.2007 passed by the learned Single Judge of the

High Court of Allahabad (Lucknow Bench) whereby the

learned Single Judge has dismissed the tax revision filed

1

by the Appellant under section 11 of the U. P. Trade Tax

Act (hereinafter referred to as "the Act") impugning the

judgment dated 14.8.2007 passed by the Trade Tax

Tribunal, Lucknow rejecting the second appeal of the

appellant/assessee.

3. Various issues were raised before the Tribunal as well as

the High Court with respect to the liability of the

appellant/assessee to pay tax which, in nutshell, are as

follows: -

(i) That there is no transfer of rights of users by the

assessee when he realized rental charges for glass

bottles and crates.

(ii) The forums did not consider the terms of the

agreement/contract between the assessee and his

selling agents/consumers.

(iii) The interest charge on the tax could not have

been charged under Section 8(1) as the case falls

under Section 8(1B).

2 4. However, in the present appeal the issues Nos. (i) and (ii)

were dropped by the appellant as, in the intervening

period, the above said two issues were finally settled by

the judgment of this court in the case of State of Orissa

and another v. Asiatic Gases Ltd. (2007) 5 SCC 766.

In the said case this court held that the previous decision

of this Court in Aggarwal Bros. v. State of Haryana

(1999) 9 SCC 182, is fully applicable to rentals charged

in respect of the containers for goods that cannot be sold

without containers. This court held that the containers

constitute an integral part of the commodities in question

and the container together with the contents therein is a

"composite personality" and constitutes "goods" eligible to

sales tax.

5. Accordingly, the only issue which requires consideration

in the present appeal is whether the appellant is liable to

pay interest on the tax due under Section 8 (1) of the Act

i.e. @ 2 % per mensem from the date the tax was due or

3

under Section 8 (1B) i.e. @ 1.5 % per mensum from the

date of the assessment order and demand notice.

6. The High Court and the other forums below, for the

reasons mentioned therein, have held that the appellant

is liable to pay interest on the delayed payment of tax

under section 8 (1) of the Act (i.e. @ 2 % per mensem

from the date of filing of returns). Whereas, it is the

appellants case that the interest is payable as per section

8 (1B) of the Act (i.e. @ 1.5 % per mensum from the

expiration of the date mentioned in the assessment order

which in the present case is March 15, 2002).

7. As a short question is involved we need not mention the

facts of the case in great detail. In brief the facts leading

to the filing of the present appeal are that the appellant is

engaged in the manufacturing and selling of the

beverages and is having bottling plants in the state of

Uttar Pradesh. The dispute pertains to the trade tax

payable on its turnover of Rupees 8.54 crores in respect

of rentals by distributors of glass bottles and crates for

4

assessment year 1999-2000. The appellant disputed the

liability to pay tax on such turnover as well as the

interest, as according to them no tax is payable on the

rental of glass bottles and crates as the same did not

amount to a transfer of right to use the goods for value

or consideration under section 3-F of the Act. However,

the said submission was negated by the first and second

appellate authority as well as, on revision, by the High

Court. As mentioned hereinabove, the challenge to the

liability to pay tax was dropped by the appellant in the

light of the judgment passed by this Hon'ble court in

Asiatic Gases Ltd. case (supra).

8. We heard the learned counsel appearing for both the

parties and perused the record. It was submitted by the

learned senior counsel appearing for the Appellant that

as it was the bonafide belief of the appellant/assessee

that they were not liable to pay tax on the turnover

realized as rental from the bottles and crates, therefore,

the tax should be charged only from the date of the

assessment order and not from the date of filing of the

5

returns. It was further submitted that section 8 (1) of the

Act only becomes applicable when the assessee had

admitted its tax liability in its accounts or its return and

as the appellant/assessee had disputed the liability to

pay tax and raised a bonafide dispute they would not be

liable to pay interest under Section 8 (1) of the Act.

Resultantly, interest, if any, can only be charged under

Section B (1B) which covers the cases which does not fall

within the ambit of Section 8 (1) of the Act.

9. All the abovesaid contentions were negated by the

counsel appearing for the respondent and it was

submitted that after disclosing the turnover in its

accounts a dealer cannot run away from his liability to

pay tax by raising false and frivolous dispute. In case, if

he does so then he will be liable to pay penal rate of

interest under section 8 (1) of the Act.

10.Section 8 (1) of the act, prior to its amendment in 2002,

is reproduced below:

6 "8. Payment and recovery of tax:

(1) The tax admittedly payable shall be deposited

within the time prescribed or by the thirty-first day of

August, 1975, whichever is later failing which simple

interest at the rate of 2 per cent per mensem shall

become due and be payable on the unpaid amount with

effect from the day immediately following the last date

prescribed or till the date of payment of such amount,

whichever is later and nothing contained in section 7

shall prevent or have the effect of postponing the

liability to pay such interest.

Explanation: - For the purposes of this sub-section, the

tax admittedly payable means the tax which is payable

under this Act on the turnover of sales or, as the case

may be, the turnover or purchases, or of both, as

disclosed in the accounts maintained by the dealer, or

admitted by him in any return or proceeding under this

Act, whichever is granted, or, if no accounts were

maintained then according to the estimate of the dealer

and includes the amount payable under Section 3B or

sub-section (6) of section 4B."

11. The explanation to the said subsection clearly defines the

term "the tax admittedly payable" and illustrates the

situation in which the tax would be deemed to be

admittedly payable, the same are as follows: -

(i) The tax which is payable under this Act on the

turnover of sales, as the case may be, the

7

turnover of purchase, or both, as disclosed in the

accounts maintained by the dealer.

(ii) The tax admitted by the dealers in any return or

proceeding under this act, whichever is greater.

(iii) If no accounts were maintained, then according

to the estimate of the dealer and includes the

amount payable under section 3-B or subsection

(6) of section 4-B.

12.It is not in dispute in the present case that the appellant

has themselves mentioned in their accounts the turnover

in respect of rentals by distributors of glass bottles and

crates. However, the appellant has disputed that the said

turnover is liable to tax under the Act.

13.The question that emerged for adjudication before forum

and Court below was that whether the tax is payable

under the Act on the turnover from rentals of glass

bottles and crates. The Court has answered the question

8

in affirmative and confirmed that on such turnovers the

tax will be payable under the Act.

14. The appellant had taken the chance to get a judicial

verdict on the said issue. Once it has been confirmed that

the tax is payable under the Act, the same becomes

payable from the date when it was due and not from the

date when the judicial verdict was pronounced (unless

and until, in a case, the court specifies a particular date

from which it shall be payable). Thus, once it has been

confirmed by the Court that the tax is payable under the

Act it would be covered within the definition of the term

"the tax admittedly payable" as defined in the explanation

to section 8 (1) and, in case, the tax had not been paid

then the same becomes payable along with interest as

mentioned in section 8 (1) of the Act.

15. Provisions of subsection (1B) of section 8 of the act will

come into operation only if the case is not covered under

subsection (1) of section 8 of the Act. The opening words

of the said subsection (1B) states "if the tax, other than

9

the tax referred to in subsection 1, assessed by the

assessing authority is not paid". The said subsection is

reproduced herein below for reference: -

"Section 8(1B) - If the tax, other than the tax referred to

in sub-section (1), assessed by any Assessing Authority

is not paid within the period specified in the notice of

assessment and demand referred to in sub-section (1-

A), simple interest at the rate of one and half per cent

per mensem on the unpaid amount calculated from the

date of expiration of the period specified in such notice

shall become due and be payable."

16.As in the present case the tax becomes admittedly

payable once it has been held that the tax is payable

under the Act, the interest would be payable in terms of

subsection (1) of section 8 of the Act and not in terms of

subsection (1B) of Section 8 of the Act.

17. This court in the case of Commissioner of Sales Tax v.

Qureshi Crucible Centre, 1993 Supp (3) SCC 495 has

held that where a dealer fails to pay tax at the correct

rate because he claimed not to know the revision in the

rate, the dealer remains liable to pay interest at a higher

1

rate, penal rate under section 8 (1) from the date when

the tax became due and payable. In such a case, the

dealer cannot claim that he is liable only from the date of

the assessment order fixing the correct rate of tax.

Similarly, in case where the dealer has taken a chance

and it has been held that the tax is payable under Act,

the same becomes payable from the date when it was

due.

18.Accordingly, the present appeal dismissed but without

any orders as to costs.

......................................J.

[Dr. Mukundakam Sharma]

......................................J.

[Anil R. Dave]

New Delhi,

April 5, 2011

1