Ex-post facto approval amounts to sufficient compliance of the proviso to Section 3-A(1) of the U.P. Sugarcane Purchase Tax Act, 1961.

ORDER :

The appellant herein is a Sugar Mill which procures sugarcane for the purpose of manufacture of sugar. On the purchase of sugarcane, the tax is payable by such Sugar Mills under the provisions of U.P. Sugarcane Purchase Tax Act, 1961. In order to ensure that this tax is paid faithfully on the purchase of sugarcane, Section 3-A in the said Act mandates the Sugar Mills not to remove any sugar produced in the factory either for consumption or for sale or manufacture of any other commodity in or outside the factory, unless the owner has paid towards the tax levied under Section 3 of the said Act. Proviso to this Section 3-A, however, gives little indulgence to the owners of these factories and provide that sugar may be deposited in any godown or other space for storage approved by the Assessing Authority without payment of any sum. However, as per this proviso also such sugar which is allowed to be deposited in a Godown or other space for storage is not to be removed therefrom until the tax is paid as per the provision of Section 3 of the Act. The combined reading of the aforesaid provisions along with proviso will indicate that normally factory owner is supposed to keep the sugarcane inside the factory premises and is not allowed to take it out unless the tax as levied under Section 3 is paid. However, under certain circumstances, the factory owner can store such sugar outside the factory i.e. in some Godown or other space for storage approved by the Assessing Authority. The main purpose for such provision is to allow sugarcane owner to store the sugar outside the factory premises when there is no space available in factory premises. At the same time, proviso ensures that the sugar is not to be removed even from such godown or space for storage unless the tax is paid. In the present case, the appellant had faced the problem of storing sugar in the factory premises in the year 1995-96 and 1996-97 and had stored the sugar in some Godown outside the factory premises. When this was pointed out to the appellant by the Inspector by making entry in this behalf on the inspection, the appellant made an application dated 28.03.1997 to the Tax Assessment Officer/Collector for giving approval for storage of sugar in rented Godown outside the factory. It was followed by another application dated 05.04.1997. The appellant also furnished, vide its application dated 10.05.1997, the details of the sugar which was stored in the aforesaid Godown outside the factory premises. It was emphasised that whenever sugar bags were removed from the said Godown, tax which is payable under Section 3 of the Act was deposited. After verifying the aforesaid bags and the stand of the appellant that it had paid the tax before removal of the sugar from the godown where the same was stored, the Assessing Authority, who was at the material time Collector, granted above order dated 07.06.1997 giving tax ex-post facto approval. In the said order the Assessing Authority also warned the appellant to take such permission in time, in future.

2. It appears that the tax assessment, was thereafter assigned to the District Magistrate. After few days of the passing of the aforesaid order, after taking over the said assignment, the District Magistrate and tax Assessing Officer issued show cause notice dated 21.06.1997 calling upon the appellant to show cause within one week as to why penalty should not be imposed for not taking prior approval for depositing the sugar bags in the rented Godown situated outside the factory premises. It may be mentioned at this stage that as per sub-section (5) of Section 3 A of the Act if the quantity of sugar is removed in violation of sub-section (1) of Section 3 A, there can be a penalty not exceeding 100 per cent of the sum, so paid as tax. The aforesaid show cause notice was, purportedly issued under the aforesaid provisions. The appellant contested the aforesaid notice by submitting that it had been granted approval ex-post facto and pl