M/S RAPTI COMMISSION AGENCY versus STATE OF U.P. AND ORS.

Citation: [2006] SUPP. 4 S.C.R. 250 · Decided: 02-08-2006 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
M/S RAPT! COMMISSION AGENCY 
v. 
STATE OF U.P. AND ORS. 
AUGUST 2, 2006 
[ARIJIT PASA VAT AND S.H. KAPADIA, JJ.] 
U.P. Trade Tax Act, 1948-Section 8-E-Agent purchases and consigns 
goods to its principal siluated outside the State-Revenue detained one of the 
C consignments for not deducting tax from payments made to sellers and 
depositing tax-Writ Petition before High Court by the agent challenging 
constitutional validity vf section 8-E of the Act for levying tax on an inter-
state transaction---High Court upheld the constitutional validity of the Section 
by reading down the provision to make it applicable only to intra-State sales! 
purchases-Correctness of-Held, Section 8-E of the Act cannot be made 
D applicable to inter-State transactions--High Court was in error by reading 
down the provision without going intu the facts-Directions issued to Revenue 
to deal with the case in accordance with law. 
Appellant-agent purchases Mentha Oil from sellers/agriculturists and 
consigns them to its principal situated in another State. Respondent-State 
E Revenue detained one of the consignments and issued a notice to the 
appellant stating that the detention was made for not deducting tax from 
the payment made to the seller/agriculturists and depositing the same as 
required under section 8-E of the Uttar Pradesh Trade Tax Act, 1948.
0
The 
appellant replied to the notice stating it is not liable to deduct and deposit 
F tax under the Act as it merely purchases and consigns them for and on 
behalf of its principal situated outside the State. When the Revenue insisted 
on the deposit of the tax, the appellant, by a Writ Petition before High 
Court, challenged the constitutional validity of section 8-E of the Act 
contending that the sellers/agriculturists cannot be treated as a 'dealer' 
under the proviso to section 2(c) of the Act; and that, the State does not 
G have legislative competence to levy tax on inter-State transactions. The 
High Court dismissed the Writ petition holding that the language of a 
statutory provision can bee narrowed down to sustain its constitutional 
validity and accordingly held that Section 8-E of the Act is valid and is 
applicable only to intra-State sales/purchases; and that the appellant, 
H 
250 
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RAPT! COMMISSION AGENCY v. STATE OF U.P. 
251 
though not liable under section 8-E of the Act, is otherwise liable to pay A 
purchases tax on the purchases made from them under section 3(1) of the 
Act. 
In appeal to the Court, the appellant contended that the State has 
no competence to collect tax under the Act as the transactions are inter-
state in nature; and that, when it is not liable to pay tax under the Act, it B 
cannot be compelled to go through the procedure under the Act for the 
purpose of assessment and determination of tax, if any. 
The State, supporting the High Court judgment, raised a preliminary 
objection contending that the Writ Petition will not lie since there is an 
alternative remedy available under the Act. 
Allowing the appeal with directions, the Court 
HELD: 1.1. The plea of alternative remedy has not been raised by 
the State before High Court as there is no discussion in its judgment in 
c 
this regard. Further, the constitutional validity of Section 8-E of the Uttar D 
Pradesh Trade Tax Act, 1948 cannot be decided by the statutory 
authorities under the Act. 1254-BJ 
1.2. The High Court observed that the language of Section 8-E of 
the Act can be narrowed down so as to make it applicable only to intra-
state sales/purchases. The appellant raised the dispute on the factual E 
aspects contending that the transaction was one of inter-state character. 
Its emphasis was on the validity of the provision vis-a-vis inter-state 
transactions. There was no necessity of any reading down as there was 
no dispute in the case at hand relating to intra-states. The question of the 
appellant having liability to pay purchases tax was also not a relevant 
factor for determination of the basic question regarding validity of section · F 
8-E of the Act. The nature of a transaction cannot be decided on the basis 
of the provisions of a taxation statute. It has to be factually examined. The 
High Court, instead of focussing on the factual aspects, dealt with issues 
not relevant, and that too giving clearly indefensible interpretations. The 
factual aspects should have been asked to be dealt with by the authorities. G 
By directing the authorities to do it after laying down t

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