CHAPTER II

THE INCIDENCE, LEVY AND RATES OF TAX

Section:3. Incidence of tax-

(1) Tax shall be levied and charged in accordance with the provisions of this Act on every sale made within the State by a dealer or a person;

(2) Every person who is registered or is liable to be registered under the provision of this Act shall be a taxable person and liable to pay tax in the manner provided in the Act.

(3) Subject to provisions of sub-section (4) or sub-section (5) or sub-section (6) or sub- section (7) as may be applicable, every dealer or a person shall pay from the date he becomes so liable, a tax for each assessment year on his turnover, to be determined in the prescribed manner, of all sales or purchases, as the case may be, inside the State, made on or after the date he becomes liable to pay tax at such rates as provided by or under Section 4 of the Act;

(4) Where a dealer carries on the business of-

(i) sale of any taxable goods in the course of inter-state trade or commerce; or

(ii) sale of any taxable goods in the course of export out of the territory of India; or

(iii) consigns any taxable goods for delivery at a place out side the State; or

(iv) sale of any taxable goods purchased or received form out side the State; or

(v) purchases of any taxable goods after furnishing any form of declaration or certificate prescribed either under the Uttaranchal Trade Tax Act.1948 or the Central Sales Tax Act,1956; or under this Act; or

(vi) sales or purchases of taxable goods if such dealer is already registered under the Uttaranchal Trade Tax Act.1948 or the Central Sales Tax Act,1956; and desires to retain such registration after the commencement of this Act or applies for grant of registration voluntarily under the provisions of this Act; and

(a) if such dealer has been carrying on the business in the immediately preceding assessment year and continues it on the date of commencement of this Act, he shall be liable to pay tax from the date of commencement of this Act;

(b) if such dealer commences business on or after the date of commencement of this Act, he shall be liable to pay tax from the date on which any of events from (i) to (vi) above takes place for the first time in any assessment year;

(5) Where any dealer has carried on business of purchases and, or of sales of goods inside the State only and has neither furnished nor received any form of declaration or certificate prescribed under Uttaranchal Trade Tax Act, 1948, or the Central Sales Tax Act, 1956 or rules made or notifications issued thereunder in respect of any purchases or sales, and the business continues on the date of commencement of this Act, and

(a) if such dealer has been carrying on business for whole or part of the immediately preceding assessment year, and continues it on the date of commencement of the Act and-

(i) the aggregate of his turnover as per provisions of Uttaranchal Trade Tax Act, 1948, in the preceding year exceeded the amount prescribed under sub-section (9) in case of whole year or the proportionate amount incase of part of the year, he shall be liable to pay tax from the date of commencement of this Act; or

(ii) the aggregate of turnover as per the provisions of Uttaranchal Trade Tax Act,1948, for the period from the first day of the year of commencement upto the date of commencement, of the Act, exceeds the amount prescribed under sub section (9) proportionately,

he shall be liable to pay tax from the date of commencement of the Act; or

(iii) if such dealer is not liable to pay tax from the date of commencement, under clause (a) (i) and (ii) above, he shall be liable to pay tax from the date the aggregate of his turnover for the first time exceeds the taxable quantum in any assessment year;

(iv) if such dealer is already registered under the Uttarnachal Trade Tax Act, 1948, or Central Sales Tax Act,1956 and desires to retain it voluntarily, he shall be liable to pay tax from the date of commencement of the Act;

(b) if such dealer commences business in the year of commencement on the first day or any other subsequent date but before the date of commencement of the Act, and

(i) the aggregate of his turnover from commencement of business till the date of commencement of this Act exceeds the proportionate amount of taxable quantum, he shall be liable to pay tax from the date of commencement of this Act;

(ii) if such dealer is not liable to pay tax from date of commencement of this Act, under sub clause (i) above, he shall be liable to pay tax from the date the aggregate of his turnover for the period starting from the date of commencement of business and ending on the last date of the assessment year, for the first time exceeds the proportionate amount of taxable quantum;

© (i) If such dealer commences business on or after the date of commencement of the Act either in the year of commencement or in any subsequent assessment year, he shall be liable to pay tax in such first assessment year from the date when the aggregate of his turnover for the period starting from the date of commencement of his business and ending on the last date of that assessment year for the first time exceeds the proportionate amount of taxable quantum; and

(ii) If he is not liable to pay tax in the year of commencement of business as per sub- clause (i) above, he shall be liable to pay tax in the first assessment year in which the aggregate of his turnover exceeds taxable quantum and shall be liable from the date his turnover so exceeds for the first time;

(6) Every dealer who has become liable to pay tax under this Act shall continue to be so liable but if for three consecutive years his turnover remains below the taxable quantum in each of the years, his liability to pay tax shall cease:

(7) Every dealer whose liability to pay tax under this Act has ceased under sub-section (6) and his turnover again exceeds the taxable quantum on any day, he shall be liable to pay tax with effect from the date immediately following the day on which his turnover calculated from the commencement of the year again exceeds the taxable quantum, on all sales or purchases effected by him after that date;

(8) Where by any order passed under this act, it is found that any person registered as dealer ought not to have been so registered and the registration certificate is cancelled, then notwithstanding any thing contained in this act, such person shall be liable to pay tax for the period commencing with the date of his registration and ending with the date of such order, as if he was a dealer;

(9) Taxable Quantum- (1) No dealer shall, except as otherwise provided under clause (5) of this sub-section, be liable to tax under sub- section (3), if, during the assessment year, the aggregate of his turnover of sales of all goods, whether such sale is made by the dealer directly or through his branch, depot or agent inside the State, or in the course of inter-state trade or commerce, or in the course of export out of the territory of India or by way of consignment out side the State, is less than the amount mentioned hereinafter-

(a) manufacturers or producers of any goods for sale Rs 2 lacs

(b) in case of execution of works contract Rs 1 lac

© in case of transfer of right to use goods Rs 1 lac

(d) in case of dealers engaged in any other business Rs 2 lacs

The State Government may, by notification in the Gazette, fix a larger amount either in respect of all dealers in any goods or in respect of particular class of dealers;

(2) Nothing in clause (1) shall apply in respect of –

(i) the sale by a dealer of goods imported by him from out side Uttaranchal, the turnover whereof is liable to tax under the Act,

(ii) the sale by a dealer of-

(a) goods imported by him form out side Uttaranchal after furnishing to selling dealer a declaration under sub-section (4) of Section (8) of the Central Sales Tax Act, 1956; or as the case may be,

(b) goods purchased or imported by furnishing any declaration or certificate prescribed under any provision of this Act;

© goods manufactured by him by using the goods referred to in sub-clause (i) or sub-clause (ii);

(3) Where the amount specified in, or notified under clause (1) is altered during an assessment year, the tax payable by a dealer under this section shall be computed as follows:-

(i) on the turnover relating to the period prior to such alteration, as though the amount specified in or notified under clause (1) had not been altered; and

(ii) on the remainder, as though the altered amount has been in force on all material dates;

(4) Where tax is payable, and has been so paid, by a commission agent on any turnover on behalf of his principal, the principal shall not be liable to pay the tax in respect of the same turnover;

(5) (i) Every dealer commencing business during the course of an assessment year shall be liable to pay tax in that year with effect from the date immediately following the day on which the aggregate of his turnover from the date of commencement of his business for the first time exceeds the proportionate amount of taxable quantum;

(ii) Every dealer discontinuing business during the course of an assessment year, shall be liable to pay tax upto that date if the aggregate of his turnover for the period from the first day of the commencement of the assessment year to the date of discontinuance of his business exceeds the amount of taxable quantum proportionately.

(10) For the purpose of calculating the gross turnover to determine the liability to pay tax under the Act-

(i) except as other wise expressly provided, the turnover of all sales (whether taxable or not) and as the case may be, the turnover of all purchases on which tax is payable under the provisions of clause (3) of sub-section (11) of this section shall be included;

(ii) the turnover shall include all sales and such purchases made by the dealer in his account and also on behalf of principals whether disclosed or not;

(11) Taxable Turnover - (1) The tax payable by a dealer liable to pay tax under sub-section (3) of Section 3 shall be levied on his taxable turnover of sales;

(2) Taxable turnover of sales in relation to a dealer liable to pay tax on sale of goods under sub-section (3) of Section 3 shall be that part of the gross turnover of sales during any period which remains after deducting therefrom,

(a) sales of goods declared as exempt from tax in Schedule 1

(b) sales of Special Category Goods specified in Schedule III

© sales of goods which are shown to the satisfaction of the assessing authority to have taken place-

(i) in the course of inter-state trade or commerce, or

(ii) out side the State of Uttaranchal , or

(iii) in the course of export of the goods out of the territory of Inida

Explanation: (1) Section 3, Section 4 and Section 5 of the Central Sales Tax Act, 1956

shall apply for determining whether or not a particular sale or purchases has taken place in the manner indicated in sub-clause (i), sub-clause (ii) or sub-clause (iii).

Explanation: (2) A sale or purchase specified under sub-section (1) and sub-section (3) of Section 5 of Central Sales Tax Act, 1956 shall be zero rated- which means there shall be no tax on the sale turnover of the transaction and exporter shall be entitled to a refund of tax paid by him on purchase of goods in any form which is so exported,

Explanation: (3) Sale of goods to any person or international organization specified in Schedule IV shall be deemed to be exempt.

(d) turnover of such purchases on which tax is payable under provisions of clause (3) of this sub-section,

(e) in case of turnover of sales in relation to work contract certain deductions as may be prescribed and subject to such conditions and restriction as may be imposed;

(f) such other sales subject to such conditions and restrictions as may be prescribed;
(3) Tax on Purchases- Every dealer who in the course of his business purchases any goods-

(i) from a registered dealer in the circumstances in which no tax under this Act is payable by that registered dealer on the sale price of such goods; or

(ii) from a dealer other than a registered dealer and tax on sale of such goods can not be levied on the seller either in view of any provision of this Act or because the selling dealer though liable to pay tax but has not obtained registration, or has not deposited tax due on such sale; or

(iii) from any other person,

he shall be liable to pay tax on purchase price of such goods and such tax shall be levied at the same rate at which it would have been levied under this Act on the sale of such goods within the state on the date of such purchases.

Section 4- Rate of Tax-

(1) The tax payable by a dealer under this Act shall be levied on his taxable turnover at such rates as may be prescribed in Schedules under sub-section (2), but not exceeding-

(a) the maximum rate for the time being specified in Section 15 of Central Sales Tax Act, 1956 in respect of declared goods, and

(b) 50 percent in respect of goods other than the goods referred to in clause (a) above;

(2) (1) No tax under this Act shall be payable on the sale or purchase of the goods specified in Schedule-I;

(1) Subject to the provisions of Section 3, a dealer shall be liable to pay tax on

his taxable turnover-

(a) At every point of sale at the rate hereafter provided:

(i) In respect of goods specified in Schedule II (A) 1 percent

(ii) In respect of goods specified in Schedule II (B) 4 percent

(iii) In respect of goods specified in Schedule II © 20 percent

(iv) In respect of goods other than those included 12.5 percent

in any of the Schedules

(b) at the point of sale by manufacturer or sale by 20 percent

importer in respect of Special Category Goods

specified in Schedule III

(3) (i) When goods are sold or purchased in containers or packed in any packing material, the rate of tax applicable to such containers or packing material, as the case may be, shall, whether the price of container or packing material is charged separately or not, be the same as those applicable to the goods contained or packed and turnover in respect of container and packing material shall be included in the turnover of such goods.

(ii) Where the sale of goods contained in container or packed in

packing material is exempt from tax, then the sale of such container or packing material shall also be exempt from tax.

(4) The State Government may, by notification in the official gazette, declare different rates in respect of different goods, or add or remove any schedule (s), or add to, amend or alter any Schedule of this Act,

(5) Every dealer shall pay a tax on the net turnover, determined in the prescribed manner, in respect of-

(i) transfer of the right to use any goods for any purpose (whether or not for a specified period) at the rate of five percent;

(ii) transfer of property in goods ( whether as goods or in some other form) involved in the execution of works contract at such rates as are provided under sub-section (2) above;

Provided that where any goods purchased are involved in execution of works

contract and tax has been paid or is payable with in the State in accordance with provisions under Section 3 at the rate prescribed under sub-section (2) of Section 4, on any earlier sale or purchase of such goods, tax shall not be levied on the purchase price of such goods under a works contract.

Provided further that the State Govt. may, by notification in the Gazette,

declare different rates for different goods or for different class of dealers so as not to exceed (i) maximum rate of tax prescribed under Section15 of the Central Sales Tax Act, 1956, in respect of declared goods, and (ii) 20 % in respect of goods other than declared goods.

(6) Rebate on tax on certain purchases and sales: (1) Subject to such conditions as it may impose, the Government may, if it deems necessary so to do in the public interest, by notification in the Official Gazette, exempt the sale or purchase of any goods or any sales or purchases made to or by a class of dealers or persons specified in the said notification from payment of the whole or any part of any tax payable under the provisions of this Act, and any notification issued under this section may be issued so as to be retrospective to any date not earlier than the date of commencement of this Act and such exemption shall take effect from the date of the publication of the notification in the Gazette or such other earlier or later date as may be mentioned therein;

(2) Where any dealer or person has purchased any goods under a declaration or certificate given by him under any notification issued under this section and-

(i) any of the conditions subject to which such exemption was granted; or

(ii) any of the restrictions or the conditions of the declaration or the certificate

are not complied with for any reasons whatsoever, then without prejudice to the other provisions of this Act, such dealer or person shall be liable to pay tax on the sale price of the goods at the rate setout against each of such goods in the schedule under Section 4 notwithstanding that such dealer or person was not liable to pay tax under any other provisions of this Act and accordingly the dealer or the person who has become liable to pay tax under this sub-section shall file a return including the sale price of such goods therein, and also pay the tax, in the prescribed manner. The tax due from any such dealer or person shall be assessed and recovered as if the person or dealer is a dealer liable to be proceeded against under the provisions of this Act.

(3) If the assessing authority has reason to believe that any person or dealer is liable to pay tax under sub-section (2), the assessing authority, shall, after giving him reasonable opportunity of being heard, assess the amount of tax so due.

(7) Every notification made under this section shall, as soon as may be after it is made, be laid before the State Legislative Assembly while it is in session, for a total period of not less than fourteen days, extending in its one session or more than one successive sessions, and shall, unless some later date is appointed, take effect from the date of its publication in the Gazette subject to such modifications or annulments as the State Legislative Assembly may during said period make. However any such modification or annulment shall be without prejudice to the validity of any thing previously done thereunder except that any imposition, assessment, levy or collection of tax or penalty shall be subject to the said notification or annulment.

(8) Levy of Presumptive Tax on certain Registered Dealers:- All registered dealers whose gross turnover of sales does not exceed rupees Five lakhs, subject to such conditions and restrictions as may be prescribed shall pay, in lieu of the tax under the provisions of this Act, a tax at such percentage on the entire taxable turnover of such sales and purchases as the Govt. may, by order, notify, subject to the conditions that such dealer shall not be entitled to charge or collect any tax on such sales and shall not be entitled to any input tax credit on his purchases;

Provided that this sub-section shall not apply to a registered dealer who is an importer or a manufacturer, or who imports goods from or export goods outside the territory of India;

Provided further that a registered dealer may, by exercising options in the prescribed manner, elect to pay tax as specified in Section 3 of this Act in lieu of the provisions of this sub-section.

(9) Notwithstanding any thing contained in this section, the State Government may, grant moratorium for payment of the admitted tax to industrial units under the provisions of Section 79 of this Act.

Section-5: Net Tax Payable;

(1) The net tax payable by a taxable person for a tax period shall be determined by the formula:

Net tax payable = (O+P)-I

Where “O” is Output Tax being the total of the tax payable as per sub- section (2) below: and

“P” is Tax on Purchases for the said tax period under provision of clause (3) of sub-section (9) of Section 3: and

“I” is Input Tax being the total of the tax paid as per clause (3) below and subject to provisions of Section 6.

(2) Output Tax- (i) Out put tax in relation to a registered dealer means the tax payable under this Act in respect of any sale or supply of goods made by the dealer in the course of his business and includes tax paid by a commission agent in respect of sale of goods made on behalf of such dealer;

(ii) Subject to provisions of Section 6, a dealer shall be liable to pay the output tax under this Act leviable on the taxable turnover at the rate and subject to such conditions as may be prescribed from time to time.

(3) Input Tax- Input tax in relation to any registered dealer means the tax paid or payable under this Act by the dealer to such selling dealer on the purchase of any taxable goods other than Special Category Goods in the course of business for resale or use in manufacturing or processing of such taxable goods for sale in the State or for use as container or packing materials for packing of such manufactured goods;

(4) The net tax payable by a dealer liable to pay tax but not registered under this Act for a tax period shall be equal to the out put tax and tax on purchases, if any, payable for the said period.

(5) Every taxable person shall pay in full the tax payable by him for the tax period at the time that person is required to file his return pursuant to sub-section (1) of Section 23.

(6) If the input tax credit of a registered dealer, other than in respect of the goods exported out of the territory of India, for a tax period exceeds the tax liability for that period, the excess amount will not be refunded in cash and will be allowed to accumulate as credit for adjustment. The amount shall be adjusted against the tax liability, if any, under the Central Sales Tax Act, 1956, for the same tax period and the balance shall be credited against any outstanding tax, penalty or interest under this Act or under the Central Sales Tax Act, 1956 and only the remaining amount shall be carried forward by the dealer to succeeding tax periods and the amount shall be deemed to be an input tax credit for that period.

(7) Every dealer liable to file returns under Section 23 shall, after the end of the assessment year, file, within 30 days, a statement showing his admitted tax liability and the amount of input tax credit for the assessment year after calculating the adjustments, if any, made between different tax periods during the relevant assessment year and also the amount if any, adjusted towards outstanding tax, penalty and interest dues.

(8) If any amount is claimed by the dealer to his credit in excess after adjustments as per sub-section (7) above, he may apply to the assessing authority showing his desire to adjust such excess amount in subsequent year which he may claim in returns of different tax periods.

(9) Notwithstanding any thing contained in sub-section (6), sub-section (7) or sub-section (8), the assessing authority shall determine the amount of input tax credit paid by the dealer in excess of his tax liability at the time of final assessment for the relevant assessment year under Section 25 or Section 26, and if any amount is found refundable, the same shall be refunded or adjusted under the provisions of Section 36.

Section-6: Input Tax Credit:

(1) Input Tax Credit shall be allowed only to a registered dealer, and subject to the provisions of this Act, for the purpose of calculating the net tax payable by a registered dealer for any tax period after being registered, an input tax credit as determined under this Act shall be allowed to such registered dealer for the tax paid or payable in respect of all taxable sales other than goods specified in Schedule III and excluding sale of any goods as may be prescribed, made to the person during the tax period and also excluding the taxable purchases on which the tax is payable under clause (3) of sub-section(9) of Section 3 of this Act;

(2) The input tax credit to which the registered dealer is entitled shall be the amount of tax paid by the registered dealer to the seller, (according to the books of account and the prescribed registers maintained by him showing the true and correct account of all his purchases, sales and stocks, so as to verify the accuracy of his turnover of sales and purchases or both) on his turnover of purchases made during the tax period, intended to be used for the purposes and subject to the conditions as specified in sub-section (3), sub-section (8), sub-section (9), and sub-section (10) and calculated in such manner as may be prescribed.

(3) Input tax credit shall be allowed for the goods purchased within the State of Uttaranchal, from a registered dealer holding a valid certificate of registration under Section 15 or Section 16; for the purpose of-

(a) sale in Uttaranchal; or

(b) sale of declared goods in the course of inter-state trade and commerce; or

© sale in the course of export out of the territory of India; or

(d) use as raw material in manufacturing or processing of goods (other than those specified in Schedule I or Schedule III) and containers or other packing materials used for packing of such manufactured goods, for sale or resale as per (a) and (b) above;

(e) use as raw material in manufacturing or processing of goods and containers and other packing materials used for packing of such manufactured goods, for sale or resale as per © above;

Provided that with reference to clause (d) above, in case such finished

products are despatched out side the state other than by way of sale, and such products (other than declared goods) are sold in the course of inter-state trade or commerce, input tax credit may by allowed on tax paid in excess of four percent on the raw materials used directly in the manufacture of such finished products.

Provided further that input tax credit shall be allowed in respect of tax paid in excess of four percent on petroleum products used as fuel (other than Petrol. A.T.F. and diesel) and other fuels used in production of taxable goods or captive power, but excluding fuel when used as fuel in motor vehicles.

(4) (i) Where during a tax period a registered person purchasing goods (other than capital goods) on which an input tax credit is admissible under provisions of this Section, and the purchases are used partially for various purposes specified in sub-section (3), input tax credit shall be allowed proportionate to the extent they are used for the purposes specified therein, and such different purposes include-

(a) sales consisting of sale of taxable goods and sale of goods exempted from tax, or

(b) sales out side the State consisting of sale of goods and dispatches of goods in the form of consignment or stock transfer to other states, or

© inputs being used in the course of business and inputs being used for any other purposes;

(ii) Amount of input tax credit in respect of purchases of a particular commodity during the tax period shall be the aggregate of all amounts of input tax credit computed in respect of each purpose the commodity purchased is utilized. The total amount of input tax credit shall be the aggregate of input tax credit for all commodities;

(iii) The method that is used by a person in a year to determine the extent to which goods are sold or supplied, or used or consumed in the manufacturing of goods, or intended to be sold or supplied, or used or consumed in the manufacturing of the goods, for different purposes, shall be fair and reasonable in the circumstances. The assessing authority, after giving the dealer an opportunity of being heard, may reject the method adopted by the dealer and determine the amount of input tax credit on the basis of any other method of proportionate distribution.

(5) For the purpose of calculating the net tax payable by a registered person for his first tax period after commencement of this Act or his becoming registered, as the case may be, an input tax credit as determined under this Section shall be allowed subject to the following conditions to the registered person for the tax paid or payable in respect of stock in hand of all taxable goods (excluding capital goods) purchased by the person prior to the commencement of this Act, or, as the came may be, the person becoming registered-

(i) goods were purchased by a registered dealer for use in his business,

(ii) goods were purchased not more than six months prior to the date of commencement of this Act or, as the case may be, the date of registration, and goods are in hand on such date,

(iii) goods have suffered tax under Uttaranchal Trade Tax Act, 1948 and are also taxable under this Act,

(iv) input tax credit shall be the actual rate of tax paid on purchase of such goods or the rate as applicable under this Act, whichever is lower,

input tax credit shall be allowed only when supported by proof of payment of tax.

(6) An input tax credit shall be claimed by a registered dealer in the following manner:

(i) In respect of goods held in the opening stock on the date of commencement of this Act, or on the date the dealer applies for grant of registration, input tax credit shall be claimed in six equal monthly instalments in returns for the tax periods covering period of nine months starting after expiry of three months from the month in which the date of commencement of this Act or, as the case may be, the date of presentation of application for registration falls;

(ii) In respect of capital goods, amount of input tax credit shall be claimed in accordance with the provisions of sub-section (7);

(iii) In other cases input tax credit shall be claimed in the return of the tax period in which purchase of goods to which such input tax credit relates, have been made.

(7) (i) Input tax credit on Capital Goods shall be limited to plant, machinery and equipment directly connected with the manufacturing or processing of the finished product and it shall commence from the date of sale of such taxable product. Total of such input tax for a financial year shall be adjusted in thirty-six equal monthly installments commencing from the beginning of the next financial year against tax payable on output during the period.

Provided that no input tax credit shall be allowed on capital goods used for manufacturing or processing of goods specified in Schedule I and Special Category Goods specified in schedule III :

Provided further that in case of an exporter, the amount of input tax credit shall be adjusted in twenty-four equal monthly installments instead of thirty six installments as above.

Explanation The Government may, by notification, declare certain Capital Goods which shall not be deemed, for purpose of this Section, to be included in plant, machinery and equipment above.

(ii) No person shall be entitled to input tax credit on such capital goods which have already been used, or acquired for use in other factory or workshop in India;

(iii) In case of closure of business before the period specified above, no further input credit shall be allowed and input tax credit carried forward, if any, shall be forfeited;

(8) No input tax credit on purchase of goods shall be allowed in respect of-

(a) goods purchased from an un-registered dealer or a dealer whose Certificate of Registration has been suspended or cancelled; or

(b) goods purchased from out side the State in respect of which tax has been paid in the other State ; or

© goods the sale of which are exempt under this Act or the goods used in manufacture, processing or packing of such goods; or

(d) capital goods directly connected with the manufacturing or processing of exempt goods and Special Category Goods; or

(e) capital goods which have already been used or acquired for use in any other factory or workshop in India; or

(f) goods whether goods as such or constituents of finished or semi finished goods which remain unsold in stock at the time of closure of business due to discontinuance by the dealer or cancellation of his registration or his being declared non-taxable under the provisions of this Act; or

(g) goods transferred outside the State, other than by way of sale; or

(h) in respect of raw material used in manufacture or processing of goods where the finished products are dispatched out side the State other than by way of sales; or

(i) goods purchased from a registered dealer who has given an option to pay lump sum amount in lieu of tax on sale and, or purchase of such goods by way of composition under section 7 or Presumptive tax at a percentage of turnover of sales as provided under sub-section (8) of Section 4; or

(j) goods, other than declared goods, sold in the course of inter state trade or commerce; or

(k) goods that are stolen or lost or destroyed or disposed of in any manner other than in ordinary course of business or goods distributed by way of free sample or gift; or

(l) goods leased under an agreement of transfer of right to use any goods ( whether for a specified period or not) for any purpose; or

(m) goods on which tax being payable under this Act or under Uttaranchal Trade Tax Act, 1948, has not been paid on any earlier sale or purchase of such goods; or

(n) Special Category Goods specified in Schedule III or the goods used in manufacture, processing or packing of such goods.

Provided that in respect of transactions falling under items (h), and (j), the input tax credit may be allowed on the tax paid in excess of four percent on the raw materials used directly in the manufacture of finished products.

Provided further that if input tax credit on purchase of goods in the circumstances referred to above, has been claimed by a dealer, the same shall stand reversed.

(9) (a) Input tax credit shall not be allowed to a dealer where the tax invoice from the registered dealer selling the goods evidencing the input tax paid is-

(i) not available with the dealer in original or its duplicate copy as per provisions under Section 63 ; or

(ii) the assessing authority has reason to believe that the original tax invoice has not been issued by the selling dealer from whom the goods are purported to have been purchased;

(b) Where a taxable person does not have an original tax invoice or a duplicate copy thereof, evidencing the input tax paid, Assessing Authority may after recording the reasons in writing allow an input tax credit in the tax period in which the credit arises where the assessing Authority is satisfied –

(i) that the taxable person took all the reasonable steps to obtain a tax invoice;

(ii) that the failure to obtain tax invoice was not due to any fault of the taxable person; and

(iii) the amount of input tax claimed by the taxable person is correct;

(10) Adjustment in Tax Credit: (1) Adjustments as provided under this section shall be made in relation to taxable sales by a person, when-

(i) the rate of tax charged to that sale is different from the rate of tax as applicable under the provisions of this Act; or

(ii) the sale amount is altered whether due to the offer of discount allowed as a normal trade practice or for any other reason; or

(iii) the goods or part of the goods sold have been returned to the seller within 6 months from the date of sale;

(2) The seller has, as a result of the occurrence of one or more of the events described in sub-clauses (i) to (iii) in clause (1) above-

(i) issued a tax invoice in relation to that sale and the amount shown therein as tax charged on that sale is incorrect in relation to the amount properly chargeable on that sale; or

(ii) filed a return for the tax period in which the sale occurred and had accounted for an incorrect amount of output tax on that sale in relation to the amount properly chargeable on that sale;

(3) Where a seller has accounted for an incorrect amount of output tax as contemplated in clause (1), that seller shall make an adjustment in calculating the tax payable by that seller in the return for the tax period during which it has become apparent that the output tax is incorrect, and if-

(a) the output tax properly chargeable in relation to that sale exceeds the output tax actually accounted for by the seller, the amount of that excess shall be deemed to be tax charged by that seller in relation to a taxable sale attributable to the tax period in which the adjustment is to be made, and shall not be attributable to any prior tax period; or

(b) the output tax actually accounted for exceeds the output tax properly chargeable in relation to that sale, that seller shall reduce the amount of output tax attributable to the said tax period in terms of Section 4 by the amount of that excess:

(4) The credit allowed under clause (3) (a) above is treated as a credit for input tax;

(5) No credit shall be allowed under clause (3) (a) above where-

(i) the excess tax has been borne by the purchaser of the goods

(ii) the sale has been made to a person who is not a registered person,

(iii) unless the amount of the excess tax has been repaid by the taxable person to the person from whom the excess tax collection is made, whether in cash or by adjustment through a credit note and the registered person maintains evidence to the satisfaction of the assessing authority for such payment;

(11) Credit notes and Debit notes: (1) Where a tax invoice has been issued and the amount shown as tax charged in the tax invoice exceeds the tax payable under this Act in respect of that sale the registered dealer making the sale shall provide the purchaser with a credit note containing the requisite particulars as may be prescribed;

(i) where the tax invoice has been issued and the tax payable under this Act in respect of the sales exceeds the amount of tax charged in that tax invoice the registered dealer making the sale shall provide the purchaser with a debit note containing the requisite particulars as may be prescribed;

(j) in case of goods returned or rejected by the purchaser, a credit note shall be issued by the selling dealer to the purchaser and a debit note will be issued by the purchaser to the selling dealer containing the particulars as may be prescribed

(12) Reverse tax credit: If goods purchased for use specified under sub-section (3) are subsequently used, fully or partly, for purposes other than those specified under the said sub-section, the input tax credit there on shall be calculated and be reduced from the tax credit for the tax period during which the said utilization otherwise has taken place.

Provided that if part of purchased goods are utilized otherwise, the

amount of reverse tax credit shall be proportionately calculated;

(13) Net Input Tax Credit: The net input tax credit to which a registered dealer is entitled shall be determined by the formula:

Net Input Tax Credit = A+B-C

Where

A = the amount of input tax credit the dealer is entitled to under sub-section (2).

B = outstanding credit brought forward as determined under sub-section (6) of Section 5, from the previous tax period or under sub-section (10) of this Section.

C = reverse tax credit as determined under sub-section (12) of this Section.

Section-7: Composition of Tax Liability:

(1) Notwithstanding anything contained in this Act, but subject to direction of State Govt., the assessing authority may agree to accept a composition money either in lump sum or at an agreed rate on his turnover in lieu of tax that may be payable by a dealer in respect of such goods or class of goods and for such period as may be agreed upon.

(2) Such dealer shall not realize from any person any amount in lieu of composition money by giving it a different name or colour, by way of tax on sale of goods and no input tax credit shall be allowed on his purchases.

Provided that this Section shall not apply to a registered dealer who imports goods inside or exports goods outside the territory of India, or whose gross turnover in an assessment year exceeds Rs. Fifteen Lacks.

(3) Where a composition money for a period has been accepted in respect of a single commodity any change in the rate of tax which may come into force after the date of such agreement shall have the effect of making a proportionate change in the lump sum or the rate agreed upon in relation to that part of the assessment during which the changed rate remains in force.

(4) Where the State Govt. is of the opinion that it is no longer in the public interest to continue any scheme of composition of tax liability, it may at any time during the period, withdraw such scheme and in that case if a lump sum amount of composition money has been fixed, a part of it in proportion to the part of the period during which the scheme remained in force shall be payable by the dealer.

Explanation : For the purpose of this Section the dealer includes –

(i) a dealer who makes sale of goods by way of transfer of property in goods (whether as goods or in some other form) involved in a works contract, and

(ii) a dealer who makes sale of goods by way of transfer of right to use of any goods (whether or not for a fixed period) for any purpose.

Section 8: Liability of a Proprietory Concern;

(1) Where a dealer dies, his executor, administrator or other legal representative shall be deemed to be the dealer for the purposes of this Act and the provisions of this Act shall apply to him in respect of the business of the said deceased dealer.

(2) If the business carried on by the dealer is continued after his death by his legal representative or any other person, such representative or person shall be liable to pay tax including any penalty and interest due from such dealer under this Act or any earlier law, in the like manner and to the same extent as the deceased dealer, whether such tax including penalty and interest has been assessed before his death, but has remained unpaid or is assessed after his death;

(3) If the business carried on by the dealer is discontinued whether before or after his death his legal representative shall be liable to pay in the like manner and to the same extent as the deceased dealer would have been liable to pay if he had not died, the tax including any penalty and interest due from such dealer under this Act or under any earlier law.

(4) Where a dealer liable to pay tax under this Act, is succeeded in the business by any other person in the manner described in sub-section (2) then such person shall be liable to pay tax on the sales or purchases of goods made by him on or after the date of such succession and shall (unless he already holds a certificate of registration) within 60 days thereof apply for registration.

(5) In respect of any liability of the deceased, his executor, administrator or other representative shall however be liable only to the extent of the assets of the deceased in his hand;

(6) Any proceedings under this Act, including the proceedings for recovery, may be continued from the stage at which it was pending at the time of the death of the dealer;

(7) The provisions of sub–section (1) and sub-section (2) shall mutatis mutandis apply to a dealer being a partnership firm, which may stand dissolved in consequence of the death of any partner.

Section- 9: Liability in case of a Firm:

(1) Notwithstanding any thing contained in the Indian Partnership Act,1932 or any contract to the contrary, where any firm is liable to pay tax including penalty and interest under this Act, the firm and each of the partners of the firm shall be jointly and severally liable to pay tax including penalty and interest and accordingly any notice or order under this Act may be served on any person who was a partner during the relevant time whether or not the firm has been dissolved and all the provisions of this Act shall apply accordingly;

(2) Where any such partner retires from the firm he shall be liable to pay the tax, penalty and interest remaining unpaid at the time of his retirement and any such amount due up to the date of retirement though un-assessed at that date.

(3) Where any such partner retires from the firm, he shall intimate the date of his retirement to the assessing authority in writing and shall be liable to pay tax including any penalty or interest remaining unpaid at the time of his retirement and any such amount due up to the date of his retirement though un-assessed on that date. However if no such intimation is given within 30 days from the date of retirement, the liability of the partner shall continue until the date on which such intimation is received by the assessing authority.

(4) Where a dealer is a firm or association of persons or a Joint Hindu Family, and such firm, association or Family has discontinued business, -

(i) tax including penalty, if any, payable under this Act by such firm, association or family up to the date of such discontinuance may be assessed and determined as if no such discontinuance had taken place: and

(ii) every person who was at the time of such discontinuance, partner of such firm, or a member of such association or family shall, notwithstanding such discontinuance, be liable severally and jointly for the payment of the tax assessed any penalty imposed and payable by such firm, association or family whether assessment is made or penalty is imposed prior to or after such discontinuance, and subject to as aforesaid, the provisions of this Act shall apply as if every such person or partner were himself a dealer :

Provided that where it is found that a change has occurred in constitution of the firm or association, the firm or association, as re-constituted, as well as partners or members of the firm or association, as it existed before re – constitution, shall jointly and severally be liable to pay tax including penalty, if any, due from such firm or association for any period before its re-constitution.

Explanation: The dissolution or re-constitution of a firm or association of persons or partition of a Joint Hindu Family shall be deemed to be discontinuance of business within the meaning of this Section.

Section-10: Liability in cases of Minors and Incapacitated Persons:

(1) In case of any guardian or trustee of any minor or other incapacitated person carrying on the business on behalf of or for the benefit of such minor or other incapacitated person the tax shall be levied upon and recoverable from such guardian or trustee, as the case may be, in like manner and to the same extent as it would be leviable upon and recoverable from any such person or other incapacitated person, if he were of full age and sound mind and as if he were conducting the business himself, and all provisions of the Act and the rules made there under shall apply accordingly;

(2) If the guardianship or the trust is terminated, the ward or, as the case may be, the beneficiary shall be liable to pay the tax including any penalty and interest due from such dealer up to the time of the termination of the guardianship or trust, whether such amount has been assessed before the termination of the guardianship or trust, but has remain unpaid, or is assessed thereafter.

Section-11: Liability in case of Court of Wards etc.:

In case of business owned by a dealer whose estate or any portion of whose estate is under the control of the Court of Wards, the Administrator General, the Official Trustee or any Receiver or Manager (including any person whatever his designation who in fact manages the business on behalf of a dealer) appointed by him or under any order of a court, the tax shall be levied upon and recoverable from such Court of Wards, Administrator General, Official Trustee, Receiver or Manager, in like manner and in the same terms as it would be leviable upon and recoverable from the dealer, as if he were conducting the business himself, and all the provisions of the Act and the rules made thereunder shall apply accordingly.

Section-12: Liability in case of a Company:

(1) Liability of Directors of Private Company in Liquidation:

Notwithstanding anything contained in the Companies Act, 1956, when any private company is wound up after the commencement of this Act, and any tax assessed on the company under this Act for any period, whether before or in the course of or after its liquidation, can not be recovered, then, every person who was a director of the private company at any time during the period for which the tax is due shall be jointly and severally liable for payment of such tax unless he proves that the non-recovery can not be attributed to any gross neglect, misfeasance or breach of duties on his part in relation to the affairs of the company.

(2) Liability in case of Company in Liquidation

(a) Every person –

(i) who is a liquidator of any company which is being wound up whether under the orders of a court or otherwise; or

(ii) who has been appointed the receiver of any assets of a company (herein after referred to as the “Liquidator"),

shall, within 30 days after he has become such liquidator, give notice of his appointment as such to the assessing authority ;

(b) The assessing authority shall, after making such enquiries or calling for such information as he may deem fit, notify the liquidator within three months from the date on which he receives notice of the appointment of the liquidator, the amount which in the opinion of the assessing authority would be sufficient to provide for any tax (including any penalty or interest) which is then, or is likely thereafter, to become payable by the company,

© The liquidator shall not part with any of the assets of the company or the properties in his hand until he has been notified by the assessing authority under clause (b) above and on being so notified, the liquidator shall set aside an amount equal to the amount notified by the assessing authority and, until he so sets aside such amount, he shall not part with any of the assets of the company or the properties in his hand:

Provided that nothing contained in this clause shall debar the liquidator from parting with such assets or properties in compliance with any order of a court or for the purpose of the payment of tax and penalty, if any, payable by the company under this Act or for making any payment to secure creditors whose debts are entitled under law to priority of payments over debts due to Govt. on the date of liquidation or for meeting such cost and expenses of the winding up of the company as are in the opinion of the assessing authority reasonable;

(d) If the liquidator fails to give notice in accordance with clause (a) or fails to set aside the amount as required by clause © or parts with any assets of the company or the properties in his hand in contravention of the provision of that clause, he shall be personally liable for the payment of tax, penalty and interest, if any which the company would be liable to pay under this Act:

Provided that if the amount of tax, penalty and interest, if any, payable by the company is notified under clause (b) the personal liability of the liquidator under this sub-section shall be to the extent of such amount:

(e) Where there are more liquidators than one, the obligation and liabilities attached to the liquidator under this section shall attach to all liquidators jointly and severally;

(f) the provisions of this section shall have effect notwithstanding any thing to the contrary contained in any other law for the time being in force;

(g) for the purpose of this Section, the expressions “company” and “private company” shall have the meanings respectively assigned to them under clauses (i) and (ii) of sub-section (1) of Section 3 of the Companies Act,1956.

(3) Amalgamation of Companies:

(a) When two or more companies are to be amalgamated by the order of a Court or of the Central Govt. and the order is to take effect from a date earlier to the date of order and any two or more such companies have sold or purchased any goods to or from each other in the period commencing on the date from which the order is to take effect and ending on the date of the order, then such transaction of sale and purchases will be included in the turnover of the sales or the purchases of the respective companies and will be assessed to tax accordingly;

(b) Notwithstanding any thing contained in the said order, for all the purposes of this Act, the said two or more companies will be treated as distinct companies and will be treated as such for all periods up to the date of the said order and the registration certificates of the said companies will be cancelled where necessary, with effect from the date of the said order;

© Words and expressions used in this section, but not defined will have the respective meaning to them in the Companies Act 1956.

Section-13 Certain Agents liable to tax for sales on behalf of Principal:

(1) Where any person sells or purchases any taxable goods on behalf of his principal then such person and his principal shall both be jointly and severally liable to pay taxes on the turnover of such sales or purchases;

(2) If the principal, on whose behalf the commission agent has sold or purchased any goods, shows to the satisfaction of the assessing authority that the tax has been paid by such commission agent on such goods under sub-section (1) the principal shall not be liable to pay the tax again in respect of the same transaction;

(3) Where a manager or agent of a non-resident dealer sells or purchases any goods on behalf of a non-resident dealer in the State, then the non-resident dealer and the manager or agent residing in the State, shall be jointly and severally liable to pay tax on the turnover of such sales or purchases;

Provided that if the non-resident dealer shows to the satisfaction of the assessing authority that the tax payable in respect of such sale or purchase has been paid by the manager or agent residing in the State, then the non-resident dealer shall not be liable to pay in respect of the same transaction.

Section-14 Liability in case of Transfer of Business:

(1) Where a dealer, liable to pay tax under this Act, transfers his business in whole or in part, by sale, gift, lease, license, hire or in any other manner whatsoever the transferor and the transferee shall jointly and severally be liable to pay tax (including any penalty and interest) due form the dealer upto the time of such transfer, whether such tax( including any penalty and interest) has been assessed before such transfer but has remain unpaid or is assessed thereafter;

(2) Where the transferee or lessee of a business referred to in sub-section (1) carries on such business either in his own name or in some other name, he shall be liable to pay tax on sale of goods effected by him with effect from the date of such transfer and shall, if he is an existing dealer, apply with in the prescribed time for amendment of his certificate of registration.

(3) Where a tax including penalty and interest, if any is recovered from a transferee under sub-section (1) such transferee shall be entitled to recover the same from the person who was originally liable to pay the tax.

(4) Where a dealer is liable to pay tax under this Act is succeeded in the business by any person, then such person shall be liable to pay tax on the sales or purchases of goods made by him on or after the date.