M/S Jai Prakash Oil Mill vs Commissioner Trade Tax, U.P. ...
2017 Latest Caselaw 7333 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

AFR
 
Court No. - 59
 

 
Case :- SALES/TRADE TAX REVISION No. - 1490 of 2007
 

 
Applicant :- M/S Jai Prakash Oil Mill
 
Opposite Party :- Commissioner Trade Tax, U.P. Lucknow
 
Counsel for Applicant :- Aloke Kumar
 
Counsel for Opposite Party :- S.C.
 

 
Hon'ble Yashwant Varma,J.

Heard Shri Aloke Kumar, learned counsel for the revisionist and Shri A.C. Tripathi, the learned standing counsel.

This revision has been preferred against the judgment rendered by the Tribunal on 15 September 2007. The assessee had, against the order of assessment, been granted relief by the first appellate authority which accepted its contention that it was not engaged in the sale and purchase or manufacture of articles so as to be exigible to tax under the UP. Trade Tax Act, 1948 [1948 Act]. The Tribunal has set aside this order by allowing the appeal of the Department in part and while restoring the order passed by the assessing authority, reduced the amount of tax, which according to the respondents had not been fully and faithfully disclosed.

The proceedings themselves emanate from a survey of the premises owned by the revisionist on 29 September 2005. During the course of the survey, the team is stated to have noted the existence of 55 sacks of chana, 3 sacks of chana dal, 30 kg of chuni and 4 sacks containing pouches and packages of mustard oil. Upon this discovery, the revisionist was called upon to show cause. In its reply, which was preferred before the assessing authority, it took the stand that it was not engaged in any transaction of sale and purchase and that it only undertakes the processing of flour and manufacture of oil on the basis of certain conversion charges which are paid to it for this purpose. The assertion stands duly reflected in paragraph Nos. 3, 5 and 13 of the reply which was submitted. The assessing authority, however, proceeded to hold that the very existence of products in such quantity would establish the assessee being engaged in the sale and purchase of commodities and willfully not making a candid and full disclosure with regard to its liability under the 1948 Act. Taking into account the quantity of articles which were found, it has proceeded to form an opinion that the revisionist was engaged in the manufacture of dal and other commodities. It has accordingly been assessed as such under the 1948 Act.

The submission of Shri Kumar, learned counsel for the revisionist, was that the entire assessment proceedings have been framed on the basis of surmises and conjectures. He laid stress upon the fact that there was no material before the respondents which may have even remotely evidenced or established a transaction of sale or purchase that may have been entered into by the assessee. He submits that the respondents also do not rest their conclusions on any material which may have been found tending to indicate that the reply which was tendered and the contentions which stood raised therein were false and misleading. He submitted that the assessee had categorically asserted that it was only processing the articles for and on behalf of individuals who were paying it a conversion charge alone. Shri Kumar submitted that this activity of conversion or processing could not be subjected to tax under any provision of the 1948 Act.

Shri Tripathi, learned standing counsel, on the other hand has taken the Court through the order passed by the assessing authority to establish and contend that from the large quantity of material which was found existing on spot as well as the machineries which were found established at the site, it was evident that the assessee was regularly entering into transactions of sale and purchase and the same were not being disclosed to the authorities under the Act. He submitted that bearing in mind the material which was gathered by the survey team, the levy of tax upon the assessee based upon the estimation of the assessing authority would merit no interference. It is these rival submissions, which fall for determination.

At the very outset it must be noted that the entire backdrop of the view taken by the respondents is based upon the presence of articles in different quantities and machineries which were evidently found on the site. This aspect must be necessarily tested in light of the reply which the assessee had proffered. According to him, it was admitted that this material was being worked upon for and on behalf of individuals who paid to the assessee a conversion charge. This stand of the assessee has not been proven to be false nor is it belied by any evidence that may have been relied upon by the respondents. There was no material on record which may have established that the claim as raised and voiced by the assessee was belied or not liable to be accepted. The Court must necessarily consider and bear in mind the fact that the respondents were dealing with the administration and enforcement of a taxing statute. The tax under the 1948 Act admittedly stands restricted to transactions of sale or purchase of goods. It was therefore imperative for the respondents to establish as a fact that a transaction of sale or purchase had in fact occurred and had deliberately not been disclosed by the assessee. However, as this Court reads the orders of the assessing authority as well as the Tribunal, it is more than evident that an adverse view has been taken against the assessee solely on the basis of the existence of the commodities referred to above as well as the placement of machineries on the site. This, in the considered view of the Court, was by itself not sufficient to sustain a levy of tax under the 1948 Act.

Admittedly there is no provision under the 1948 Act which raises a presumption rebuttable or conclusive against the assessee merely on the basis of a trader or dealer being found in possession of articles which may be eligible to be traded in. A presumption, conclusive or rebuttable must necessarily flow from a specifically embodied statutory provision. Both the creation of a legal fiction as well as a conclusive or rebuttal presumption rests upon the authority of statute. It is the statute or the enactment which must necessarily engraft or place such a provision and empower the authorities administering the same to presume the existence of particular facts and thus shift the burden of proof upon the assessee. Undisputedly no such presumption stood raised against the assessee under the 1948 Act. At least no provision could be pointed out which embodied such a presumption. The Court then proceeds to consider the submission of Shri Tripathi that the burden of proof under the 1948 Act stands statutorily placed upon the assessee in terms of Section 12-A of the Act. The said provision, which is extracted herein below, reads thus:-

"12-A Burden of proof. - (1). In any assessment proceedings, when any fact is specially within the knowledge of the assessee, the burden of proving that fact shall lie upon him, and in particular, the burden of proving the existence of circumstances bringing the case within any of the exceptions, exemptions or reliefs mentioned in Section 3-A, Section 3-D, Section 4, Section 4-A, Section 4-B, or Section 7-D shall lie upon him and the assessing authority shall presume the absence of such circumstances.

(2) Where any dealer claims that he is not liable to tax under Section 3-D in respect of any transaction of purchases:

(a) any declaration made or certificate issued by him admitting to be the first purchaser and accepting the liability to pay trade tax on purchase of goods, shall be conclusive evidence of his liability to pay the trade tax on purchase of goods in respect of the transaction specified in such declaration or certificate;

(b) the burden of proving the existence of facts and circumstances on the basis of which he claims such exemption from liability shall lie upon him, and in particular, the dealer shall also be liable to disclose full particulars of the person from whom he has purchased the goods in such transaction of purchase; and

(c) no such claim shall be accepted unless reasonable opportunity of being heard has been given to the person, whose particulars are disclosed by such dealer."

A careful reading of sub section (1) thereof establishes that if any facts are specially within the knowledge of the assessee, then in the course of assessment proceedings, the burden of proving those facts lies upon him. Similarly sub section (2) (b) which was also pressed into aid deals with the burden of proof in respect of existence of facts and circumstances on the basis of which the assessee claims exemption. Both under sub section (1) as well as sub section (2) (b), the burden stands placed or shifted upon the assessee in respect of special facts or circumstances upon which he claims exemption. These two provisions would clearly have no application in a case where the assessee was asserting that he was only processing the articles in question and not entering into any transaction of sale or purchase. Reading section 12-A in any other manner would result in the Court holding that a negative burden lies upon the assessee. It would basically compel the assessee to prove and establish a fact which according to him never came into existence. Section 12 A cannot possibly be conferred such a construction. More importantly section 12 A read in any fashion and stretched to any limit does not result in the Court coming to conclude that the respondents are conferred the authority to presume that a transaction of sale or purchase has occurred merely on the basis of some articles or commodities being found in the possession of a dealer or a trader.

It would in this connection be apposite to refer to the decision of the Supreme Court in State of West Bengal Vs. Mohd. Khalil1. Dealing with a matter which arose from the Entry Tax legislation prevalent in West Bengal, the Supreme Court was called upon to test the validity of a levy of tax on the ground that certain goods were found in the possession of an individual though there was no evidence to suggest that the goods had entered the State for sale, use or consumption therein. Answering the questions which arose, the Supreme Court made the following pertinent observations:-

"20. It must be borne in mind that before the tax could be imposed under sub-section (3) of Section 14 of the Entry Tax Act, the authority will have to be satisfied of the requirements noted above. Without there being any material to show that the specified goods in the possession of the respondent have been brought into the Calcutta Metropolitan Area and that they were brought without payment of any tax leviable thereon, no tax can be levied under sub-section (3) of Section 14 even on a dealer. It cannot be lost sight of that the tax under the Entry Tax Act is a tax on the entry of the specified goods into the Calcutta Metropolitan Area and not on possession of the specified goods within the Calcutta Metropolitan Area.

21. However, the contention of Mr Chakravarty is that when specified goods are found in possession of a person and when he, on being required to produce before the authority any accounts, register or document under sub-section (6) of Section 14, has failed to do so, a presumption arises that the specified goods have been brought by him into the Calcutta Metropolitan Area without payment of tax. We are afraid, we cannot accede to this contention. A presumption is a rule of law which requires the court to draw a given conclusion on proof or existence of certain facts and leaves it to the party disputing the conclusion to rebut the same. Presumptions may be of fact or of law. A presumption is an inference sanctioned by law which does not logically or necessarily follow from the proved facts. For raising a presumption, as submitted by Mr Chakravarty, there must be a specific provision in the Entry Tax Act. No provision in the said Act is brought to our notice which may enable the authority to raise the presumption that a possessor of the specified goods, who fails to produce before the authority his accounts, register or document on being required to do so, has imported the goods into the Calcutta Metropolitan Area without payment of tax. On the facts and circumstances of the case, it is impossible for a court to infer that the respondent has imported the goods into the Calcutta Metropolitan Area without payment of tax.

(emphasis supplied)

The legal position with regard to the imperative necessity of a presumption being based upon a legislative provision was reiterated by the Supreme Court in its recent pronouncement in Bhuwalka Steel Industries Ltd. Vs. Union of India2.

Reverting to the facts of our case, as noted above, no provision of the 1948 Act enabled or empowered the respondents to presume that the revisionist was engaged in the trade or sale and purchase of the commodities which were found present on site during the course of the survey. The solitary factor, upon which alone rested the levy of tax was the existence of the commodities in and machinery at the premises of the revisionist. The respondents do not rest their decision to levy tax on any material or evidence which may have belied or even remotely tended to indicate that the explanation submitted was factually incorrect. There was not a shred of evidence, cogent or reliable to establish and prove that the revisionist was engaged in the sale or purchase of commodities. In view thereof the levy and imposition of tax cannot be sustained. For all the aforesaid reasons, the Court finds itself unable to endorse the decision of the Tribunal either.

Accordingly and for all the reasons noted above, this revision is allowed. The order of the Tribunal dated 15 September 2017 is set aside. The levy of tax upon the revisionist in consequence shall stand annulled.

Order Date :- 28.11.2017                               (Yashwant Varma, J.)
 
nethra