Rebuttable statutory presumption in sales tax transit checks upheld, with reassessment required after opportunity to rebut

A taxing legislature may enact machinery and evidentiary provisions to prevent sales tax evasion, and section 28-B with rule 87 was upheld as a valid transit-control measure consistent with Articles 19(1)(g) and 301. The provisions were treated as regulatory devices that did not themselves impose tax but ensured that goods claimed to be in transit were ally taken outside the State. The statutory presumption under section 28-B was construed as rebuttable, not conclusive, so the transporter must be allowed to produce reliable material to displace it. Assessments based on a conclusive view of the presumption were therefore required to be revisited with opportunity to rebut.

---

---

Issues: (i) Whether section 28-B of the Uttar Pradesh Sales Tax Act, 1948 and rule 87 of the Uttar Pradesh Sales Tax Rules, 1948 were constitutionally valid as measures within the State's taxing power and consistent with articles 19(1)(g) and 301 of the Constitution of India. (ii) Whether the presumption in section 28-B was a rebuttable presumption or a conclusive presumption, and whether assessments made on that basis could stand without giving the transporter an opportunity to rebut it.

Issue (i): Whether section 28-B of the Uttar Pradesh Sales Tax Act, 1948 and rule 87 of the Uttar Pradesh Sales Tax Rules, 1948 were constitutionally valid as measures within the State's taxing power and consistent with articles 19(1)(g) and 301 of the Constitution of India.

Analysis: The provisions were treated as machinery provisions enacted to prevent evasion of sales tax and to make the levy effective. A legislature competent to levy tax also has ancillary and incidental power to enact measures to prevent evasion. The impugned provisions did not themselves impose a tax but regulated transit and inspection to ensure that goods represented as passing through the State were actually taken out of the State. The restrictions were held not to unduly hamper trade and were justified in the public interest.

Conclusion: The provisions were upheld as constitutionally valid and the challenge based on legislative competence, article 301, and article 19(1)(g) failed.

Issue (ii): Whether the presumption in section 28-B was a rebuttable presumption or a conclusive presumption, and whether assessments made on that basis could stand without giving the transporter an opportunity to rebut it.

Analysis: The expression used in section 28-B was construed in the sense of a rebuttable presumption, akin to a rule of evidence shifting the burden of proof. The transporter was not shut out from showing by reliable material that the goods were not sold inside the State. Assessments made on the mistaken footing that the presumption was conclusive were therefore liable to be re-examined, and the State accepted that fresh notices should be issued and ex parte assessments withdrawn where necessary.

Conclusion: The presumption under section 28-B was held to be rebuttable, and reassessment with opportunity to rebut the presumption was directed.

Final Conclusion: The challenge to the statutory scheme failed on constitutional grounds, but the assessments were required to be dealt with afresh in accordance with the correct legal effect of the rebuttable presumption and with due opportunity to the affected transporters.

Ratio Decidendi: A taxing legislature may enact machinery and evidentiary provisions reasonably connected with preventing tax evasion, and a statutory presumption framed for that purpose will be construed as rebuttable unless the language clearly makes it conclusive.

---