New dealer classification under sales tax law requires first-time business entry, not annual licence renewal or new commodity sales.

Section 18(2) of the U.P. Sales Tax Act applies only where a dealer begins business for the first time during the assessment year; an existing dealer who merely sells a new commodity or operates under an annual liquor licence is not treated as a new dealer and remains subject to the regular return regime. An ex parte provisional monthly assessment could not stand without a recorded finding that the assessee was a new dealer and that section 18(2) applied. Section 12-A did not shift the burden of proof in such ex parte proceedings, because it presupposes an opportunity for the assessee to participate and explain.

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Issues: (i) Whether a dealer already carrying on business, but selling country liquor under an annual licence, could be treated as having commenced business during the assessment year so as to attract section 18(2) of the U.P. Sales Tax Act and monthly returns under rule 41 of the U.P. Sales Tax Rules. (ii) Whether an ex parte provisional monthly assessment could be sustained without a finding that the assessee was a new dealer, and whether section 12-A of the U.P. Sales Tax Act could shift the burden of proof in such ex parte proceedings.

Issue (i): Whether a dealer already carrying on business, but selling country liquor under an annual licence, could be treated as having commenced business during the assessment year so as to attract section 18(2) of the U.P. Sales Tax Act and monthly returns under rule 41 of the U.P. Sales Tax Rules.

Analysis: Section 18(2) was held to apply to a dealer who starts business for the first time during the assessment year. The expression "during the course of an assessment year" was construed to cover the whole year, but the provision was read in the setting of the Act as dealing with new entrants to business, not with an existing dealer who merely begins selling a new commodity or operates under a yearly licence. The scheme of section 7, section 8-A, rule 41 and rule 6(b) showed that an existing dealer remains subject to quarterly returns and assessment by the appropriate authority, and does not become a fresh dealer each time an annual licence is renewed or obtained.

Conclusion: The case did not fall within section 18(2), and the petitioners were not liable to monthly returns or assessments on the footing that they had commenced business during the assessment year.

Issue (ii): Whether an ex parte provisional monthly assessment could be sustained without a finding that the assessee was a new dealer, and whether section 12-A of the U.P. Sales Tax Act could shift the burden of proof in such ex parte proceedings.

Analysis: The assessing authority proceeded ex parte under rule 41(3), yet recorded no finding that the petitioners were new dealers or that they had commenced business for the first time. On such an ex parte foundation, the authority had to satisfy itself that section 18(2) applied. The facts recorded in the assessment order were insufficient for that purpose. Section 12-A, which places the burden on the assessee in respect of facts especially within his knowledge, was held inapplicable to an ex parte proceeding because it presupposes that the assessee has been associated with the enquiry and given an opportunity to explain.

Conclusion: The provisional monthly assessment orders were not sustainable and disclosed a manifest error of law on their face.

Final Conclusion: The petitions succeeded and the impugned provisional monthly assessment orders were quashed with costs.

Ratio Decidendi: Section 18(2) of the U.P. Sales Tax Act applies only to a person who begins business for the first time during the assessment year, and an existing dealer does not become a new dealer merely because he carries on a trade under an annual licence; an ex parte assessment cannot be upheld on a presumed application of that provision without a recorded finding and proper opportunity to the assessee.

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