Sales tax on timber requires a positive finding of importation before liability can be fastened

Sale of timber could not be subjected to sales tax in the dealer's hands unless the authorities first recorded a positive finding, on material on record, that the timber sold had been imported by the dealer from outside the State. Timber purchased within the State was not exigible to tax on that basis, and the burden was not properly shifted to the dealer under section 12-A of the U.P. Sales Tax Act. The approach of requiring the dealer to prove that the timber was not imported was legally unsound, so the demand could not stand on the basis adopted and the matter required reconsideration in accordance with law.

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Issues: Whether sale of timber could be subjected to sales tax in the hands of the dealer without a positive finding that the timber sold had been imported by him from outside the State, and whether the authorities were justified in placing the burden on the dealer under section 12-A of the U.P. Sales Tax Act.

Analysis: The taxable event for the relevant year was sale of timber by the importer alone, and timber purchased within the State was not exigible to tax in the dealer's hands. The assessment authorities and the Tribunal proceeded on the erroneous footing that the dealer had to prove by cogent evidence that the timber sold by him was not imported. That approach was legally unsound, because the authorities were required in the first instance to record a positive finding, based on material on record, that the timber sold was imported by the dealer before fastening tax liability. The earlier reasoning that a similar question required a positive finding on importation was applied to the present dispute.

Conclusion: The demand could not be sustained on the basis adopted by the authorities, and the matter had to be reconsidered by the Tribunal in accordance with law.

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