2004 (12) TMI 663 - HC - VAT and Sales Tax

Supreme Court annuls lower orders, cites procedural flaws. Unsigned entries insufficient for presumption of sale.

Escorts Limited Versus Commissioner o Trade Tax, UP., Lucknow

The Supreme Court set aside the lower authorities' orders as they failed to meet procedural requirements and discharge the burden of proof. The ... - Issues Involved:1. Validity of the presumption of sale within the state under Section 28B of the U.P. Trade Tax Act, 1948.2. Compliance with procedural requirements for confronting original documents.3. Burden of proof on the revenue to establish the connection of Form XXXIV with the applicant.Issue-wise Detailed Analysis:1. Validity of the presumption of sale within the state under Section 28B of the U.P. Trade Tax Act, 1948:The court examined the validity of Section 28B of the U.P. Trade Tax Act, 1948, which presumes that goods not surrendered at the exit check-post were sold within the state. The provision was upheld by the Supreme Court in Sodhi Transport Co. v. State of U.P., recognizing it as a machinery provision to prevent tax evasion and not a charging section. The presumption under Section 28B is rebuttable, meaning the party against whom it is raised has the opportunity to disprove it by leading evidence.2. Compliance with procedural requirements for confronting original documents:The applicant argued that they were not confronted with the original Form XXXIV or Panji 3, as directed by the Tribunal. The Tribunal had remanded the case to the assessing officer with specific instructions to provide these documents. Despite reminders, the assessing authority failed to comply, providing only extracts of Panji 3, which lacked signatures and other necessary details. The court emphasized the necessity of confronting the original Form XXXIV, as it is the primary evidence for initiating proceedings and drawing adverse inferences.3. Burden of proof on the revenue to establish the connection of Form XXXIV with the applicant:The court highlighted that when the applicant disputes the connection with the alleged Form XXXIV, the burden lies on the revenue to prove the association. The revenue must confront the applicant with documents signed or acknowledged by them. In this case, the revenue failed to provide original or photostat copies of Form XXXIV. The entries in Panji 3, which were unsigned, could not be held binding on the applicant. The court noted that the information from the check-posts was not always reliable, as evidenced by the incorrect information in several cases.Conclusion:The court set aside the orders of the Tribunal and the authorities below, ruling that the procedural requirements were not met, and the burden of proof was not discharged by the revenue. The presumption of sale within the state based on unsigned entries in Panji 3 was deemed unsafe without specific evidence of sale. The revision was allowed, and the orders were annulled.