2007 (12) TMI 439 - HC - VAT and Sales Tax

High Court decision emphasizes evidence, burden of proof, and circular impact on penalty in tax cases

The High Court upheld the penalty revision while dismissing the assessment revision. The judgment emphasized the importance of evidence, burden of proof, ... Penalty proceedings under section 15A(1)(o) of the U.P. Trade Tax Act, 1948 - Held that:- Tribunal's finding cannot be sustained that the goods were being imported only for the reason that the bags containing the 'supari' was bearing marks of manufacturer of Kerala and Gwalior. In my opinion, this . Merely because the bags bore the marks of manufacturers of Kerala and Gwalior it was not enough to hold that they were being imported. It is possible that some other party had imported the goods in U.P. and thereafter sold it to the dealer. The importer may not have been a registered dealer and may or may not have paid the tax. The dealer could not be held to be an importer. But definitely as the dealer had failed to prove that he had purchased tax-paid goods within the State of U.P. he was liable to pay tax as the goods were found missing in the subsequent survey which indicated that the goods had been sold by the dealer. The law with regard to imposition of penalty is that the burden lies on the department to establish violation of section 28A(1) of the Act. With regard to turnover of the sales the burden would lie on the dealer. Similar view has been taken in the judgments referred to above, relied upon by the learned counsel for the dealer. In view of the above discussion, the imposition of penalty cannot be justified and has to be set aside. Whereas the liability of tax has to be maintained. Issues:1. Assessment proceedings under section 7(3) of the U.P. Trade Tax Act, 1948.2. Penalty proceedings under section 15A(1)(o) of the Act.Assessment Proceedings (Issue 1):The case involved a truck carrying goods intercepted by the Trade Tax Department. The driver admitted incomplete papers and stated relevant papers were with the owner. Despite the papers showing tax-paid goods within U.P., an FIR was lodged, and goods were seized. The Chief Judicial Magistrate later released the goods on sureties. The department imposed a penalty for violating section 28A of the Act, and later, during a survey, found the goods missing. Appeals against penalty and assessment orders were dismissed, leading to two second appeals.Penalty Proceedings (Issue 2):The dealer argued that circulars by the Commissioner prohibited penalty during pending criminal proceedings. The dealer presented evidence showing goods were tax-paid and transported within U.P. The department claimed the goods were imported, evidenced by marks on bags. The Tribunal rejected the dealer's evidence and held the goods were sold, justifying tax liability. The burden of proof for importation was on the department, but the burden for turnover was on the dealer. The judgment set aside the penalty but maintained the tax liability.Conclusion:The High Court upheld the penalty revision while dismissing the assessment revision. The judgment highlighted the importance of evidence, burden of proof, and the impact of circulars on penalty proceedings during pending criminal cases. The decision emphasized the need for proper documentation and proof to establish tax liability and importation of goods.