2008 (8) TMI 855 - HC - VAT and Sales Tax

Taxability of Inter-State Sales by Endorsement: Burden of Proof and Presumptions

The case involved the taxability of turnover on inter-State sales by endorsement of a document of title. The assessing authority disputed the sales, ... Whether the judgment and order of the Tribunal is based on assumption and presumption and is conjectural? Held that:- The Tribunal has noticed that the goods receipt is drawn in triplicate and one copy is handed over to the bank to collect the sale proceeds and the other two copies were handed over to the transporter and the endorsement is made on the transporter's copy, would amount to the transfer of title by endorsement. The Tribunal has failed to address the real issue involved as to whether the dealer-opposite party has proved that the subsequent sale took place by endorsement of document of title. It proceeded on the presumption and assumption that the State of Madhya Pradesh is a neighbouring State and a person may reach there within 3-4 days. It may be so but it does not mean that in the absence of any other evidence the dealeropposite party collected the document of title from the bank and made the endorsement for transfer of goods thereon. Unless and until the evidence is produced by the dealer-opposite party that he collected the document of title from the bank, and transferred the goods, by making endorsement thereon, no inference of subsequent Central sale by endorsement of document of title can be drawn in view of the plain language of section 6(2) of the Central Sales Tax Act, 1956. Thus the order of the Tribunal is indefensible and it suffers with manifest error of law. It is held that there is no evidence on record to show that the dealer-opposite party made the subsequent Central sales by endorsement of document of title. Revision succeeds and is allowed. Issues:Taxability of turnover on inter-State sale by endorsement of document of title.Analysis:1. The main issue in this case pertains to the taxability of turnover on inter-State sale by endorsement of document of title. The dealer declared inter-State sales worth Rs. 1,19,84,063.50, and the assessing authority found that the goods were sold without endorsement of document of title. The Trade Tax Tribunal, however, upheld the dealer's contention based on form C and form EI/II. The questions of law raised in the memo of revision include the definition of document of title, the sufficiency of form EI and form C for exemption under the Central Sales Tax Act, and the assessing officer's right to enquire into the fulfillment of conditions under the Act.2. The burden of proof lies with the dealer to establish that the transaction took place by endorsement of document of title. Failure to provide cogent evidence may result in a presumption against the dealer. In this case, the Tribunal's decision was based on presumption rather than concrete evidence. The Tribunal's reliance on a judgment from the Kerala High Court was deemed irrelevant to the present case, emphasizing the necessity to prove the subsequent sale by endorsement of document of title.3. The Tribunal's approach was criticized for assuming the existence of multiple documents of title, whereas there can only be one true document of title. The definition of 'document of title' under the Sale of Goods Act, 1930 was cited to clarify the requirements for a document to qualify as proof of possession or control of goods. The Tribunal failed to address the crucial issue of whether the subsequent sale occurred through the endorsement of a document of title.4. It was emphasized that the dealer must prove the essential facts to claim exemption under the Central Sales Tax Act. The absence of evidence showing that the dealer collected the document of title from the bank and endorsed it for the transfer of goods led to the conclusion that the subsequent Central sales were not proven to be by endorsement of document of title. The Tribunal's decision was deemed erroneous and lacking in legal foundation.5. Ultimately, the revision was allowed, setting aside the Tribunal's order and restoring that of the first appellate authority. The judgment highlighted the necessity for concrete evidence to prove the endorsement of document of title in inter-State sales for tax purposes.This detailed analysis covers the key legal aspects and arguments presented in the judgment regarding the taxability of turnover on inter-State sales by endorsement of document of title.