Transit pass non-surrender triggers intra-State sale presumption, tax liability, and penalty unless the owner rebuts it with reliable proof.

Failure to surrender the transit pass within the stipulated time under section 28AA of the Karnataka Sales Tax Act triggers a statutory presumption that the goods were sold within the State by the owner of the vehicle, and penalty follows on non-compliance. The provision is aimed at preventing diversion of goods in transit, and the owner bears the burden of producing reliable material to rebut the presumption, such as proof of delivery to the consignee, lawful extension of time, or evidence that the goods actually left the State. A Tribunal cannot treat the transaction as a second sale exempt from tax without meeting the specific liability created by section 28AA; authorities relied on for exemption are inapplicable where the statutory transit-pass breach is admitted.

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Issues: Whether, on failure to surrender the transit pass within the stipulated time under section 28AA of the Karnataka Sales Tax Act, 1957, the statutory presumption of sale within the State and the consequential tax and penalty could be fastened on the owner of the vehicle, and whether the Tribunal was justified in treating the transaction as a second sale exempt from tax.

Analysis: Section 28AA was enacted to prevent diversion of goods in transit and leakage of revenue. The scheme of the provision requires the driver or person in charge of the vehicle to obtain a transit pass and surrender it at the exit check-post within the stipulated time. On non-compliance, sub-section (4) raises a statutory presumption that the goods have been sold within the State by the owner of the vehicle, and sub-section (5) attracts penalty. The provision also places the onus on the owner where goods are moved by another vehicle, and the record did not establish any acceptable material showing actual delivery to the consignee, lawful extension of time, or proof that the goods had in fact moved out of the State. The Tribunal's reasoning based on second sale and exemption did not answer the specific liability created by section 28AA, and the decisions relied upon by it were held inapplicable on the admitted facts.

Conclusion: The non-surrender of the transit pass attracted the statutory presumption and the resulting tax and penalty under section 28AA; the Tribunal was wrong in deleting the levy, and the Revenue's case was accepted.

Ratio Decidendi: When a goods vehicle carrying taxable goods fails to comply with the mandatory transit-pass requirements under section 28AA, the statutory presumption of intra-State sale and the consequent tax and penalty operate against the owner of the vehicle unless the contrary is proved by reliable material.

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