2014 (7) TMI 534 - HC - VAT and Sales Tax

High Court quashes assessment reopening for broken glass trader due to lack of substance. Burden of proof on petitioner.

The High Court quashed the permission to reopen assessment for a trader of broken glass for the year 1994-95, as the reasons lacked substance. The court ... Validity of re opening of assessment - Tax on broken glass - Authorities held that assessee should be referred as manufacturer and liable to tax - Therefore, authorities reopened assessment - Held that:- A bare perusal of the impugned 11 order would show that it is based on hypothesis that broken glass in huge quantity cannot be found out except from filling factories. This approach is wholly conjectural and is not based upon any material - the petitioner is a trader and is not a manufacturer actual or deemed and his case that he has purchased the broken glass from Kabaries, has not been disputed either in the original assessment proceedings or in the reasons recorded in the impugned order - reasons recorded in the impugned order are not sufficient to form an opinion that the turnover of the peti tioner has escaped assessment. It is based on conjecture and surmises. The sanction granted by the impugned order to reopen the assessment cannot be allowed to stand. - Decided in favour of assessee. Issues:Reopening of assessment based on broken glass sales for the year 1994-95 under U.P. Trade Tax Act - Permission granted to reopen assessment - Whether broken glass is waste product or material - Burden of proof on the assessee - Escapement of turnover assessment - Legal distinction between waste product and waste material - Reliance on previous judgments and notifications - Sufficiency of reasons for reopening assessment.Detailed Analysis:1. Reopening of Assessment:The petitioner, a trader of broken glass, had the assessment for the year 1994-95 completed initially based on accepted account books. However, permission was sought and granted to reopen the assessment on the ground that the petitioner is a 'deemed manufacturer.' The High Court had earlier set aside this portion of the order as it lacked reasons. The subsequent permission to reopen the assessment was granted based on the premise that broken glass is considered a waste product from glass bottles, which is returned to suppliers and sold to Kabaries.2. Nature of Broken Glass - Waste Product or Material:The main contention revolved around whether broken glass should be classified as a waste product or waste material. The petitioner argued that broken glass is waste material and not a waste product, as erroneously assumed by the assessing authority. Previous judgments highlighted the legal distinction between waste product and waste material, emphasizing the need for a rational connection in forming beliefs for assessment reopening.3. Burden of Proof and Escapement of Turnover Assessment:The burden of proof regarding the purchases of broken glass from Kabaries within the State of U.P. lay upon the petitioner. The assessing authority should have a valid reason to believe that the turnover of the dealer has escaped assessment, which should not be based on conjecture or surmises. The reasons for reopening assessment should have a rational connection to the escapement of turnover.4. Reliance on Previous Judgments and Notifications:The respondents relied on previous judgments and notifications to argue that the petitioner is liable for tax under specific entries. However, the court scrutinized these references and found them insufficient to support the reopening of the assessment based on the classification of broken glass as a waste product.5. Sufficiency of Reasons for Reopening Assessment:The court concluded that the reasons recorded in the impugned order were not substantial enough to form an opinion that the turnover of the petitioner had escaped assessment. The decision to reopen the assessment was deemed to be based on conjecture and surmises, leading to the quashing of the impugned order.In the final verdict, the writ petition was allowed, and the impugned order dated March 23, 2009, granting permission to reopen the assessment, was quashed.