Tax levy cannot rest on mere possession of goods and machinery without proof of taxable sale or purchase.

Tax under the U.P. Trade Tax Act could not be sustained merely because articles and machinery were found during survey. The assessee's explanation that it only processed goods on conversion charges was not shown false, and mere possession of commodities did not prove a sale or purchase attracting tax. Section 12-A was confined to facts specially within the assessee's knowledge or claims for exemption; it did not create a presumption of taxable transactions or shift a negative burden onto the assessee. In the absence of any statutory presumption and any evidence of sale or purchase, the levy was unsustainable and the assessment-based tax was annulled.

---

---

Issues: Whether tax under the U.P. Trade Tax Act, 1948 could be sustained merely on the basis of articles and machinery found during survey, and whether Section 12-A of the Act permitted a presumption that the assessee was engaged in sale or purchase so as to shift the burden of proof.

Analysis: The assessee's stand was that it only processed goods on conversion charges and was not engaged in sale or purchase. That explanation was not shown to be false by any material on record. The tax under the Act is attracted only where there is a sale or purchase of goods, and the authorities relied only on the existence of commodities and machinery at the premises. The Court held that such circumstances, by themselves, do not establish taxable transactions. Section 12-A shifts the burden only in respect of facts specially within the assessee's knowledge or claims for exemption, and it does not create a negative burden or authorise a presumption that a sale or purchase occurred merely because goods were found in possession. In the absence of any statutory provision creating such a presumption, and in the absence of evidence proving taxable transactions, the levy could not stand.

Conclusion: The tax levy was unsustainable and the assessee succeeded.

Final Conclusion: The revision was allowed and the assessment-based levy of tax was annulled.

Ratio Decidendi: A tax authority cannot presume the existence of a taxable sale or purchase merely from possession of goods and machinery unless the statute expressly creates such a presumption; the burden of proof provisions apply only within their stated limits.

---