1970 (2) TMI 113 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of Sales Tax Officer in passing provisional assessment orders.
2. Applicability of Section 18(2) of the U.P. Sales Tax Act.
3. Interpretation of "commencement of business" under Section 18(2).
4. Burden of proof and applicability of Section 12-A of U.P. Ordinance No. 2 of 1970.

Detailed Analysis:

1. Jurisdiction of Sales Tax Officer in passing provisional assessment orders:
The petitioners challenged the provisional assessment orders passed by the Sales Tax Officer, Hardoi, for the months of April, May, and June 1969, on the ground that they were without jurisdiction. The orders were purportedly passed under Rule 41(3) of the U.P. Sales Tax Rules, which allows the Sales Tax Officer to determine turnover to the best of his judgment if no return is submitted within the prescribed period. The court found that the Sales Tax Officer did not sufficiently establish that the petitioners were new dealers commencing business for the first time, which was necessary to invoke Rule 41(3) in conjunction with Section 18(2) of the Act.

2. Applicability of Section 18(2) of the U.P. Sales Tax Act:
Section 18(2) deals with the commencement of business during the course of an assessment year and requires such dealers to submit monthly returns. The court analyzed whether the petitioners, who had taken an annual license for selling country liquor starting from April 1, 1969, could be said to have commenced business during the assessment year 1969-70. The court concluded that the term "during" includes the entire assessment year, starting from the first moment of April 1st.

3. Interpretation of "commencement of business" under Section 18(2):
The court held that Section 18(2) applies to dealers who set up business for the first time during an assessment year, and not to existing dealers expanding their business or starting a new line of business. The court emphasized that interpreting Section 18(2) to include existing dealers who commence a new line of business would conflict with the overall scheme of the Act, which generally requires quarterly returns and assessments. The court clarified that the mere acquisition of an annual license does not constitute the commencement of business under Section 18(2) if the dealer was already engaged in taxable activities.

4. Burden of proof and applicability of Section 12-A of U.P. Ordinance No. 2 of 1970:
The court noted that the Sales Tax Officer, in ex parte proceedings, must establish that the dealer is a new dealer under Section 18(2). The court rejected the argument that Section 12-A of the U.P. Ordinance No. 2 of 1970, which places the burden of proof on the assessee for facts within their special knowledge, could be applied in ex parte proceedings without giving the assessee an opportunity to explain. The court held that Section 12-A implies that the assessee must be associated with the proceedings and given a chance to prove the relevant facts.

Conclusion:
The court found that the provisional monthly assessment orders were based on a manifest error of law as the Sales Tax Officer did not establish that the petitioners were new dealers commencing business for the first time. Consequently, the court quashed the impugned orders and allowed the petitions, awarding costs to the petitioners.