1971 (1) TMI 106 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the second part of clause (d) of rule 44-A of the U.P. Sales Tax Rules.
2. Assessment of additional purchase tax on oil-seeds.
3. Burden of proof regarding first purchases under section 3-D(7) of the U.P. Sales Tax Act.
4. Admissibility of evidence and statements made by the assessee.
5. Relief sought by the petitioner regarding the quashing of the assessment order and demand notice.

Detailed Analysis:

1. Validity of the second part of clause (d) of rule 44-A of the U.P. Sales Tax Rules:
The court scrutinized the validity of the proviso in clause (d) of rule 44-A, which required proof that tax under section 3-D had already been paid on goods purchased by a registered dealer from another registered dealer. The court found this proviso to be ultra vires and invalid, stating that it imposed an unreasonable burden on the assessee to prove tax payment on previous transactions, which could be impractical and lead to absurd consequences. The court emphasized that the levy of purchase tax under section 3-D is on first purchases, and the proviso contradicted the principle of single-point taxation.

2. Assessment of additional purchase tax on oil-seeds:
The petitioner firm was assessed for additional purchase tax on oil-seeds worth Rs. 38,63,608. The firm contended that these purchases were made from registered dealers who were not producers, thus not liable for purchase tax. The Sales Tax Officer, however, found that purchases worth Rs. 27,83,949 were made through commission agents, making them first purchases liable for tax. For the remaining Rs. 10,79,659, the officer initially found the firm failed to prove tax payment on the goods, leading to the additional tax assessment.

3. Burden of proof regarding first purchases under section 3-D(7) of the U.P. Sales Tax Act:
Section 3-D(7) places the burden on the dealer to prove that their purchases are not first purchases. The court noted that this burden should be limited to proving that the purchases do not qualify as first purchases per sub-sections (1) and (2) of section 3-D. The court found that the additional requirement in rule 44-A's proviso, demanding proof of prior tax payment, exceeded the statutory burden and was therefore invalid.

4. Admissibility of evidence and statements made by the assessee:
The court examined conflicting statements regarding the assessee's admission of liability. The Sales Tax Officer claimed the firm admitted liability for Rs. 10,79,659, while the firm disputed this, citing a letter denying liability. The court concluded that the firm was not bound by the alleged admission, as the letter disputing liability was not considered in the assessment order.

5. Relief sought by the petitioner regarding the quashing of the assessment order and demand notice:
The court did not grant the petitioners' request to quash the entire assessment order and demand notice, as only part of the demand related to the disputed rule. The court directed the Assistant Commissioner (Judicial) Sales Tax, Kanpur, to reassess the purchase tax on the disputed amount of Rs. 10,79,659.94, excluding the invalid proviso in clause (d) of rule 44-A. The court allowed the writ petition to this extent and directed each party to bear its own costs.

Conclusion:
The petition was partly allowed, with the court striking down the second part of clause (d) of rule 44-A of the U.P. Sales Tax Rules as ultra vires and invalid. The assessment of purchase tax on the disputed amount was remanded for reconsideration without the invalid proviso.

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