1973 (9) TMI 83 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the transactions of cotton yarn in question are inter-State transactions and exempt from sales tax?
2. Whether the turnover of cotton yarn in dispute was liable to tax under the U.P. Sales Tax Act?

Detailed Analysis:
Issue 1:
The case involved a dispute regarding the location of sales of cotton yarn by M/s. Raza Textile Limited. The assessee claimed that the sales occurred in Delhi through a dealer, while the revenue contended that the sales took place in U.P. The assessing authority imposed tax on the alleged inter-State sales, which was later set aside by the appellate authority. However, the revisional authority, relying on a report by the Sales Tax Officer, held that the sales took place in U.P. The assessee argued that all cotton yarn was to be sold to the Delhi dealer under an agreement. The revising authority rejected the explanation provided by the assessee and reimposed the tax. The High Court reframed the question to determine whether the turnover of cotton yarn was liable to tax under the U.P. Sales Tax Act. The court found that there was no evidence to prove that the cotton yarn was sold in U.P., and since the department failed to establish the sale in U.P., the turnover was not liable to tax under the U.P. Sales Tax Act.

Issue 2:
The High Court emphasized that the burden of proof lies on the department to establish a sale within the state for tax liability under the U.P. Sales Tax Act. In this case, the department did not provide evidence or material to demonstrate that the sale of cotton yarn occurred in U.P. The court noted that a sale in U.P. cannot be presumed if denied and must be proven with relevant evidence. As there was no material supporting the sale in U.P., the court ruled in favor of the assessee, concluding that the turnover of cotton yarn was not liable to tax under the U.P. Sales Tax Act. The court awarded costs to the assessee and answered the reference accordingly.