1974 (11) TMI 82 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of rule 5(1)(vi) of the Bombay Sales Tax Rules, 1952 regarding resale certificates.
Burden of proof on the department to show violation of certificate issuance.
Comparison with a similar provision in the Orissa Sales Tax Act.

Analysis:
The High Court of Bombay was tasked with interpreting the application of rule 5(1)(vi) of the Bombay Sales Tax Rules, 1952, specifically regarding the requirement of resale certificates for purchased goods. The case involved a respondent firm dealing in bullion, where the assessing authority alleged that the firm had purchased bullion with resale certificates but failed to resell the goods, leading to a breach of declaration and inclusion in taxable turnover. The Tribunal, however, ruled in favor of the respondent, stating that the burden of proving the issuance of certificates lay with the department. This decision was supported by a similar case in the Orissa High Court, indicating a consistent interpretation across jurisdictions.

In this context, the Court examined the language of rule 5(1)(vi) which allowed deduction of certain sales in taxable turnover if goods were purchased for resale with a certificate. The department argued that since the respondent's vendors claimed exemption, it implied that resale certificates were issued by the respondent firm. However, the Tribunal rejected this argument, placing the onus on the department to provide positive evidence of certificate issuance. This approach aligns with the principle that the burden of proof rests on the party making the assertion, in this case, the department claiming a violation of the resale certificate requirement.

Drawing from the decision in a similar matter before the Orissa High Court, the Bombay High Court concurred with the interpretation that the burden of proof shifts to the department when alleging a violation of certificate conditions. The Court emphasized that the negative, i.e., absence of violation, does not need to be proven by the assessee. Therefore, in line with this legal principle and consistent with precedent, the Court held that the burden of proof regarding the issuance of resale certificates rested with the department, not the respondent firm. As a result, the Court answered the reference question in the affirmative, affirming the Tribunal's decision in favor of the respondent.

In conclusion, the judgment clarifies the application of rule 5(1)(vi) of the Bombay Sales Tax Rules, 1952, emphasizing the burden of proof on the department to establish violations of resale certificate requirements. This decision underscores the importance of clear evidence and adherence to legal principles in tax matters, ensuring fairness and consistency in the interpretation of tax laws across different jurisdictions.