1984 (12) TMI 282 - HC - VAT and Sales Tax

Issues Involved:
1. Entitlement of the respondent-assessee to the benefit of resale claim under section 8(ii) of the Bombay Sales Tax Act, 1959.
2. Validity of reassessment order disallowing the resale claim.
3. Burden of proof regarding the nature of sales (casual vs. regular business).
4. Interpretation of relevant provisions of the Bombay Sales Tax Act, including sections 8(ii), 12A, and related rules.
5. Legal effect of certificates issued under section 12A.

Issue-wise Detailed Analysis:

1. Entitlement of the respondent-assessee to the benefit of resale claim under section 8(ii) of the Bombay Sales Tax Act, 1959:
The Tribunal held that the respondent-assessee was entitled to the benefit of resale claim under section 8(ii) of the Bombay Sales Tax Act, 1959, for purchases amounting to Rs. 83,306 from Kamala Mills Ltd. The Tribunal found that Kamala Mills Ltd. had issued valid certificates as required under section 12A, indicating that the sales were made by a registered dealer. The Tribunal concluded that the respondent had discharged the initial burden of proving that the purchases were from a registered dealer, shifting the burden to the department to prove otherwise.

2. Validity of reassessment order disallowing the resale claim:
The Sales Tax Officer had reassessed the respondent and disallowed the resale claim based on the finding that the sales by Kamala Mills Ltd. were casual sales. The Tribunal found that this reassessment was based solely on the assessment order of Kamala Mills Ltd. and that the respondent was not given any notice or opportunity to contest this finding. The Tribunal held that such a finding could not affect the respondent's claim as it was arrived at without notice to the respondent and in violation of the principles of natural justice.

3. Burden of proof regarding the nature of sales (casual vs. regular business):
The Tribunal noted that the respondent had produced the necessary certificates under section 12A, thereby discharging the initial burden of proof. The burden then shifted to the department to prove that the sales were casual and not in the regular course of business. The Tribunal found that the department failed to provide any cogent evidence to support this claim and relied solely on the assessment order of Kamala Mills Ltd., which was insufficient.

4. Interpretation of relevant provisions of the Bombay Sales Tax Act, including sections 8(ii), 12A, and related rules:
The court examined the definitions and provisions under the Bombay Sales Tax Act. Section 8(ii) allows for the deduction of resales of goods purchased from a registered dealer if a certificate as provided in section 12A is furnished. Section 12A requires the selling dealer to certify that their registration was in force at the time of sale. The court emphasized that the plain language of section 8(ii) and section 12A, read with rule 53, suggests that once a valid certificate is produced, the purchasing dealer is entitled to the deduction unless the certificate is proven to be bogus or fraudulent.

5. Legal effect of certificates issued under section 12A:
The court held that a certificate issued under section 12A creates a presumption in favor of the purchasing dealer that the sale was made by a registered dealer in the regular course of business. The court noted that the legislative intent behind the amendment of section 8(ii) and the enactment of section 12A was to simplify the process and protect purchasing dealers from undue hazards. The court rejected the department's argument that the purchasing dealer must prove that the sales were not casual, stating that the plain language of the statute does not support such an interpretation.

Conclusion:
The court answered the reference in the affirmative, holding that the respondent-assessee was entitled to the benefit of the resale claim under section 8(ii) of the Bombay Sales Tax Act, 1959. The reassessment order disallowing the resale claim was invalid as it was based on findings made without notice to the respondent and in violation of natural justice principles. The department failed to discharge its burden of proving that the sales were casual. The court emphasized the legal effect of certificates issued under section 12A, stating that they create a presumption in favor of the purchasing dealer unless proven otherwise. The applicant was ordered to pay the costs of the reference to the respondent.

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