1990 (4) TMI 268 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the wheat product sold by the assessee is eligible for exemption as a second sale or exigible to tax as a first sale.

Comprehensive Analysis:
The judgment delivered by the Madras High Court involved a series of tax cases concerning an assessee named Subramanian for the assessment years 1973-74 to 1977-78. The primary issue in all cases was the eligibility of the wheat product sold by the assessee for exemption as a second sale or liability for tax as a first sale. Initially, the assessing officer accepted the exemption claim but later reopened the assessments based on an Intelligence Department report, alleging that the assessee should be deemed the first seller due to the untraceability of the original seller, Vasavi & Co. Consequently, tax and penalties were imposed, which were upheld by the Appellate Assistant Commissioner and appealed by the assessee to the Sales Tax Appellate Tribunal.

The Tribunal considered various aspects, including the lack of evidence against the assessee, the nature of purchases made through brokers, and the responsibility of the Revenue to establish the first seller's identity. It noted that the appellant was not a manufacturer and had not purchased from outside the State, indicating that the purchases were likely from dealers whom the Revenue could not identify. The Tribunal also highlighted the impracticality of expecting the assessee to trace the seller after a long period, especially for cash transactions made through brokers. It emphasized that the onus was on the Revenue to prove the first sale, especially in the absence of concrete evidence against the assessee.

The Tribunal ultimately found in favor of the assessee, stating that the Revenue had failed to investigate the actual persons involved in clandestine transactions and had not verified the claim for exemption adequately. It concluded that the assessee had established being a second seller of wheat products, thereby negating the tax liability on the sales. As a result, the assessments made under section 16 for the relevant years were deemed unsustainable, and the Tribunal's order was set aside, allowing the tax revisions in favor of the assessee. The judgment highlighted the importance of evidence, the burden of proof on the Revenue, and the necessity for thorough verification before imposing tax liabilities.