1991 (2) TMI 373 - HC - VAT and Sales Tax

Issues Involved:
1. Violation of principles of natural justice.
2. Determination of the first purchaser for tax liability.
3. Onus of proving second purchases.
4. Compliance with the Tamil Nadu General Sales Tax Act, 1959.

Detailed Analysis:

1. Violation of principles of natural justice:
The petitioner contended that there was a violation of the principles of natural justice as they were denied an effective opportunity to summon the decorticating mills or their representatives and examine the records of those mills. The court examined this issue in light of the decisions in *State of Kerala v. Shaduli Yusuff* and *S.L. Kapoor v. Jagmohan*. It was noted that the principle of audi alteram partem (hear the other side) is applicable to quasi-judicial functions of taxing authorities. However, the court emphasized that the scope and content of the opportunity depend on the nature of the inquiry and the specific circumstances of each case. In this case, the court found that the information relied upon was the orders of the statutory Tribunal, which had already adjudicated that the decorticating mills were not dealers liable to tax. The court concluded that sufficient opportunity was given to the petitioner to examine the records and take appropriate action, and thus, there was no violation of natural justice.

2. Determination of the first purchaser for tax liability:
The authorities treated the assessee as the first purchaser of groundnut kernel from the decorticating mills, making them liable to tax. The petitioner argued that the decorticating mills were the first purchasers. The court noted that the Tribunal had already determined that the decorticating mills were not dealers within the meaning of the Act, thus they could not be considered first purchasers. The court held that the onus was on the petitioner to prove that their purchases were second purchases not liable to tax, which they failed to do. Consequently, the court upheld the finding that the petitioner was the first purchaser.

3. Onus of proving second purchases:
The petitioner claimed that their transactions were second purchases and thus not liable to tax. The court reiterated that if an assessee claims exemption on the ground that their transactions are second purchases, they must prove that there was an earlier taxable sale or purchase. The court found that the petitioner did not discharge this burden, as they failed to provide sufficient and proper material to substantiate that the decorticating mills were dealers and first purchasers. The Tribunal's finding that the petitioner was the first purchaser was upheld as it did not suffer from any legal infirmity.

4. Compliance with the Tamil Nadu General Sales Tax Act, 1959:
The court examined whether the petitioner complied with the provisions of the Tamil Nadu General Sales Tax Act, 1959. It was noted that the petitioner had been given time to examine the records and take appropriate action, but they failed to do so. The court also addressed the petitioner's reliance on an affidavit from one of the decorticating mills, which supported the finding that the mills were not dealers. The court concluded that the petitioner did not provide sufficient evidence to prove that their transactions were second purchases, and thus, their liability under the Act was affirmed.

Conclusion:
The court dismissed the tax revision case, finding no merit in the petitioner's claims of violation of natural justice and failure to prove second purchases. The petitioner was held liable as the first purchaser under the Tamil Nadu General Sales Tax Act, 1959. The court emphasized that the opportunity given to the petitioner was sufficient and in compliance with the principles of natural justice. The petition was dismissed with no order as to costs.

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