1996 (5) TMI 408 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 8(1)(a) of the M.P. General Sales Tax Act, 1958 regarding entitlement to set-off for tax-paid raw material and incidental goods.

Analysis:
The judgment pertains to a sales tax reference under section 44(1) of the M.P. General Sales Tax Act, 1958, involving the question of whether the assessee, who purchased tax-paid raw material and incidental goods from registered dealers, is entitled to claim set-off of tax under section 8(1)(a) of the Act. The assessing officer disallowed the set-off claim as the purchase vouchers did not indicate whether the selling dealer had paid tax on the goods, and the assessee failed to prove the tax payment despite opportunities provided.

The assessee contended that he was entitled to set-off as per section 8(1)(a) of the Act and rule 20-C of the Rules framed under the Act. However, the appellate authorities upheld the disallowance, stating that the assessee failed to establish whether the goods were tax-paid. The central issue revolved around whether the assessee had discharged the burden of proving tax payment on the purchased goods.

Section 8(1)(a) of the Act provides for set-off on tax-paid raw material and incidental goods to prevent double taxation. The judgment emphasized the importance of establishing that the goods were purchased from registered dealers and were tax-paid. The Court referred to relevant definitions under the Act regarding registered dealers and tax-paid goods to support its interpretation.

The Court highlighted that rule 20-C, specifically clause (iv), places the onus on the dealer claiming set-off to produce bills from the selling registered dealer to prove tax payment. Once the purchasing dealer provides these bills, it is presumed that the goods have suffered tax. The Court emphasized that the assessing authority should verify tax payment if there are doubts, rather than burdening the assessee with extensive proof.

Citing precedents such as Govindan & Co. v. State of Tamil Nadu and other cases, the Court reiterated that the burden is on the revenue to establish tax liability on the first sale, not on subsequent sellers to prove tax payment by their sellers. The judgment concluded by ruling in favor of the assessee, emphasizing that once the purchasing dealer produces bills from registered dealers, the burden is discharged, and the assessing authority should obtain further evidence if needed.

In conclusion, the Court answered the reference in the negative, supporting the assessee's entitlement to set-off under section 8(1)(a) of the Act based on the evidence provided and the legal principles outlined in the judgment.