2003 (12) TMI 607 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of proceedings under section 21 of the U.P. Sales Tax Act, 1948.
2. Burden of proof regarding whether the applicant was an importer.

Issue-wise Detailed Analysis:

1. Validity of proceedings under section 21 of the U.P. Sales Tax Act, 1948:

The applicant challenged the validity of the proceedings initiated under section 21 on the grounds that there was no material to form a belief about escaped assessment at the time of issuing the notice on March 27, 1984. The assessing authority initiated an enquiry about the sellers, which revealed that the addresses were incomplete, and the sellers were untraceable, leading to the inference that the parties were forged. The applicant's appeal against the assessment was initially allowed, but upon remand, the assessing authority confirmed the tax levy on the turnover.

The court examined whether there was any material available on December 3, 1984, to justify the belief of escaped assessment. It was found that the letter from the Sales Tax Officer, Kanpur, dated March 25, 1985, which confirmed the forged addresses, was not in existence at the time of issuing the notice. The only letter available was dated July 13, 1984, which was vague and did not provide definite information. The court held that the action under section 21 could not be based on conjectures or vague information and must be based on relevant material. The court concluded that there was no material to form a belief about escaped assessment on the date of issuing the notice, making the initiation of proceedings under section 21 illegal and without jurisdiction.

2. Burden of proof regarding whether the applicant was an importer:

The court addressed the issue of whether the applicant was liable for tax on the turnover of oil, which was claimed to be purchased within the state of U.P. The exemption was initially granted on the ground that the applicant was neither an importer nor a manufacturer. The assessing authority, upon further enquiry, found the seller parties untraceable and inferred them to be fake, leading to the tax levy.

The court emphasized that oil is taxable at the point of manufacture or import, and the burden of proof lies on the revenue to establish that the applicant was an importer. The court found that there was no material on record to prove that the applicant was an importer of the goods. The mere fact that the seller parties were untraceable or fake was insufficient to levy tax without establishing the applicant's role as an importer. The assessment order failed to prove that the applicant was an importer, rendering the tax levy illegal.

Conclusion:

The revision was allowed, and the order of the Tribunal dated December 21, 1991, was set aside. The court held that the initiation of proceedings under section 21 for the assessment year 1980-81 was illegal and without jurisdiction. The petition was allowed.