2007 (9) TMI 558 - HC - VAT and Sales Tax

Intra-State sales v/s Inter state sale - Held that - In case if the Revenue wants to rely upon the inquiries or any statement taken on the back of the dealer from the transport companies and Ganga Enterprises, Calcutta, the burden lies upon the assessing authority to prove its correctness and for that the opportunity of the cross-examination to the applicant must be afforded. Since in the present case, the opportunity of cross-examination has not been given, the orders of the Tribunal and the authorities below are liable to be set aside. The matter is remanded back to the assessing officer to pass the assessment orders afresh. In case, the assessing authority wants to rely upon the inquires or any statement held on the back of the dealer, the opportunity of crossexamination should be given. However, it is open to the revenue authority to ask the dealer to adduce the evidence in support of its claim that the goods had been transported to Ganga Enterprises, Calcutta and the sales were made through the commission agent, in accordance with law. Thereafter, the assessment orders may be passed in accordance with the law after hearing the dealer. In the result, all the three revisions are allowed.

Summary

Issues:
Assessment of tax on alleged intra-State sales based on disputed transactions and lack of opportunity for cross-examination of involved parties.

Analysis:
The case involved three revisions under section 11 of the U.P. Trade Tax Act, 1948, challenging the Tribunal's order for the assessment years 1984-85, 1985-86, and 1988-89. The applicant dispatched goods for sale to a consignment agent in Calcutta through various transport companies. The assessing authority doubted the transactions and inquired with the transport companies and the consignment agent. The authority concluded that the goods had not moved outside the State of U.P., treating the transactions as intra-State sales and levying tax.

The applicant appealed the order before the Assistant Commissioner (Judicial), Sales Tax 2, Allahabad, who rejected the appeals. Subsequently, the applicant filed three appeals before the Tribunal, which also rejected them. The Tribunal upheld the rejection of the opportunity for cross-examination of the transport companies and consignment agent, stating that the consignment agent was the applicant's agent and should have been produced by the applicant.

The High Court emphasized that if the Revenue relies on inquiries made behind the back of the dealer, the burden lies on the Revenue to prove the correctness of such inquiries by allowing cross-examination. As the applicant was denied the opportunity for cross-examination, the Court set aside the orders and remanded the matter to the assessing officer for fresh assessment. The Court directed that if the assessing authority wants to rely on such inquiries, the opportunity for cross-examination must be provided. The applicant was instructed to appear before the assessing officer with a certified copy of the order for further proceedings without issuing a fresh notice.

In conclusion, the High Court allowed all three revisions, setting aside the Tribunal's order and directing a fresh assessment with the opportunity for cross-examination of involved parties. The Court emphasized the importance of providing a fair opportunity for the dealer to defend their case and prove the correctness of disputed transactions.