2008 (8) TMI 849 - HC - VAT and Sales Tax

Whether the Sales Tax Tribunal was legally justified in law in fixing the liability of tax upon the applicant against form IIIB duly issued by the purchasing dealer? Held that - The Tribunal has recorded a finding that the dealer could not produce any evidence to show that any sale transaction took place at the hand of the dealer. It could not explain the manner in which the goods were despatched from Allahabad to Aligarh. The only explanation which was submitted by the dealer-applicant was that the purchaser took the delivery of goods at his shop and payment was made to him but the same has not been accepted. It has further found that the dealers received various bank drafts, the details of which have been noted in the order of the Tribunal. In view of the finding recorded by the Tribunal that the alleged sale by the dealer-applicant is suspicious and not beyond doubt, the authorities below were justified in refusing to extend any benefit of form IIIB to the dealer-applicant. When a transaction itself is surrounded by suspicious circumstances, as has been found in the present case, a person cannot take the shelter that the purchasing dealer had issued form IIIB. Revision dismissed.

Summary

Issues: Taxability of turnover under the U.P. Sales Tax Act, 1948 based on the exemption claimed through form IIIB issued by a non-existent firm, Suman Kutir Udyog.

Analysis:
The dispute in the present revision before the Allahabad High Court pertains to the assessment year 1986-87 under the U.P. Sales Tax Act, 1948. The applicant is involved in the business of manufacturing and selling parafin wax, foot oil, and its by-products. The main contention revolves around the taxability of a turnover amounting to Rs. 9,61,602.14. The applicant claims to have made sales to M/s. Suman Kutir Udyog, a firm holding a recognition certificate and issuing form IIIB for tax exemption or concessional rates. However, all three authorities below have rejected this claim, citing the non-existence of Suman Kutir Udyog as a registered firm with the Department. The questions of law raised include the justification of the Sales Tax Tribunal in confirming the lower courts' orders, fixing tax liability based on form IIIB, determining turnover against sales made through form IIIB, imposing obligations on the selling dealer to verify declaration correctness, and disregarding relevant documents submitted by the applicant during the hearing. The Tribunal's findings are crucial in determining the tax liability against the applicant under section 4B.

The applicant's counsel argues that the benefit of form IIIB issued by Suman Kutir Udyog was wrongly denied by the authorities, emphasizing that the form was genuine and obtained based on valid documents presented by the purchasing dealer. In contrast, the standing counsel contends that Suman Kutir Udyog is a non-existent entity not registered with the Department, and the form IIIB in question was actually issued to a different entity, Aligarh Ispat Udyog. The Tribunal's factual findings play a significant role in assessing the validity of the exemption claimed by the applicant.

Upon reviewing the submissions and evidence presented, the High Court finds that Suman Kutir Udyog is indeed a non-existing firm, and the form IIIB was issued to a different entity, Aligarh Ispat Udyog. The Tribunal's conclusion that the sale transaction by the dealer-applicant is suspicious and lacks clarity is upheld. The burden of proving exemption or concessional tax rates lies with the party claiming it, and in this case, the applicant failed to provide sufficient evidence to support the transaction's legitimacy. The Court highlights the importance of establishing transactions with reasonable certainty to qualify for tax benefits.

Referring to relevant legal precedents, the Court reiterates that the scope of interference with Tribunal orders is limited to questions of law, which must be precisely framed. The Court finds no legal errors or perversity in the Tribunal's findings, dismissing the revision without costs. The judgment underscores the need for concrete evidence to support tax exemption claims and upholds the Tribunal's factual determinations in such matters.