2018 (11) TMI 1441 - HC - VAT and Sales Tax

Exemption u/s 4-A of the U.P. Trade Tax Act, 1948 - negligibility of machines as regards total investments made - no inquiry was conducted by the Tribunal before passing the final order - principles of natural justice - Held that - It being a case of eligibility to exemption, a liberal approach is not warranted at this stage. The burden was strictly on the assessee to establish its entitlement to exemption. Only if the assessee was found to fall within the four corners of the scheme of exemption, a liberal approach may become available for the remaining purpose. In view of the specific finding recorded by this Court to the effect that the investment of ₹ 41,000/- was not negligible in the context of total investment of ₹ 2,51,000/-, the Tribunal has not erred in recording the finding to that effect. Once the Tribunal was rejecting the entire claim made by the assessee, with respect to both the disputed machineries, it was never open to the Tribunal to record a finding contrary to that recorded by this Court - Mere mention of the same in the operative part of the order would not vest any authority with the Tribunal to examine that issue de novo. That issue may have become open if upon remand, the Tribunal may have reached a conclusion that one of the two machines was new. In that event, the cost of the remaining machinery may have been required to be examined to determine whether that was negligible. That is clearly not the case here. It would remain open to the revenue to examine whether the unregistered dealer/seller claimed by such assessee was genuine and not a mere pretence or false claim made to evade any further inquiry. Once the assessee failed to establish the identity of the seller and the genuineness of the bill documents against which such purchases were claimed to have been made the assessee prevented the revenue from making any further inquiry to determine whether the machinery in question had been or had not been used or acquired for use anywhere else, before being purchased by the assessee. Therefore, the Tribunal has rightly rejected the claim made by the assessee. Revision dismissed - decided against the assessee.

Summary

Issues Involved:
1. Justification of considering the total value of machines by the Trade Tax Tribunal.
2. Justification of the Tribunal's rejection of the appeal without finding if the motors were acquired for use anywhere in India.
3. Proper inquiry by the Tribunal as per remand order.
4. Consideration of original bills of purchase by the Tribunal.
5. Eligibility for exemption for purchases from unregistered dealers.

Issue-wise Detailed Analysis:

1. Justification of considering the total value of machines by the Trade Tax Tribunal:
The Tribunal's decision to consider the total value of the machines was based on the High Court's earlier finding that an investment of ?41,000/- out of a total investment of ?2,51,000/- was not negligible. The Tribunal adhered to this specific finding, thus justifying its stance. The Court affirmed that the Tribunal had not erred in recording this finding, as it was consistent with the previous judgment.

2. Justification of the Tribunal's rejection of the appeal without finding if the motors were acquired for use anywhere in India:
The Tribunal rejected the assessee's appeal, concluding that the assessee failed to prove that the disputed machines were not previously used or acquired for use. The Tribunal found that the assessee did not establish the purchase of the machines from the disclosed dealer, which was crucial to determine the machines' prior use. The High Court upheld this conclusion, emphasizing that the burden of proof lay strictly on the assessee to establish eligibility for exemption.

3. Proper inquiry by the Tribunal as per remand order:
The Tribunal did not conduct a fresh inquiry but relied on existing documents and reports as directed by the High Court's remand order. The High Court specified that the Tribunal should base its findings on the material already available, thus validating the Tribunal's approach. The Court noted that the Tribunal correctly followed the remand instructions and did not commit any procedural error.

4. Consideration of original bills of purchase by the Tribunal:
The Tribunal considered the original bills of purchase but found them unreliable due to the non-existence of the alleged selling dealer, M/S R.K. Electricals, and its supplier, M/S Mercury Electricals. The assessee could not substantiate the genuineness of these dealers, leading the Tribunal to reject the bills. The High Court supported this finding, noting that the assessee's failure to establish the identity of the seller and the genuineness of the bills prevented further inquiry into the machines' prior use.

5. Eligibility for exemption for purchases from unregistered dealers:
The High Court dismissed the argument that purchases from unregistered dealers should be eligible for exemption, as this plea was not raised by the assessee at any stage. The Court emphasized that even if such a plea were raised, the identity and genuineness of the unregistered dealer would still need to be established. In this case, the assessee's failure to identify the seller and prove the genuineness of the purchase documents invalidated any claim for exemption.

Conclusion:
The High Court affirmed the Tribunal's findings and dismissed the revision. The Tribunal's decision to reject the assessee's claim for exemption under Section 4-A of the U.P. Trade Tax Act was upheld, as the assessee failed to meet the burden of proof regarding the purchase and prior use of the disputed machines. The questions of law were answered in favor of the revenue and against the assessee, leading to the dismissal of the revision.