2019 (7) TMI 1203 - HC - VAT and Sales Tax

Liability of tax - Whether in absence of any statutory provision enabling the revenue to draw and rely on any presumption as to trading performed by the assessee/transporter, any tax liability could have been fixed merely because the assessee did not furnish the details of the consignor and the consignee of completed transactions? - HELD THAT - Section 8 A(5) of the Act is not with respect to completed transactions of transportation of goods. Rather it is a provision that governs the conduct of the parties while the goods are in course of transportation. It is in that regard that the Act provides that the dealer would handover to the transporter complete documents/prescribed forms and the transporter or a person-in-charge of the vehicle (who would be carrying such goods during transportation), shall on demand, made under Section 13 (2) of the Act, produce such documents etc. for inspection. It is in the event of failure to discharge such obligations that an adverse presumption has been provided to be drawn on presumptive basis. It is true that the presumption would remain rebuttable. In absence of any material or evidence being brought on record to establish that though the assessee was a transporter but had engaged in trading in goods, again it could never be said that the assessee was liable to pay tax. It was for the revenue to have brought evidence to establish that the assessee had engaged in trading activity. That evidence being lacking the best judgement assesment and quantification of turnover are found to be with no legs. The question of law is answered in favor of assessee-revisionist and against the revenue-respondent. Revision allowed.

Summary

Issues Involved:
1. Interpretation of statutory provisions regarding tax liability of a transporter.
2. Validity of best judgment assessment based on presumption of trading activity.
3. Relevance of evidence in determining tax liability.

Issue 1: Interpretation of Statutory Provisions
The judgment delves into the interpretation of Section 8-A(5) of the Act and Rule 84-A of the U.P. Trade Tax Rules 1948. Section 8-A(5) pertains to the obligations of dealers while goods are in transportation, requiring them to furnish necessary documents to the transporter. The provision allows for a presumption to be drawn if the documents are not produced upon demand. However, the Court clarifies that this provision is not applicable to completed transactions but governs conduct during transportation. The judgment emphasizes that the presumption arises only when documents are not produced during transportation, and there is no authority to demand such documents post-transaction.

Issue 2: Validity of Best Judgment Assessment
The Court scrutinizes the best judgment assessment made against the transporter, based on the presumption of trading activity due to incomplete documentation. The assessee contended that there was no statutory provision enabling such presumption, and the assessment was arbitrary. The judgment highlights that the transporter's role is that of a bailee, not a trader, and for tax liability to be imposed, specific statutory provisions must exist. The Court notes the lack of evidence establishing trading activity by the transporter, rendering the assessment baseless and overturning the decision in favor of the assessee.

Issue 3: Relevance of Evidence
The judgment underscores the importance of evidence in determining tax liability. It criticizes the revenue authorities for drawing adverse inferences solely based on incomplete documentation without concrete proof of trading activity by the transporter. The Court emphasizes that the burden of proof lies with the revenue to establish any tax liability, especially in the absence of clear evidence indicating trading by the transporter. Consequently, the Court rules in favor of the assessee, deeming the assessment and quantification of turnover as unfounded and devoid of supporting evidence.

In conclusion, the judgment provides a comprehensive analysis of the statutory provisions, the validity of the assessment based on presumption, and the significance of evidence in determining tax liability. It highlights the necessity of concrete proof to impose tax obligations and safeguards against arbitrary assessments, ultimately ruling in favor of the assessee and setting aside the impugned order.