2009 (7) TMI 1153 - HC - VAT and Sales Tax

Whether, on the facts and circumstances of the case, the initiation of proceedings under section 21 of the U.P. Trade Tax Act, 1948 was justified? Held that - The very first ingredient of the provisions of section 21 was not attracted in this case. Secondly, during the course of the first appeal, the assessee filed an affidavit, categorically stating that he had not utilized the allotment order for import and he had closed his business. This affidavit was not controverted or doubted by the Department at any stage. Also once the assessee had discharged the burden placed on him to show that he had not utilized the import allotment or the burden shifted on the Department to produce any such evidence that it may have, after due investigation, especially in view of the fact that the Department had also within its knowledge that there was an import allotment order. The record does not reflect that the Department made any effort to investigate the said matter but simply initiated the proceedings on the basis of the information received. Thus the proceedings initiated under section 21 of the Act were wholly illegal and are liable to be set aside by this court.The revision is allowed.

Summary

Issues Involved:
1. Justification of passing an ex parte order by the Tribunal.
2. Justification of initiating proceedings under section 21 of the U.P. Trade Tax Act, 1948.
3. Justification of believing that the applicant had imported coal and sold it without evidence.
4. Justification of the estimate of turnover in respect of the sale of coal.

Analysis:

Issue 1:
The assessee challenged the ex parte order passed by the Tribunal for the assessment year 1982-83. The Tribunal's decision was based on the belief that the applicant had imported coal and sold it, despite lack of evidence. The assessee argued that the proceedings were initiated without proper basis or reason, solely on received information, which was inadequate to invoke section 21 of the Act.

Issue 2:
Proceedings were initiated under section 21 of the U.P. Trade Tax Act based on information that the assessee was allotted coal. The assessee, however, provided an affidavit stating non-utilization of the coal allotment and business closure. The Department did not refute this affidavit, shifting the burden to prove utilization on them. The court found the initiation of proceedings under section 21 to be illegal due to lack of evidence and failure to investigate.

Issue 3:
The Tribunal's conclusion that the applicant imported and sold coal without evidence was disputed by the assessee. The court emphasized that the burden of proof shifted to the Department once the assessee provided a non-utilization affidavit. The Department's failure to produce evidence of utilization rendered the proceedings invalid.

Issue 4:
The Tribunal's estimation of turnover for the sale of coal was challenged by the assessee, highlighting the lack of evidence supporting the claim. Previous court decisions were cited to support the argument that negative facts cannot be proven, and the burden of proof lies with the Revenue. The court found the Tribunal's decision to be based on presumptions without substantial evidence.

In conclusion, the High Court set aside the Tribunal's order, ruling that the proceedings under section 21 were initiated illegally without proper justification or evidence. The burden of proof was not met by the Department, leading to the decision in favor of the assessee.