2014 (3) TMI 569 - HC - VAT and Sales Tax

Taxability of sale of unusable polyester yarn Whether sale of unusable Polyester yarn by assessee was taxable as a waste product under Item 32 of notification no.ST-II-5785/X-10(1)-80-U.P. Act XV/48-Order-81 dated 7.9.1981, or it is taxable under Entry 55 of the Notification dated 7.9.1981 - Held that - Polyester fibre yarn was not capable of use for the purpose of manufacturing Zippers - the assessee admitted that it was a discarded unserviceable item and was sold as waste product - the revisionist himself having admitted that goods in question was not treated to be a yarn at the time of sale but waste product - the Revenue rightly held that it was taxable on higher rate - despite the fact that initial burden lie upon Revenue but the onus shifted upon assessee to show that item in question, though shown by him as waste product yet for the purpose of tax liability, it will be covered by different entry wherein lessor rate of tax is chargeable - the same has rightly been taxed under item 32 Decided against assessee.

Summary

Issues:
Interpretation of tax notification - Whether the sale of "unusable Polyester yarn" should be taxed as a waste product under one specific entry or under a different entry in the tax notification.

Analysis:
The dispute in this case revolves around the correct tax treatment of the sale of Polyester Fibre Yarn by the assessee. The Assessing Authority treated the Polyester Fibre Yarn as a "waste product" and taxed it at a higher rate under Entry 32 instead of Entry 55 for the assessment year 1993-94.

The counsel for the revisionist argued that the Revenue failed to provide evidence to demonstrate that the goods were indeed a waste product and not yarn. The counsel relied on a previous court decision to support this argument.

Regarding the burden of proof, it was emphasized that the initial burden lies with the Revenue in such proceedings. However, the distinction between the "burden of proof" and "onus" was highlighted, with reference to the Indian Evidence Act, stating that the burden of proving a fact rests on the party asserting the affirmative of the issue.

The court explained that once the assessee admitted that the Polyester Fibre Yarn was sold as a waste product and not as yarn, the Revenue was justified in taxing it at a higher rate under Entry 32. The court held that the onus shifted to the assessee to demonstrate that the goods should be taxed at a lower rate under a different entry.

Ultimately, the court ruled in favor of the Revenue, stating that since the assessee admitted to selling the goods as a waste product, they should be taxed under the relevant entry, i.e., Entry 32. The revision was dismissed based on this analysis.