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M/S Escort Ltd. v. The Sales Tax Commisioner - SALES/TRADE TAX REVISION No. 563 of 1991 [2003] RD-AH 500 (8 December 2003)


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M/s Escorts Limited, Faridabad. ....Applicant


The Commissioner of Sales Tax, U.P., Lucknow. ....Opp.Party


Hon'ble Rajes Kumar, J.

These three revisions under Section 11 of U.P. Sales Tax Act (hereinafter referred to as "Act") are directed against the order of Tribunal dated 13.02.1991 relating to the assessment years 1976-77, 77-78 and 79-80.

Applicant is a public limited company incorporated under the Indian Companies Act, 1956 having its registered office at H-2, Cannaught Circus, New Delhi and its factory at Faridabad in the State of Haryana for the manufacturing of tractors, motor-cycle and its spare parts etc. In appears that during the aforesaid assessment years, applicant had sold tractors and motorcycle to the various parties outside the State of U.P. from their Faridabad factory (Haryana). It appears that vehicles were to be transported from Faridabad (Haryana) to other State through the State of U.P., thus Form-34 were issued at the entry check post in respect of such vehicles, which were supposed to be surrendered at exit check post but same were not surrendered at the exit check post. Thus on the basis of information being received from check post about the non-surrender of such Form-34, proceeding under Section 28-B of the Act read with Section 7 were initiated against the applicant. Applicant did not appear before assessing officer and, therefore, treating the applicant as transporter dealer in respect of the alleged tractors and motor vehicles an ex-parte assessment orders were passed. Applicant filed appeals before Deputy Commissioner (Appeals). During the course of hearing of first appeals, applicant filed written submissions, in which it was stated that the sales were made in the course of inter-state sales against Form-C to the various parties outside the State of U.P. It has also been alleged that transit passes in Form-34 were never obtained by the applicant at entry check post and the information in original relating to Form-34were never shown. First Appellate Authority sought report under Section 9 (3) of the Act from the assessing authority. In pursuance of order of appellate authority, assessing officer summoned the applicant. Order sheet entries shows that applicant appeared before assessing authority and filed document namely invoices, dispatch advices and Form-C and got them verified from the original documents. Assessing Authority furnished the report to the appellate authority. Thereafter, Deputy Commissioner (Appeals) fixed the hearing of the appeal. Applicant filed submission. Deputy Commissioner (Appeals) has not accepted the plea of the applicant and rejected the appeals. Perusal of the order of Deputy Commissioner (Appeals) shows that he has not considered the plea of the applicant that Form-34 was not obtained by it and about the request for confronting Form-34 in original.    Deputy Commissioner (Appeals) had rejected the appeals merely on the ground that the applicant could not furnish any proof about surrender of the alleged Form-34. Applicant filed second appeals before Tribunal. In ground no.8, applicant stated that transit passes in any form have never been obtained and prepared by applicant-company including "transit passes" in Form-34 as prescribed under Section 28-B of the Act read with Rule 87 of the Act. In para 24, sub para 5, applicant had stated that learned authorities below were very much unfair in not providing the petitioner-company with the cogent material as well as information in original including transit passes Form-34 to enable the petitioner to rebut the presumptions which were proposed to be drawn against him under the Act. It has been further stated that transit passes Form-34 were never confronted to the petitioner-company and the contentions as made by him were also never false and wrong on record. In the written submission filed before Tribunal in para 9, it has been further stated that "moreover it would also be borne out from the records that Form-34 which have been made as the basis of assessments in the instant case were never placed on the records and the same were never confronted to the appellant." In another written submission dated 08.12.1990 in para 4 it has been further stated that "inspite of several request made by them were not confronted and shown the transit passes in original whereas the revenue authorities informed the appellant that the same could not be traced out, thereby a reasonable opportunity of being heard was never provided to the appellant, hence all the 3 aforesaid impugned assessments orders which were made ex-parte as well as arbitrarily are not liable to be sustained on facts as well as law." Tribunal vide order dated 13.02.1991 rejected the appeals. Tribunal has not accepted the plea of the applicant that Form-34 were not obtained by them. Tribunal further observed that Form-34 dated 30.06.1976, 13.05.1976, 12.05.1976, 27.05.1976 and 30.05.1976 and many other shows that the name of the driver and also a declaration that the vehicle were owned and goods were being transported by Escorts India Limited and on the back of these Forms it is clearly mentioned that Escorts India Limited is the consignor. With regard to the submission made by the learned counsel for the appellant that Form-34 has not been shown to the assessee and in this connection he has moved an application on 08.12.1990 before Tribunal, it is observed that "It is true that the assessee has moved said application. The transit passes are in the assessment file. Entire files have been produced at the time of arguments which were thoroughly seen by learned counsel for the assessee. Form-34 which were in the said file were seen by the learned counsel for the assessee but no argument was placed with regard to these Forms."

Heard learned counsel for the parties.

Section 28-B of the Act reads as follows:

"Transit of goods by road through the State and issue of [authorization for transit of goods]----- When a vehicle coming from any place outside the State and bound for any other place outside the State, and carrying goods referred to in sub-section (1) of Section 28-A, passes through the State, the driver or other person-in-charge of such vehicle shall obtain in the prescribed manner an [authorization for transit of goods] from the officer-in-charge of the First Check Post or barrier after his entry into the State and deliver it to the officer-in-charge of the Last Check Post or barrier  before his exit from the state, falling which it shall be presumed that the goods carried thereby have been sold within the State by the owner or person-in-charge of the vehicle:

Provided that where the goods carried by such vehicle are, after their entry into the State, transported outside the State by any other vehicle or conveyance, the onus of proving that goods have actually moved out of the State shall be on the owner or person-in-charge of the vehicle.

Explanation: In a case where a vehicle owned by a person, is hired for transportation of goods by some other person, the hirer of the vehicle shall for the purposes of this section, be deemed to be the owner of the vehicle."

"Rule 87. The transit of goods by road through the State - (1) The driver or person-in-charge of a vehicle coming from any place outside the State and bound for any other place outside the State shall present the trip sheet in triplicate to the officer-in-charge of Check-Post or barrier, if any, established near the point of entry into the State hereinafter referred to as Entry Check-Post.

(2) The officer-in-charge of the Entry Check-Post shall after examining the document and after making such enquires as he deems necessary specify on all the copies of the trip sheet check post or the barrier (hereinafter  referred to as the Exit Check-Post) of the State to be crossed by the vehicle or vessel and the time and date upto which it should be so crossed and deliver two copies of the trip sheet to the driver or person-in-charge of the vehicle retaining one copy himself.

(3) The driver or person-in-charge of the vehicle or vessel shall stop his vehicle at such Exit Check Post surrender one copy of the trip sheet and allow the officer-in-charge of the check post to inspect the documents, consignments and goods in order to ensure that the consignments being taken out of the State are the same as mentioned in the trip sheet. The officer-in-charge of the Exit Check-Post shall issue a receipt on the other copy of the trip sheet surrendered by such driver or person-in-charge of the vehicle.

(4) The officer-in-charge of the Exist Check-Post shall have the power to detain, unload and search contents of the vehicle for the purpose mentioned in sub-rule (3)"

Section 28-B of the Act is a machinery section to check the evasion of tax. It is not a charging section. Every person has a right to move freely and to carry business throughout the territory of India as guaranteed by Articles 19 and 301 of the Constitution of India. State Legislature is competent to make the law for levy of tax on purchases and sales of any goods other than newspaper under Entry 54 of List II of the Seventh Schedule of the Constitution of India and as an incidental and ancillary power can also enact machinery provisions to check the evasion of tax. If any person wants to carry the goods from the one place to another place through the State of U.P., in order to ensure that such goods have not been sold inside the state of U.P., the provisions of Section 28-B has been introduced. The validity of Section 28-B of the Act has been challenged before Hon'ble Supreme Court in the case of Sodhi Transport Company and another Vs. State of U.P. and another, reported in 1986 UPTC, 712 on the ground that, (i) The provisions were outside the scope of Entry 54 of List II of the Seventh Schedule: (ii) they infringed freedom of trade, commerce and intercourse guaranteed under Article 301 of the Constitution of India and (iii) imposed unreasonable restrictions on the freedom of trade guaranteed under Article 19(1)(g) of the Constitution of India. Hon'ble Supreme Court has upheld the validity of the provisions.

The Apex Court held as follows:

Para 8- "now the impugned provisions are just machinery provisions. They do not levy any charge by themselves. They are enacted to ensure that there is no evasion of tax. As already observed, the Act is traceable to Entry-54 in List-II of the Seventh Schedule to the Constition which reads thus: 54. Taxes on the sale or purchase of goods other than newspapers subject to the provisions of Entry 92-A of List I'. It is well settled that when the Legislature has the power to make a law with respect to any subject it has all the anciallary and incidental powers to make the law effective.

Para 9 - The provisions of Section 28-B of the Act and Rule-87 of the Rules which are impugned in these cases as mentioned above are just machinery provisions. They impose no charge on the subject. They are enacted to ensure that a person who has brought the goods inside the State of who has made a declaration that the goods are brought into the State for the purpose of carrying them outside the State should actually take them outside the State. If he hands over the transit pass while taking the goods outside the State then there would be no liability at all. It is only when he does not deliver the transit pass at the Exit Check Post as undertaken by him, the question of raising a presumption against him would arise. We shall revert to the question of presumption again at a later stage, but it is sufficient to say here that these provisions are enacted to make the law workable and to prevent evasion. Such provisions fall within the ambit and scope of the power to levy the tax itself.

Para 14 - A presumption is not in itself evidence but only makes a prima facie case for party in whose favour it exists. It is a rule concerning evidence. It indicates the person on whom the burden of proof lies. When presumption is conclusive, it obviates the production of any other evidence to dislodge the conclusion to be drawn on proof of certain facts. But when it is rebuttable it only points out the party on whom lies the duty of going forward with evidence fairly and reasonable tending to show that the real fact is not a presumed the purpose of presumption is over. Then the evidence will determine the true nature of the fact to be established.  The rules of presumption are deducted from enlightened human knowledge and experience and are drawn from the connecting relation and coincidence of facts, and circumstances.

Para 16 - In our opinion a statutory provision which creates a rebuttable presumption as regards the proof a set of circumstances which would make a transaction liable to tax with the object of preventing evasion of the tax cannot be considered as conferring on the authority concerned the power to levy a tax which the Legislature cannot otherwise levy. A rebuttable presumption which is clearly a rule of evidence has the effect of shifting the burden of proof and it is hard to see how it is unconstitutional when the person concerned has the opportunity to displace the presumption by leading evidence."

In case, if the assessing authority receives information that Form-34 (transit pass) has not been surrendered at the exit check post, by the person, to whom such transit pass was issued, and intending to draw inference on the basis of said Form, it is obligatory on the part of such authority to confront such Form-34 to the person concern. Only on confrontation of such Form-34 (transit pass) persons concerned may be able to know the contents of Form and able to adduce the evidences to rebut the presumption as contemplated under Section 28-B of the Act. Every person has a right to know about the material, which are being used against it. Therefore, in case, if in the course of proceeding if the person disputes having obtained such transit pass and about the contents of the information or even otherwise demands for the confrontation of such Form-34 it is incumbent upon the authorities to confront such Form-34 on the basis of which proceeding has been initiated against the person concerned. In case if the authority concern fails to confront Form-34, the presumption would be that revenue failed to prove its case and no adverse inference would be drawn against such person on the basis of mere information regarding alleged Form-34 and information may be treated without any material.

In the instant case, it is not disputed that the tractor and motor-cycle were sold by the applicant to the various parties outside the State of U.P. Order sheet of the assessing authority shows that in pursuance of the order of Deputy Commissioner (Appeals) applicant appeared before assessing authority and submitted the copy of the bills, Form-C and despatch advice on 22.01.1986 and the same were got verified with original on 27/28.02.1987. Copy of the order sheet is annexure no.9 to the revision petition. Only question remains for consideration is as to who actually intended to transport the vehicles from Faridabad to various places outside the State of Haryana and U.P. and who had obtained Form-34. If the applicant had acted as transporter and obtained Form-34 it is the liability of the applicant to adduce evidence to rebut the presumption raised in Section 28-B of the Act, that the goods had crossed the State of U.P. and if it is found that goods were being transported by some transporter other than applicant and Form-34 were obtained by such transporter then presumption under Section 28 of the Act would be drawn against such transporter. This issue can only be adjudicated when Form-34 are to be confronted. Tribunal has only referred in the order that at the time of argument assessment record was available in which Form-34 was also available in my opinion is not sufficient. When the applicant has moved an application for confrontation of Form-34 the same should be confronted on record. In these circumstances, in my opinion, matter requires reconsideration by Tribunal. Tribunal may ask the assessing authority to confront Form-34 at its stage and seek explanation from the applicant or remand back the matter to the assessing officer for confrontation of such Form-34. If it is found that Form-34 were obtained by the applicant Tribunal may consider the evidences filed by the applicant or may give opportunity to file evidence to rebut the presumption raised against it under Section 28-B of the Act on account of non-surrender of Form-34 in accordance to law. Therefore, Tribunal may decide the appeals afresh in accordance to the law.

In the result, revisions are allowed. Order of Tribunal dated 13.02.1991 are set aside and matter is remanded back to Tribunal to decide the appeals afresh in the light of the observation made above.




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