UP VAT | Burden To Prove Purchase From Registered Dealer On Assesee: Allahabad High Court

In a revision preferred by the Tax Department, the Allahabad High Court has held that the burden to prove that purchases were made from registered dealer lies on the Assesee claiming the same. The Department cannot be made to discharge a negative burden to prove that the sales were made from unregistered dealers.

Perusing Section 16 (Burden of Proof) of the Uttar Pradesh Value Added Tax Act, 2008, bench comprising of Justice Piyush Agrawal held,

“It is evidently clear that the burden of proof lies upon the dealer/opposite party. In other words, the burden of claim of ex U.P. purchases is squarely upon the opposite party, who has to discharge the said burden and not the Department. Merely showing the purchases through invoices from the registered dealer, will not enough and sufficient to proof that the purchases have been made bona fidely.”

Factual Background:

Assesee, i.e., the opposite party is engaged in the business of purchase of wheat and manufacture of atta, maida & suji. The business premises of the Assesee was surveyed and various incriminating materials, including loose parchas, were found. The books of account were not up to date. Best judgment assessment was made, and the books of account were rejected. An appeal filed by the Assesee was partly allowed.

Thereafter, cross appeals were filed before the Commercial Tax Tribunal wherein rejection of books of account was affirmed. However, Tribunal accepted the declared turnover and tax, and deleted the amount of tax assessed by Assessing Authority. It was argued that the negative burden to prove that goods purchased from unregistered dealer was shifted upon the Department.

Relying on Section 16 of the UP VAT Act, Counsel for Department argued that in any assessment proceedings, burden of proving any fact which is specially within the knowledge of the assessee shall lie upon him (assessee). Burden of proving that exemptions, exceptions, or reliefs under any provisions of the Act have been rightly claimed, including claim of any amount as input tax credit, is on the assessee.

Per contra, Counsel for Assesee contented that though rejection of books of account was confirmed, the Department has no cogent reason or material to show that goods have been purchased from unregistered dealers for fixing the turnover. Assesee relied on invoices of payment made through banking channels, forms issued by Mandi Parishad issued and other document show that the goods were purchased from outside the State of U.P.

High Court Verdict:

The primary question of law for consideration of the Court was whether the Commercial Tax Tribunal was legally justified in deleting the amount of tax levied by the assessing authority and shifting burden of proof on the Department when rejection of account of books had been confirmed.

The Court observed that liability of purchase tax arises only when purchases are made from unregistered dealers and not for the purchases made from registered dealers. Such liability is upon the dealer from whom purchases are made.

The Court placed reliance on The State of Karnataka Vs. M/s Ecom Gill Coffee Trading Private Limited, wherein the Supreme Court while considering a pari materia provision of the Karnataka Value Added Tax Act, 2003 held that burden to prove beyond doubt the claim of exemption and deduction of input tax credit was upon the dealer. Further, it was upon the dealer to prove and establish, inter alia, actual physical movement of goods and genuineness of the transaction.

The Court observed that the Assesee had failed to prove actual movement of goods as most of the vehicle numbers provided by the Assesee were found to be fictitious. Since goods were deemed to have been purchased from ex-UP dealers, in absence of any proof to the contrary, Assesee cannot claim non-taxability.

“The Tribunal has failed to appreciate this vital aspect of the matter that the actual physical movement of the goods could not be proved beyond doubt as claimed by the opposite party – dealer. Surprisingly, the observation of the Tribunal in shifting the burden upon the Department contrary to the provisions of section 16 of the UP VAT Act, is beyond imagination and therefore, the same is perverse.”

Accordingly, the revision was allowed and the Assesee was directed to deposit cost of Rs. 5,000 for each revision with the Department.

Case Title: The Commissioner, Commercial Tax v. M/S Ramway Foods Ltd. [SALES/TRADE TAX REVISION No. - 26 of 2023]

Case Citation: 2023 LiveLaw (AB) 334

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