Sodhi Transport Co. & ANR Vs.
State of U.P. & ANR [1986] INSC 51 (20 March 1986)
VENKATARAMIAH, E.S. (J) VENKATARAMIAH, E.S.
(J) THAKKAR, M.P. (J)
CITATION: 1986 AIR 1099 1986 SCR (1) 939 1986
SCC (2) 486 1986 SCALE (1)489
CITATOR INFO: F 1989 SC1119 (5,19,23,24)
ACT:
Uttar Pradesh Sales Tax Act, 1948/ Uttar
Pradesh Sales Tax Rules, 1948: s. 28-B/r.87 - Constitutional Validity of -
Goods - Transit of through the State - Failure to surrender transit pass at
check-post - Presumption of sale of goods within the State - Whether arises.
HEADNOTE:
Indian Evidence Act, 1872: s.4 - Rebuttable
presumption - Provision of taxing statute creating a rebuttable presumption -
Effect of.
Words and Phrases: 'Shall presume' - Meaning
of - s.4, Indian Evidence Act/s.28-B Uttar Pradesh Sales Tax Act, 1948.
Section 28 of the Uttar Pradesh Sales Tax
Act, 1948 authorises the State Government to establish check posts and barriers
with a view to preventing evasion of tax or other dues payable under the Act in
respect of sale of goods in the State. Section 28-B, added by the U.P. Act 1 of
1973, makes provision for the procedure to be followed by persons who intend to
transport goods from outside the State by road through the State to
destinations outside the State. It provides that when a vehicle coming from any
place outside the State and bound for any other place outside the State passes
through the State, the driver or the other person in- charge of such vehicle
shall obtain in the prescribed manner a transit pass from the officer in-charge
of the first checkpost or barrier after his entry into the State and deliver it
to the officer in-charge of the checkpost or barrier before exit from the
State. If he fails to do so 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. Rule 87 of the Uttar Pradesh Sales Tax Rules 1948, inserted by the
U.P. Sales Tax (First Amendment) Rules, 1974 provides that a person who wishes
to obtain a transit pass shall make an application in 940 the prescribed form
to the officer in-charge of the checkpost concerned. It also provides for the
issue of transit pass in triplicate and for inspection of the documents,
consignments and goods to ensure that the statements are true.
The appellants, who claim to be engaged in
the business of transport of goods belonging to others for hire and who in the
course of their business have to carry goods from one State to another State
along roads lying in the State of Uttar Pradesh, questioned the validity of
s.28-B of the Act and r.87 of the Rules by filing writ petitions before the
High Court. Their contentions were (i) that s.28-B and r.87 were outside the
scope of Entry 54 of the Seventh Schedule of the Constitution, (ii) that they
infringed freedom of trade, commerce and intercourse guaranteed under Art. 301
of the Constitution, and (iii) that they imposed unreasonable restrictions on
the freedom of trade guaranteed under Art.19(1)(g) of the Constitution. The
High Court having upheld the constitutional validity of the impugned provisions
appeals were preferred to this Court by special leave.
In the writ petitions under Art. 32 of the
Constitution in addition to the contentions raised in the High Court, it was
submitted that the rule of presumption contained in s.
28-B of the Act virtually made a person, who
had not actually sold the goods, liable to pay sales tax, and that a
transporter being just a transporter could not be treated as a dealer within
the meaning of that expression as it was defined in the Act at its
commencement.
Disposing of the appeals and writ petitions,
the Court, ^
HELD : 1. The decision of the High Court
upholding the constitutionality of s. 28-B of the Uttar Pradesh Sales Tax Act,
1948 and r.87 of the Uttar Pradesh Sales Tax Rules, 1948 does not call for any
interference. [957 D] The Act is traceable to Entry 54 in List II of the
Seventh Schedule to the Constitution. Section 28-B of the Act and r.87 of the
Rules are enacted to make the law workable and to prevent evasion of tax. They
fall within the ambit and scope of the power to levy the tax itself. When the
legislature has the power to make a law with respect to any 941 subject it has
all the ancillary and incidental powers to make that law effective. [949 D; 950
E; 949 E] Sardar Baldev Singh v. Commissioner of Income Tax Delhi
2. Taxation laws usually consist of three
parts - charging provisions, machinery provisions and provisions providing for
recovery of the tax. The provisions of s. 28-B of the Act and r.87 of the Rules
are just machinery provisions. They do not levy any charge by themselves. They
ensure that a person who has brought goods inside the State and 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. [949 F;
950 C; 949 D; 950 C-D] Whitney v.
Commissioner of Inland Revenue (1925) 10 T.C. 88 and Gursahai Saigal v.
Commissioner of Income-tax, Punjab [1963] 3 S.C.R. 893 referred to.
3. The words 'it shall be presumed that the
goods carried thereby have been sold within the State' contained in s. 28-B of
the Act only require the authorities concerned to raise a rebuttable
presumption that the goods must have been sold in the State if the transit pass
is not handed over to the officer at the checkpost or the barrier near the
place of exit from the State. The transporter concerned is not shut out from
showing by producing reliable evidence that the goods have not been actually
sold inside the State.
It is only where the presumption is not
successfully rebutted the authorities concerned are required to rely upon the
rule of presumption in s. 28-B of the Act. [951 E; 956 B, D] A presumption is
not in itself evidence but only makes a prima facie case for the party in whose
favour it exists.
It indicates the person on whom 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 on the fact presumed, and when that party
has produced 942 evidence fairly and reasonably tending to show that the real
fact is not as presumed, the purpose of presumption is over.
Then the evidence will determine the true nature
of the fact to be established. [954 F; 955 A] Woodroffe & Amir Ali's Law of
Evidence, Vol. I 14th Edn. 299, W.S. Holdsworth's ' A History of English Law.
Vol.
IX, 140 and Izhar Ahmad Khan v. Union of
India [1962] Supp.
3 S.C.R. 235, referred to.
4. The words 'shall presume' require the
Court to draw a presumption referred to in a law unless the fact is disproved.
They contain a rule of rebuttable presumption in respect of matters with
reference to which they are used, and do not lay down a rule of conclusive
proof. These words occur in statutes wherever facts are to be ascertained by a
judicial process. [953 E-G]
5. A statutory provision which creates a
rebuttable presumption as regards the proof of a set of circumstances which
would make a transaction liable to tax with the object of preventing evasion
cannot be considered as conferring on the authority concerned the power to levy
a tax which the legislature cannot otherwise levy. Such a rule of presumption
which has the effect of shifting the burden of proof cannot be termed
unconstitutional when the person concerned has the opportunity to displace the
presumption by leading evidence. [955 G; 956 A]
6. It cannot be said that a transaction which
is proved to be not a sale is being subjected to sales tax. The authority
concerned before levying sales tax arrives at the conclusion by a judicial
process that the goods have been sold inside the State and in doing so relies
upon the statutory rule of presumption contained in s. 28-B of the Act which
may be rebutted by the person against whom action is taken under that section.
Once a finding is recorded that a person has sold the goods which he had
brought inside the State, then he would be a dealer according to the definition
of the word 'dealer' in the Act subject to fulfilment of other conditions
prescribed in this behalf. [956 D-F] In the instant case, the assessing
authorities made assessments ex-parte in some cases proceeding on the basis
that s. 28-B contains a rule of conclusive presumption. The 943 assessees also
failed to realise the meaning of that section and did not attempt to rebut the
presumption. Even genuine transporters who were not at all engaged in the
business of purchase and sale of goods and had not effected any sale of goods,
were found in many cases liable for large amounts of tax which they could have
avoided if the authorities and the assessees had realised the true effect of
the provisions.
[957 E-G] [To meet the ends of justice the
Court approved the scheme evolved by the State providing for withdrawal and re-
examination by the respondents of all the assessment orders ex-parte or
otherwise in respect of the period prior to 1.6.1979, issuance of fresh notices
to the assessees/appellants/petitioners and finalisation of assessment proceedings
by the authorities keeping in mind the rebuttable presumption contained in s.
28-B, withdrawal of ex-parte orders of assessment passed after 1.6.1979 and
issuance of fresh notices giving opportunity to transporters/assessees to
present their cases, and completion of assessment proceedings within five
months from the date of the judgment.] [960 C; 959 C,D,F; 960 A] & CIVIL
APPELLATE JURISDICTION : Civil Appeal Nos. 3376- 80 and 3382 of 1982 etc. and
W.P. Nos. 663, 9433 of 1981 etc.
From the Judgment and Order dated 25th May,
1982 of the Allahabad High Court in Civil Misc. Writ Petition Nos. 363, 339,
546, 301, 362 and 544 of 1981 respectively.
G.L. Sanghi, S.N. Kacker, Harbans Lal, C.S. Vaidyanathan,
B.P. Singh, Ganga Dev, L.P. Aggarwala & Co., R.B. Mehrotra, E.C. Aggarwala,
S.K. Sinha, Gopal Subramanium, Mrs. Shoba Dixit, C.V. Subba Rao, Madan Lokur,
Sushil Kumar, N.S. Das Behl, P.H. Parekh, S.C. Jain, O.P.
Sharma, G.L. Sanghi, Bishamber Lal, Mehta
Dave & Co., Uma Dutta, S.N. Mehta, Ashok Grover, Rishi Kesh, R.P. Singh,
H.M. Singh, D.P. Mohanty, Mrs. Rani Chabbra, Miss A. Subhashini, B.P.
Maheswari, Badridas Sharma and R.A. Gupta for the appearing parties.
The Judgment of the Court was delivered by :
944 VENKATARAMIAH, J. These appeals by special
leave are filed against the judgment of the High Court of Allahabad in Civil
Miscellaneous Writ Petition No.339 of 1981 and connected cases delivered on May
25, 1982 holding inter alia that section 28-B of the Uttar Pradesh Sales Tax
Act, 1948 (U.P. Act No. XV of 1948) (hereinafter referred to as 'the Act') and
rule 87 of the Uttar Pradesh Sales Tax Rules, 1948 (hereinafter referred to as
'the Rules') framed by the Government of Uttar Pradesh in exercise of its
powers conferred under the Act, as constitutionally valid and dismissing the
Writ Petitions with costs. There are also before us a number of writ petitions
presented under Article 32 of the Constitution in which similar contentions are
raised. We are disposing of all the appeals and the connected writ petitions by
this common judgment. But we are setting out the facts in one set of appeals
for purposes of all these cases as the questions involved are mostly legal
issues.
The appellants who claim to be engaged in the
business of transport of goods belonging to others for hire from one place to
another and who in the course of their business have to carry goods from one
State to another State along roads lying in the State of Uttar Pradesh filed
the writ petitions out of which these appeals arise feeling aggrieved by the
restrictions imposed on them by section 28-B of the Act and rule 87 of the
Rules and the orders of assessment passed under the Act against them by the
Sales Tax authorities of the State of Uttar Pradesh.
The Legislature of a State is entitled to
levy tax on sales under Entry 54 of List II of the Seventh Schedule to the
Constitution. The Act, however, came into force prior to the commencement of
the Constitution. When the State of Uttar Pradesh found that there was large
scale evasion of sales tax by persons engaged in trade who were bringing goods
from outside the State of Uttar Pradesh into that State the Legislature enacted
certain measures by way of amendment of the Act to prevent as far as possible
such evasion. First, section 28 of the Act was enacted in 1956 providing for
establishment of check-posts and barriers. It was substituted by an amended
section 28 by U.P. Act 11 of 1972 which inter alia provided for the
establishment of check-posts and barriers at the boundaries of the State and
also for inspection of goods while in 945 transit. Even this provision was
found to be inadequate.
Therefore by U.P. Act 1 of 1973, the State
Legislature substituted the said amended section 28 by a new section 28 and
also added sections 28-A, 28-B, 28-C and 28-D to deal with the problems of
evasion arising out of transactions in which goods imported into the State from
outside were involved. Section 28-A deals with the provisions governing a
person who imports goods by road into the State from any place outside the
State. Section 28-C deals with the regulation of delivery and carrying away of
the goods which are brought into the State by rail, river or air. We are not
concerned with sections 28-A and 28-C in these cases.
Similarly section 28-D is not material for us
as it deals with cases governed by section 28-A and section 28-C.
Section 28 and section 28-B which are
material for these cases as they now stand read thus "28. Establishment of
check-posts and barriers - The State Government, if it is of opinion that it is
necessary so to do with a view to preventing evasion of tax or other dues
payable under this Act in respect of the sale of goods within the State after
their import into the State, may by notification in the Gazette direct the establishment
of check-posts or barriers at such places within the State as may be specified
in the notification.
28-B. Transit of goods by road through the
State and issue of transit pass - When a vehicle coming from any place outside
the State and bound for any other place outside the State passes through the
State, the driver or other person in charge of such vehicle shall obtain in the
prescribed manner a transit pass 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 check-post or barrier before his exist from the State,
failing 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." Rule
87 of the Rules which was inserted into the Rules by 946 the U.P. Sales Tax
(First Amendment) Rules, 1974 for the purpose of section 28-B of the Act reads
thus :
"87. Transit of goods by road through
the State and issue of transit pass - (1) The driver or other person-in-charge
of a vehicle shall, in order to obtain a pass under section 28-B, submit an
application, in triplicate on Form XXXIV to the office-in-charge of the
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 documents and after making such enquiries as he
deems necessary, issue a pass on the duplicate and triplicate copies of the
application, retaining the original himself.
The pass shall specify the 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.
(3) The driver or other person-in-charge of
the vehicle or vessel shall stop his vehicle at such Exit Check Post, surrender
the duplicate copy of pass 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 for which pass had been
obtained. The Officer-in- charge of the Exit Check Post shall issue a receipt
on the triplicate copy of the pass for the duplicate copies surrendered by the
driver or other person- in-charge of the vehicle.
(4) The Officer-in-charge of the Exit Check
Post shall have powers to detain, unload and search the contents of the vehicle
for the purpose mentioned in sub-rule (3)." The relevant part of Form No.
XXXIV which is issued in triplicate reads thus :
947 SODHI TRANSPORT v. STATE [VENKATARAMIAH,
J.] "TRIPLICATE FORM XXXIV Application for issue of Transit Pass (To be
submitted in triplicate) (See rule 87(1) of the U.P. Sales Tax Rules, 1948) SIR
I..................s/o Sri.............................r/o................(full
address).............hereby declare that I am the owner/driver of vehicle/truck
No................belonging to.............(Name and address of the owner/
transporting agency.)
2. I hereby declare that the consignments
detailed overleaf being carried by the above vehicle are meant for destination
in other States. They will not be unloaded or delivered any- where in Uttar
Pradesh.
3. My vehicle/truck will cross Uttar
Pradesh................(name of the other
State).....................................Border at..............check post on
or before (date) by ...........hours(time)...................
Date............
Time............ Signature Place...........
status Transit Pass Serial No..........
Vehicle/truck no. .........................
carrying the consignments mentioned overleaf is permitted to cross the Uttar
Pradesh ........... (Name of the other State) Border at................Check
Post by .....................hours ...................on or before
..............(date) Place ..............
Date ...............
Time ...............
948 Signature of the Officer I/c Check Post
SEAL ____________________________________________________________ ________
*Strike out whichever is not applicable.
Certified that I have received the duplicate
copy of this pass.
Place ..............
Date ...............
Time ...............
Signature of the Officer (SEAL)" I/c
Check Post Now section 28 authorises the State Government to establish
check-posts and barriers, if it so desires, with a view to preventing evasion
of tax or other dues payable under the Act in respect of sale of goods in the
State of Uttar Pradesh. Section 28-B makes provision for the procedure to be
followed by persons who intend to transport goods by roads into the State of
Uttar Pradesh from places out outside the State of Uttar Pradesh for the
purpose of transporting them to places situated outside that State. It provides
that when a vehicle coming from any place outside the State of Uttar Pradesh
and bound for any other place outside the State passes through the State, the
driver or other person in-charge of such vehicle shall obtain in the prescribed
manner a transit pass 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
check- post or barrier before the exit from the State. If he fails to do so, 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. Such presumption when
drawn against the owner or the person in charge of the vehicle and he is held
to have sold the goods inside the State of Uttar Pradesh all the liabilities
under the Act which arise in the case of a person who sells goods inside the
State would arise. Rule 87 provides that a person 949 who wishes to get a
transit pass shall make an application in Form No. XXXIV to the officer
in-charge of the check-post concerned. It also provides for the issue of the transit
pass in triplicate and for inspection of the documents, consignments and goods
to ensure that the statements made are true.
The validity of sections 28, 28-B and rule 87
was questioned by the petitioners who filed the writ petitions in the High Court
on various grounds. Broadly the contentions were that (i) the provisions were
outside the scope of Entry 54 of List II of the Seventh Schedule to the
Constitution; (ii) they infringed freedom of trade, commerce and intercourse
guaranteed under Article 301 of the Constitution; and (iii) they imposed
unreasonable restrictions on the freedom of trade guaranteed under Article
19(1)(g) of the Constitution. The High Court rejected these contentions and
dismissed the writ petitions.
Hence these appeals by special leave have
been filed. Some writ petitions have also been filed in this Court. All these
were heard together by us.
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 Constitution
which reads thus : '54. Taxes on the sale or purchase of goods other than
newspapers subject to the provisions of entry 92A of List I'. It is wellsettled
that when the Legislature has the power to make a law with respect to any
subject it has all the ancillary and incidental powers to make the law
effective. Taxation laws usually consist of three parts - charging provisions,
machinery provisions, and provisions providing for recovery of the tax. We may
refer here to the observations of Lord Dunedin in Whitney v. Commissioner of
Inland Revenue [1925] 10 T.C. 88 (110). The learned Lord said :
"My Lords, I shall now permit myself a
general observation. Once that it is fixed that there is liability, it is
antecedently highly improbable that the statute should not go on to make that
liability effective. A statute is designed to be workable and the
interpretation thereof by a Court should be to secure that object, unless
crucial 950 omission or clear direction makes that end unattainable. Now there
are three stages in the imposition of a tax : there is the declaration of
liability, that what persons in respect of what property are liable. Next,
there is the assessment. Liability does not depend on assessment. That,
exhypothesi, has already been fixed. But assessment particularises the exact
sum which a person liable has to pay. Lastly, come the methods of recovery, if
the person taxed does not voluntarily pay." These observations are quoted
with approval by our Court in Gursahai Saigal v. Commissioner of Income-tax,
Punjab [1963] 3 S.C.R. 893 at 900. 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 and
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. Dealing with the question of validity of section 23-A of the
Indian Income Tax Act, 1922 this Court observed in Sardar Baldev Singh v.
Commissioner of Income Tax, Delhi & Ajmer
[1961] 1 S.C.R.
482 at page 493 thus :
"In spite of all this it seems to us
that the legislation was not incompetent. Under Entry 54 a law could of course
be passed imposing a tax on a person on his own income. It is not disputed that
under that entry a law could also be passed to prevent a person from evading
the tax payable on his own income. As is well-known the legislative entries
have to be read in a very wide manner and 951 so as to include all subsidiary
and ancillary matters. So Entry 54 should be read not only as authorising the
imposition of a tax but also as authorising an enactment which prevents the tax
imposed being evaded. If it were not to be so read, then the admitted power to
tax a person on his own income might often be made infructuous by ingenious
contrivances. Experience has shown that attempts to evade the tax are often
made." We shall now deal with the question relating to the presumption
contained in section 28-B of the Act. It is seen that if the transit pass is
not handed over to the officer in-charge of the check-post or barrier before
his exit from the State it shall be presumed that the goods carried thereby
have been sold inside the State by the person in charge of the said goods. It
is contended that the said rule virtually makes a person who has not actually
sold the goods liable to pay sales tax and it is further argued that a
transporter being just a transporter cannot be treated as a dealer within the
meaning of that expression as it was defined in the Act at the time when
section 28-B was introduced into the Act. The appellants contend that the words
'it shall be presumed that the goods carried thereby have been sold within the
State' in section 28-B of the Act as meaning that it shall be conclusively held
that the goods carried thereby have been sold within the State to buttress
their argument that a tax is being levied on a transaction which is not a sale
at all under Entry 54 of List II of the Seventh Schedule by introducing a legal
fiction. This argument overlooks the essential difference between the two sets
of words set out above. The meaning of these words would become clear if we
read the definitions of the words 'may presume', 'shall presume', and 'conclusive
proof' given in section 4 of the Indian Evidence Act, 1872, although the said
Act is not directly attracted to this case. These words mean as follows :
"4. 'May presume'. Whenever it is
provided by this Act that the Court may presume a fact, it may either regard
such fact as proved, unless and until it is disproved; or may call for proof of
it;
'Shall presume'. Whenever it is directed by
this Act that Court shall presume a fact, it shall 952 regard such fact as
proved, unless and until it is disproved;
'Conclusive proof'. When one fact is declared
by the Act to be conclusive proof of another, the Court shall, on proof of the
one fact, regard the other as proved, and shall not allow evidence to be given
for the purpose of disproving it." In the Indian Evidence Act, 1872 there
are three cases where conclusive presumption may be drawn. They are sections
41, 112 and section 113. These are cases where law regards any amount of other
evidence will not alter the conclusion to be reached when the basic facts are
admitted or proved.
In Woodroffe & Amir Ali's Law of Evidence
(Vol. I) 14th Edition at page 299 it is stated thus :
"Conclusive presumptions of law are :
'rules determining the quantity of evidence
requisite for the support of any particular averment, which is not permitted to
be overcome by any proof that the fact is otherwise. They consist chiefly of
those cases in which the long experienced connection, just alluded to has been
found so general and uniform as to render it expedient for the common good that
this connection should be taken to be inseparable and universal.
They have been adopted by common consent, from
motives of public policy, for the sake of greater certainty, and the promotion
of peace and quiet in the community; and therefore, it is that all
corroborating evidence is dispensed with, and all opposing evidence is
forbidden (Taylor, Ev., s.71 : Best, Ev., p. 317, s.304').
.............................................
Rebuttable presumptions of law are, as well
as the former, 'the result of the general experience of a connection between
certain facts or things, the one 953 being usually found to be the companion or
the effect of the other. The connection, however, in this class is not so
intimate or so uniform as to be conclusively presumed to exist in every case;
yet, it is so general that the law itself,
without the aid of a jury, infers the one fact from the proved existence of the
other in the absence of all opposing evidence. In this mode, the law defines
the nature and the amount of the evidence which is sufficient to establish a
prima facie case, and to throw the burden of proof upon the other party; and if
no opposing evidence is offered, the jury are bound to find in favour of the
presumption. A contrary verdict might be set aside as being against evidence.
The rules in this class of presumptions as in the former, have been adopted by
common consent from motives of public policy and for the promotion of the
general good;
yet not as in the former class forbidding all
further evidence, but only dispensing with it till some proof is given on the
other side to rebut the presumption raised." Having regard to the
definition of the words 'may presume', it is open to a court where they are
used in its discretion either to draw a presumption referred to in a law or may
not. The words 'shall presume' require the court to draw a presumption
accordingly, unless the fact is disproved. They contain a rule of rebuttable
presumption.
These words i.e., 'shall presume' are being
used in Indian judicial lore for over a century to convey that they lay down a
rebuttable presumption in respect of matters with reference to which they are
used and we should expect that the U.P. Legislature also has used them in the
same sense in which Indian courts have understood them over a long period and
not as laying down a rule of conclusive proof. In fact these presumptions are
not peculiar to the Indian Evidence Act. They are generally used wherever facts
are to be ascertained by a judicial process.
The history of the rules regarding
presumptions is succintly given in W.S. Holdsworth's 'A History of English Law'
(Vol.IX) at page 140 thus :
954 "From time to time the ordinary
process of reasoning have suggested various inferences, which have been treated
by the courts in different ways.
Sometimes they are treated as more or less
probable inferences of fact; and it is possible, though by no means certain,
that in the remote past most presumptions originated as mere presumptions of
fact. Just as in the case of judicial notice, the courts, as a matter of common
sense, assume the existence of matters of common knowledge without further
proof; so they easily drew an obvious in ference from facts proved or admitted,
and thus created a presumption, as common sense dictated. And just as the
truisms which elementary experience teaches came to be embodied in maxims which
illustrate the origins of the doctrine of judicial notice, so other maxims
arose which illustrate the origins, in that same elementary experience, of some
of the commonest of the presumptions known to the law. But it was inevitable
that as the law developed, some of these presumptions should be so frequently
drawn that they took upon themselves the character of rules of laws and we shall
see that, owing to the exigencies of primitive methods of trial, the
Legislature and the courts were active in creating them. Some of them were made
or became only prima facie rules - rules, that is, which were rebuttable by
further evidence. Others were made or became irrebuttable, and therefore, in
effect rules of law. Others hovered uncertainly on the border line of
rebuttable and irrebuttable presumptions......" 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 on the fact presumed, and
when that party has produced evidence fairly and reassonably tending to show
that the real fact is not as presumed the 955 purpose of presumption is over.
Then the evidence will determine the true nature of the fact to be established.
The rules of presumption are deduced from enlightened human knowledge and
experience and are drawn from the connection, relation and coincidence of
facts, and circumstances.
In Izhar Ahmad khan v. Union of India, [1962]
Suppl. 3 S.C.R. 235 @ 257 Gajnendragadkar, J. (as he then was) explains the
meaning of a rebuttable presumption thus :
"It is conceded, and we think, rightly,
that a rule prescribing a rebuttable presumption is a rule of evidence. It is
necessary to analyse what the rule about the rebuttable presumption really
means. A fact A which has relevance in the proof of fact and inherently has
some degree of probative or persuasive value in that behalf may be weighed by a
judicial mind after it is proved and before a conclusion is reached as to
whether fact is proved or not. When the law of evidence makes a rule providing
for a rebuttable presumption that on proof of fact A, fact shall be deemed to
be proved unless the contrary is established, what the rule purports to do is
to regulate the judicial process of appreciating evidence and to provide that
the said appreciation will draw the inference from the proof of fact A that
fact has also been proved unless the contrary is established. In other words,
the rule takes away judicial discretion either to attach the due probative
value to fact A or not and requires prima facie the due probative value to be
attached in the matter of the inference as to the existence of fact B, subject
of course, to the said presumption being rebutted by Proof to the
contrary..." In our opinion a statutory provision which creates a
rebuttable presumption as regards the proof of 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 956 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.
We are of the view that the words contained
in-section 28-B of the Act only require the authorities concerned to raise a
rebuttable presumption that the goods must have been sold in the State if the
transit pass is not handed over to the officer at the check-post or the barrier
near the place of exist from the State. The transporter concerned is not shut
out from showing by producing reliable evidence that the goods have not been
actually sold inside the State. It is still open to him to establish that the
goods had been disposed of in a different way. He may establish that the goods
have been delivered to some other person under a transaction which is not a
sale, they have been consumed inside the State or have been redespatched
outside the State without effecting a sale within the State etc. It is only
where the presumption is not successfully rebutted the authorities concerned
are required to rely upon the rule of presumption in section 28-B of the Act.
It is, therefore, not correct to say that a transaction which is proved to be
not a sale is being subjected to sales tax. me authority concerned before
levying sales tax arrives at the conclusion by a judicial process that the
goods have been sold inside the State and in doing so relies upon the statutory
rule of presumption contained in section 28-B of the Act which may be rebutted
by the person against whom action is taken under section 28-B of the Act. When
once a finding is recorded that a person has sold the goods which he had
brought inside the State, then he would be a dealer even according to the
definition of the word 'dealer' as it stood from the very commencement of the
Act subject to the other conditions prescribed in this behalf being fulfilled.
A person who sells goods inside the State of Uttar Pradesh and fulfills the
other conditions prescribed in that behalf is a dealer even as per amendments
made in 1959, 1961, 1964, 1973 and 1978 to the said definition. There is,
therefore, no substance in the contention that a transporter was being made
liable for the first time after 1979 with retrospective effect to pay sales tax
on a transaction which is not a sale. Tax becomes payable by him only after a
finding is recorded that he has sold the goods inside the State though with the
help of the presumption which is a rebuttable one.
957 The levy of sates tax on goods which are
held to have been sold inside the State cannot be considered as contravening
Article 301 of the Constitution. The restrictions imposed are not also shown to
be unreasonable.
They do not unduly hamper trade. On the other
hand they are imposed in the public interest. The contentions based on article
301 and Article 19(1)(g) of the Constitution are, therefore, without substance.
The foregoing discussion disposes of the
contentions regarding legislative competence or unreasonable character of tile
provisions contained in section 28-8 of the Act and rule 87 of the Rules. They
are introduced, as stated earlier, to check evasion and to provide a machinery
for levying tax from persons who dispose of goods inside the State and avoid
tax which they are otherwise liable to pay.
The law provides enough protection to them
and makes provision to enable them to show that they are in fact not liable to
pay any tax. The decision of the High Court upholding the constitutionality of
section 28-B of the Act and rule 87 of the Rules does not call for any
interference.
We uphold the validity of the said
provisions.
This, however, does not solve all the
problems posed before us by some of the parties who are involved in these
cases. We have found that in some cases the assessing authorities have made
assessments ex parte without appreciating the true meaning of the rule of
presumption contained in section 28-B of the Act. They have proceeded virtually
on the basis that the section contains a rule of conclusive presumption. Even
the assessees have failed to realise the meaning of that section and do not
appear to have made any attempt to rebut the presumption. It is noticed that in
many cases even genuine transporters who are not at all engaged in the business
of purchase and sale of goods and have not effected any sale of goods have been
found liable for large amounts of tax, which they could have avoided, if the
authorities and the assessees had realised the true effect of the provisions
contained in section 28-B of the Act. This has led to serious prejudice in many
cases.
When this fact was brought to the notice of
the learned counsel for the State of Uttar Pradesh he very fairly submitted on
behalf of the Commissioner of Sales Tax thus:
958 'Whereas it was observed by the Hon'ble
Court in the course of the discussion that the presumption under section 28-B
is a rebuttable presumption.
Whereas it was pointed out that while the
Commissioner of Sales Tax had issued a circular in 1985 to the effect that ways
and means will be found to ensure that inter-State transporters who are not
engaged in buying or selling of goods in the Uttar Pradesh are not unduly
inconvenienced but the said circular was not extant when assessments were made
in numerous pre-1985 cases.
Whereas it was mentioned by the appellants
and petitioners that it would be virtually impossible to produce the exit
permits of pre-1979 assessments and that it would not be reasonable to treat
them as dealers who had sold assessable goods in Uttar Pradesh. Now, therefore,
the Commissioner of Sales Tax states as under :-
1. A large number of Civil Appeals have been
preferred by way of Special Leave against the Judgment and Order of Allahabad
High Court dated e 25.5.82 by which the Allahabad High Court was pleased to
uphold the constitutional validity of sec. 28-B of the U.P. Sales Tax Act and
rule 87 of the U.P. Sales Tax Rules. A large number of writ petitions have been
filed under Article 32 of the Constitution of India challenging the constitutional
validity of sec. 28-B of the U.P.
Sales Tax Act.
2. In the Civil Appeals, this Hon'ble Court
was pleased to pass an interim order staying the recovery of sales tax for the
period prior to 1.6.79. mis Hon'ble Court was pleased to clarify that there
would be no stay of payment of tax after 1.6.1979.
3. During the hearing of these appeals,
learned counsel for the appellants pointed out that some difficulties and
hardships were being faced by the 959 genuine transporters. Keeping in view the
submissions made by the learned counsel for the appellants, this Hon'ble Court
was pleased to suggest to the counsel appearing for the State to evolve a
suitable method to ensure that the Act and the provisions would not operate
unjustly or harshly against bona fide transporters.
4. Counsel appearing for the State of U.P.
has agreed on behalf of the Respondents to re-examine all the assessments in
respect of the period prior to 1.6.1979 (the date mentioned by this Hon'ble
Court in the interim order). Counsel states that all assessment orders ex parte
or otherwise, shall be withdrawn.
5. A fresh notice containing as far as
possible relevant particulars, would be issued to the
assessees/appellants/petitioners. The authorities will finalise the assessment
proceedings in accordance with law. The authorities will also bear in mind that
the presumption contained in section 28-B that if the transporter fails to
produce the transit pass at the exit check-post, then it would be presumed that
the goods carried have been sold within the State by the owner or person in
charge of the vehicle, is a rebuttable presumption and it would be open to the
transporter, assessee, to displace this presumption by producing adequate
material or evidence.
6. In respect of the assessments after
1.6.79, the department will withdraw any ex parte orders of assessment which
may have been passed. A fresh notice giving an opportunity shall be given to
the transporter / assessee to present his case. The assessments made after
1.6.79 after affording an opportunity to the transporter / assessee shall not
be disturbed except in accordance with law (i.e. by way of appeal or any other
remedy provided under the Act).
7. The revised assessment proceedings
pursuant to 960 this order may be completed within a period of 5 months from
today.
8. The assessing authorities will pass fresh
orders of assessment in accordance with law uninfluenced by the previous orders
which may have been made.
9. It may be clarified that Sec. 21 of the
U.P.
Sales Tax Act will not be a bar to the
instant re- assessments." On going through the above proposal we feel that
it would meet the ends of justice if the cases of the appellants and
petitioners are permitted to be dealt with accordingly. We give our approval to
the said proposals and make an order accordingly. Any assessment made pursuant
to the above orders shall not be open to question on the ground that it does
not satisfy the period of limitation contained in section 21 of the Act. We
also make it clear that any person who is aggrieved by the order of assessment
may question it in appeal or revision as provided by the Act on all grounds
except on the ground that it had been passed beyond time. We also direct that
if any of the appellants or petitioners has, depending upon the pendency of
these appeals or petitions, not filed any appeal or revision against any order
passed under the Act, such appellant or petitioner may prefer such appeal or
revision as the case may be on or before April 30. 1986 and if any such appeal
or revision is filed it shall be disposed of by the concerned authority without
raising any objection as to the period of limitation.
These appeals and writ petitions are disposed
of accordingly. There shall be no order as to costs.
P.S.S.
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