- (1.) In this writ petition the validity of the second part of Clause (d) of Rule 44-A of the U. P. Sales Tax Rules has been questioned. The circumstances in which the validity has been questioned and adjudication about it sought for from this court will appear from the following facts:-
(2.) Petitioner No. 1, M/s. Shadi Ram Ganga Prasad is a partnership firm of which Debi Prasad Kanodia, petitioner No. 2, is one of the partners. The firm was assessed to sales tax under the U. P. Sales Tax Act for the assessment year 1965-66. The total turnover included purchases in respect of oil-seeds. The firm admitted liability to pay purchase tax on a turnover of Rs. 11,51,720.80 in respect of purchase of oil-seeds and also showed payment of the requisite tax on that part of the turnover. The Sales Tax Officer however found the tax to be payable on additional purchases of the value of Rs. 38,63,608 and odd of oil-seeds. The controversy, therefore, relates to this part of the assessment and demand of additional purchase tax. It may be stated here that the assessment of the firm admittedly was as first purchaser under Section 3-D of the U. P. Sales Tax Act. The said section provides for levy of purchase tax on first purchases only of goods which may be notified by the Government under that section. In the explanations contained in Sub-section (1) and also Sub-section (2) of the section there are certain provisions intended to lay down as to when a purchaser will be regarded as the first purchaser and when he should not be regarded as the first purchaser. There is then Sub-section (7) which reads : (7) Unless the dealer proves otherwise to the satisfaction of the assessing authority, every purchase by or through a dealer shall, for the purposes of Sub-section (1), be presumed to be the first purchase by such dealer and every sale through a dealer shall, for the purposes of Sub-section (2), be presumed to be sale to a first purchaser. It will appear that Sub-section (7) aforesaid lays down a rule of evidence to the effect that the burden of proving that a purchaser is a subsequent and not the first purchaser will be on the purchaser.
(3.) Rule 44-A mentioned above provides for determination of turnover of first purchases under Section 3-D(1). It lays down that tax under the said provisions shall be computed on the net turnover and in determining the net turnover the amounts specified in the rule shall be deducted as if they are included in the gross turnover. One of such amounts specified in the rule is that contained in Clause (d) which is in the following words: Clause (d)-All amounts for which goods are purchased by one registered dealer from another registered dealer, provided tax under Section 3-D has already been paid on such goods. Now the contention of the petitioners before the Sales Tax Officer was that the purchases of oil-seeds of the total value of Rs. 38 lacs and odd had been made from registered dealers who were themselves the purchasers and not the producers and, therefore, the purchases by the petitioner-firm were not first purchases, with the result that there was no liability on them for purchase tax. There does not appear to have been a controversy that even if the purchases were made from persons who were registered dealers the petitioner-firm would be liable. The controversy was whether the petitioner-firm had been able to prove that the purchases made by it were first purchases (sic). In respect of purchases of the total value of Rs. 27,83,949 and odd, the finding of the Sales Tax Officer was that they were made not from but through registered dealers and accordingly in terms of the explanation contained in Sub-section (1) of Section 3-D the purchases were to be treated as first purchases by the petitioner-firm. In regard to the balance of purchases in the total sum of Rs. 10,79,659 and odd the discussion of the Sales Tax Officer is to be found at two places in his assessment order, copy of which is annexure 1 to the writ petition. At one place he stated that the assessee had not been able to provide evidence of the fact that the purchases were made of goods on which tax had already been paid. Specific reference in this connection was made to Sub-section (7) of Section 3-D of the Act but no such specific mention was made of Clause (d) of Rule 44-A however. The question of the remaining amount of Rs. 27 lacs and odd was then taken up and considered whereafter the Sales Tax Officer reverted to the dispute relating to the purchases of the value of Rs. 10,79,000 and odd. He stated that the assessee had given the names of the registered dealers from whom the purchases were claimed to have been made and on verification being sought for from the Sales Tax Officer, Sector V, he in his letter of 23rd February, 1970, did not make verification about 14 dealers and stated that the liability for tax was of the assessee-firm. It was also stated that because the said dealers had got the purchases made in their Arhat. On this fact being brought to the notice of the assessee, the assessee agreed to pay the tax on the said sum of Rs. 10,79,659.94. In the counter-affidavit filed on behalf of the opposite parties who are the State of Uttar Pradesh and the Sales Tax Officer, Sector II, Kanpur, stress has been laid on paragraph 4 to the effect that the assessee-firm admitted before the Sales Tax Officer liability to pay purchase tax on purchases made from the registered dealers for Rs. 10,79,659.94 of oil-seeds and an extract has been given from the alleged statement made on behalf of the assessee. In the rejoinder affidavit it has been stated that the liability was really not admitted and the word "Nahin" was omitted before the words "Daine ko taiyar hai". Copy of a letter sent by the assessee-firm to the Sales Tax Officer has also been annexed to the rejoinder affidavit and the said copy shows that the liability to pay purchase tax on the said sum of rupees ten lacs and odd was disputed and reference was made to the evidence on which the firm relied for proof of the fact that the purchases by the firm were not first purchases and were accordingly not liable to purchase tax. It may be noted here that in the assessment order, which is of a date subsequent to the date of the letter, no reference was made to this letter and to the denial of liability after the alleged statement in which the assessee-firm would appear to have admitted the liability. In the face of this letter made before the assessment was completed it is not possible to say that the assessee is bound by the statement which according to him was not correctly recorded. If the basis of admission is excluded, the question will arise whether the assessee can be made liable for tax on first purchases of the total value of rupees ten lacs and odd. The assessee has filed an appeal against the assessment and the learned counsel appearing for the petitioners has stated that the merits of the assessment will be the subject-matter of consideration before the appellate authority, but according to him the hurdle in the way of his getting the needed relief is the provision contained in Clause (d) of Rule 44-A aforesaid according to which even after the finding that the purchases have been made from registered dealers, tax will be claimed on the ground of the failure of the assessee-appellant to furnish evidence of tax having been already paid on the oil-seeds purchased by the assessee for the said sum of rupees ten lacs and odd.;