Heard Sri Krishna Agrawal, learned counsel for the revisionist and Sri B.K. Pandey, learned Standing Counsel.
These two revisions having arisen from proceedings taken by the respondent authorities in respect of a singular transaction, have with the consent of parties been taken up for disposal together. The facts upon which there is not much dispute are as follows:
The revisionist is a company having its registered office in Mumbai in the State of Maharashtra. It is engaged in the business of manufacture and sale of motor vehicles, chassis and other parts. For the purposes of effecting sales of the articles manufactured by it, it establishes regional sales offices in various States throughout the country. During the assessment year in question a motor vehicle was sold by the revisionist to M/s Motor & General Sales Limited, Karnal, Haryana vide Bill No. 30698 dated 24 March 1992. The aforesaid vehicle is stated to have been sold by M/s Motor & General Sales on hire purchase to one Sri Naseem Ahmad. It transpires that Sri Naseem Ahmad obtained a Form - 34 on 13 June 1992 at the entry check post at Kairana, District Muzaffarnagar for the purposes of taking the vehicle to the State of Bihar. This Form - 34 was not got cancelled at the exit check-post of the State of U.P. On 25 January 2005, a tax of Rs. 39,000/- came to be levied upon the revisionist by the Assistant Commissioner, Trade Tax on the ground of violation of Section 28-B of the U.P. Trade Tax Act, 19481. By a separate order (challenged in Trade Tax Revision No. 558 of 2011) a penalty of Rs. 1,24,800 came to be imposed upon the revisionist in terms of the provisions of Section 15A(1)(g) of the 1948 Act.
Sri Krishna Agarwal, learned counsel for the revisionist has assailed both the levy of tax as well as the imposition of penalty and has advanced the following submissions.
Sri Agarwal submits that admittedly the vehicle in question had been sold to M/s Motors and General Sales Limited at Karnal in the State of Haryana. It is his submission that since the sale had taken place at Karnal in the State of Haryana itself, the presumption of sale which stands engrafted in Section 28-B of the 1948 Act did not arise. Sri Agarwal further referred to and relied upon the judgment rendered by the Supreme Court in Asea Brown Boveri Ltd. Vs. Industrial Finance Corporation of India and Ors.2 to submit that a hire purchase agreement is imbued with the primary purpose of financing the purchase of assets or equipment. While in law, the hirer may continue to be the owner of the asset or equipment, for all practical purposes the borrower becomes the owner of the property and enjoys full rights over the asset or equipment including the right to take delivery, enjoy use of occupation, maintain, operate and bear risks of loss or damage. He has also placed reliance upon a judgment rendered by a learned Single Judge of this Court in Commissioner Trade Tax, U.P., Lucknow Vs. S/s Shrimati Harjeet Kaur, Kanpur3 to contend that the hirer in view of the explanation appended to Section 28-B is deemed to be the owner of the vehicle. Referring then to the fact as noted in the orders impugned, Sri Agarwal submitted that undisputedly Naseem Ahmad appears to have sold the vehicle to one Ali Mohammad after it had crossed into the State of U.P. He submits that neither the actions taken by Sri Naseem Ahmad post the delivery and sale of the vehicle or the infraction of registration laws by him could by any stretch of imagination be said to attach a liability of tax upon the revisionist.
Sri Pandey, learned Standing Counsel while countering the above submissions has contended that a hire purchase agreement by its very nature does not result in a sale or a transfer of property in goods. He, therefore, submits that the revisionist continued to be the owner of the vehicle and was consequently correctly held liable to be proceeded against for violation of the provisions of Section 28-B. He further referred to the fact that the hire purchase agreement itself was one which was executed between the revisionist and Naseem Ahmad and therefore submitted that the revisionist was the owner who admittedly failed to comply with the provisions of Section 28-B. In addition to the above Sri Pandey placed emphasis upon the facts as gathered by the respondent-authorities and which stood recorded in the orders impugned. He highlighted the findings recorded in the order of the Tribunal to the effect that the vehicle had come to be registered with the transport authorities at Gorakhpur while the address of the selling dealer was shown to be at Azamgarh. This, Sri Pandey submits, has compelled the Tribunal to correctly come to a conclusion that the vehicle had been sold within the State of U.P. He further placed reliance upon Clause (2) of the hire purchase agreement to submit that the owner of the chassis in question was shown to be the revisionist itself and in view of the above he submitted that both the levy of tax and imposition of penalty was clearly justified. It is these rival submissions which fall for consideration.
Since the determination of the rival submissions would pivot around the provisions of Section 28-B, it would be apposite to extract the said section which is in the following terms: -
"Section 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, and carrying goods referred to in sub-section (1) of section 28-A, passes through the State, the driver or other person incharge 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 last 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:
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."
As is evident from a reading of the above provision, the section imposes an obligation upon the driver or other person in charge of a vehicle to obtain a transit pass at the first check-post barrier after entry into the State of U.P. and surrender the same to the officer in charge of the last check-post or barrier before exiting the State of U.P. The provision itself stands attracted to cases where goods coming from any place outside the State are transiting through the State and are bound for a place outside U.P. The section then also engrafts a presumption against the driver or other person-in-charge of the vehicle to the effect that if the transit pass is not surrendered at the last check post or barrier, it shall be presumed that the goods have been sold within the State by the owner or person-in-charge of the vehicle. While the obligation to obtain a transit pass is placed upon the driver or other person-in-charge of the vehicle, it becomes apposite to note that the presumption of sale stands raised against the owner or the person in charge of the vehicle. The Explanation appended to the provision provides that in a case where the vehicle in question is hired for transportation of goods, the hirer of the vehicle shall for the purposes of the provision be deemed to the owner of the vehicle. It becomes pertinent to note here that the presumption of sale embodied in Section 28-B has been held to be a rebuttable presumption in Sodhi Transport Co. Vs. State of U.P.4. The Supreme Court described the ambit of a rebuttable presumption in the following words:
"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 that 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 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. 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.
16. 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 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.
17. 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 of 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 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 re despatched 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. 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 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."(emphasis supplied) Sodhi Transport, we may note, was subsequently noticed and explained in Heinz India (P) Ltd. Vs. State of U.P.5 wherein the Supreme Court observed as under:-
"56. Mr Chandra, however, laid considerable emphasis on the words "tending to show that the real fact is not as presumed", to argue that the test applied by this Court in rebuttable presumptions had been the test of "preponderance of probability". We do not think so. It is well settled that a decision is an authority for the point it decides. It is equally well settled that the text of the decision cannot be read as if it were a statute. That apart the expression used by this Court is "evidence fairly and reasonably tending to show", which signifies that it is not just any evidence, howsoever shaky and nebulous, that would satisfy the test of preponderance of probability to rebut the statutory presumption but evidence that can by proper and judicial application of mind be said to be fairly and reasonably showing that the real fact is not as presumed. In other words the evidence required to rebut a statutory presumption ought to be clear and convincing, no matter that the degree of proof may not be as high as proving the fact to the contrary beyond a reasonable doubt.
57. The heightened standard of proof required to rebut a presumption raised under the statute at hand is in our view applicable for two distinct reasons. The first and foremost is that the presumption is raised in relation to a fiscal statute. While the amount payable is not a tax, it is nevertheless a statutory levy which is attracted the moment the transaction of sale takes place within the market area. Goods admittedly produced within the market area and not consumed within such area are presumed to be leaving pursuant to a transaction of sale unless the contrary is proved. That the goods are produced within the market area is not in dispute in the instant case. That they left the market area is also admitted. In the ordinary course, therefore, the presumption would be that the goods left pursuant to a sale unless the appellants are in a position to prove the contrary.
58. The second reason for applying a higher standard of proof than mere preponderance of probability is that the nature of transaction pursuant to which the goods are removed from the market area is within the exclusive knowledge of the appellants or the persons to whom such goods are being dispatched. In other words, the circumstances in which the transactions, which the statute presumes to be sales, but which the appellants claim are simple transfer of stocks are within the exclusive knowledge of the appellants. The entire evidence relevant to the transactions, being available only with the appellants and the true nature of the transactions being within their special knowledge, there is no reason why the rebuttal evidence should not satisfy the higher standard of proof and clearly and convincingly establish that the fact presumed is not the actual fact. Our answer to Question 2 accordingly is that the evidence intended to rebut the statutory presumption under Section 17 of the Adhiniyam ought to be clear and convincing evidence showing that what is presumed under the provision is not the real fact." (emphasis supplied) Heinz it becomes relevant to note does not detract from the basic principles enunciated in Sodhi Transport. It, of course, with reference to fiscal statutes holds that the degree of proof must be clear and convincing.
From the material that was placed before the respondent authorities, this Court finds that a vehicle sales invoices-cum-delivery challan dated 24 March 1992 also existed. This invoice established a sale of the chassis by the revisionist to Motor and General Sales Limited Karnal. The vehicle was identified both by chassis number as well as engine number. On 5 June 1992 Motor and General Sales Limited Karnal drew up a sale certificate and delivery receipt in favour of Naseem Ahmad. These documents too identified the vehicle both by its engine and chassis number. Emphasis has been deliberately laid upon this aspect in order to indicate that the vehicle in question stood appropriated to the contract by identification of its chassis and engine numbers. The hire purchase agreement was of course between the revisionist and Naseem Ahmad and came to be executed on 29 June 1992. The issue which therefore primarily arises is whether the rebuttable presumption which stood raised under Section 28-B stood discharged or not. As was noted in Sodhi Transport a rebuttable presumption is not evidence and is only indicative of the person upon whom the burden of proof initially lies and rests. A rebuttable presumption is clearly distinct from one which is conclusive in character. Under a rule of rebuttable presumption all that a person is obliged to do is to establish by way of evidence that the real fact is not as presumed. The character of the burden of proof placed upon the party has been described by the Supreme Court by the use of the words "fairly and reasonably tending to show". It has then been explained that if the evidence tendered tends to show that the real fact is not as presumed, the purpose of the statutory presumption is over and it is then for the party concerned by way of evidence to establish the true nature of the fact. The respondents in the present case had before them not just the invoices of sale executed by the revisionist in favour of Motor and General Sales Limited but also the delivery and sale invoice executed in favour of Naseem Ahmad. These documents evidenced a sale by way of hire purchase outside the State of U.P. The documents and evidences so led clearly tended to dislodge the rebuttable presumption raised. Whether the test of "tending to show" is applied or the test of "preponderance of probability", it is apparent that the presumption raised against the revisionist stood clearly discharged. In the opinion of this Court the evidence led before the respondents was clear and convincing and worthy of being placed in the category of evidence which fairly and reasonably showed that the real fact was not as presumed.
It becomes pertinent to note here that the department does not rely upon or rest its case against the revisionist upon any other independent material or evidence.
Additionally, this Court finds merit in the submission of Sri Agarwal who relying upon the principles enunciated by the Supreme Court in Asea Brown Boveri submitted that the owner of the vehicle was for all practical purposes Naseem Ahmad and that therefore the levy of tax and imposition of penalty was clearly unjustified. The Supreme Court in Asea Brown Boveri held as under:
"In our opinion, financial lease is a transaction current in the commercial world, the primary purpose whereof is the financing of the purchase by the financier. The purchase of assets or equipments or machinery is by the borrower. For all practical purposes, the borrower becomes the owner of the property inasmuch as it is the borrower who chooses the property to be purchased, takes delivery, enjoys the use and occupation of the property, bears the wear and tear, maintains and operates the machinery/equipment, undertakes indemnity and agrees to bear the risk of loss or damage, if any. He is the one who gets the property insured. He remains liable for payment of taxes and other charges and indemnity. He cannot recover from the lessor, any of the above mentioned expenses. The period of lease extends over and covers the entire life of the property for which it may remain useful divided either into one term or divided into two terms with clause for renewal. In either case, the lease is non-cancellable." (emphasis supplied) Whether Naseem Ahmad is treated to be the owner of the vehicle for all practical purposes or is viewed as the person in charge of the vehicle, the liability of tax and penalty foisted upon the assessee is unjustified and cannot be sustained.
Accordingly, these revisions shall consequently stand allowed. The orders of the authorities below are set aside. The questions are answered in favor of the assessee.