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Srinivasa Traders and ors. Vs. Commercial Tax Officer, Chintamani Circle and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberWrit Petition Nos. 5031 to 5034 of 1975, 3124, 3125, 5734 and 5735 of 1977, 13978 of 1978, 137 of 19
Judge
Reported inILR1985KAR1179; [1985]58STC343(Kar)
ActsKarnataka Sales Tax Act, 1957 - Sections 6-A, 6-A(2), 12(3) and 12-B(4); Central Sales Tax Act of 1956 - Sections 15; Karnataka Sales Tax Rules, 1957 - Rule 16
AppellantSrinivasa Traders and ors.
RespondentCommercial Tax Officer, Chintamani Circle and ors.
Appellant AdvocateK. Srinivasan, Adv.
Respondent AdvocateS. Rajendra Babu, Government Adv.
Excerpt:
- labour & services section 4(6): [s. abdul nazeer, j] statutory liability of the employer to pay gratuity - held, the act is enacted for introducing a scheme for payment of gratuity for certain industrial and commercial establishments as a measure of social security. it is a beneficent piece of social legislation expressly drafted in the interest of employees for payment of statutory gratuity to them. gratuity is a retirement benefit for long and continuous service as a provision for old age. it is earned as a matter of right subject to fulfilling the conditions therefor. section 4 of the act prescribes the statutory liability of the employer to pay gratuity and the right of the employee to seek it whenever it becomes payable. it is only under sub-section (6) of section 4 that the.....orderputtaswamy, j.1. what is the true scope and ambit of section 6-a of the karnataka sales tax act of 1957 (karnataka act 25 of 1957) ('the k. s. t. act') and whether that provision violates article 286 of the constitution and section 15 of the central sales tax act of 1956 (central act no. 74 of 1956) ('the c.s.t. act') are the twin questions that arise for determination in these cases. 2. in order to appreciate those questions and certain other cognate questions raised in the writ petitions, it is necessary to notice the facts in writ petition no. 5031 of 1975 in some detail and the facts in the other cases, in general. 3. m/s. srinivasa traders of gulur, kolar district, the petitioner in writ petition no. 5031 of 1975, a firm of partners, is engaged in the business of purchase and.....
Judgment:
ORDER

Puttaswamy, J.

1. What is the true scope and ambit of section 6-A of the Karnataka Sales Tax Act of 1957 (Karnataka Act 25 of 1957) ('the K. S. T. Act') and whether that provision violates article 286 of the Constitution and section 15 of the Central Sales Tax Act of 1956 (Central Act No. 74 of 1956) ('the C.S.T. Act') are the twin questions that arise for determination in these cases.

2. In order to appreciate those questions and certain other cognate questions raised in the writ petitions, it is necessary to notice the facts in Writ Petition No. 5031 of 1975 in some detail and the facts in the other cases, in general.

3. M/s. Srinivasa Traders of Gulur, Kolar District, the petitioner in Writ Petition No. 5031 of 1975, a firm of partners, is engaged in the business of purchase and sale of groundnuts and oil-seeds. The petitioner is a 'registered dealer' under both the State and the Central Acts on the file of the Commercial Tax Officer, Chintamani Circle, Chintamani ('C.T.O.'). For the period from 1st January, 1974 to 31st December, 1974 the petitioner filed two returns under the K. S.T. and C.S.T. Acts before the C.T.O. on 27th January, 1975 disclosing various turnovers under different heads claiming various exemptions. The C.T.O. called upon the petitioner to produce its books of account on 19th May, 1975 for examination. Petitioner did not comply. In that view, on 16th June, 1975 the C.T.O. under sections 12(3) and 12-B(4) of the K.S.T. Act and rule 16 of the Karnataka Sales Tax Rules of 1957 ('the Rules'), issued a proposition notice in form No. 31-A setting out the reasons for the best judgment assessment proposed by him. In response, the petitioner filed its objections/reply before the C.T.O. and produced the books of account on 26th June, 1975. In so far as on the purchase turnover of Rs. 4,11,535 with which alone we are precisely concerned, the petitioner asserted thus :

'So far as the levy of purchase tax of groundnuts amounting to Rs. 4,11,535, we wish to submit that we are not the first purchasers within the State of Karnataka. We are only the subsequent purchasers within the State. The charge under the Karnataka Sales Tax Act is on the first purchase and the burden of proving that we are the first purchasers is on the assessing authority. Unless this burden is discharged no purchase tax can be levied. We cannot be deemed to be the first purchasers.'

Before the C.T.O. as also before this Court, the petitioner has claimed, that it had purchased the goods from unregistered sellers who represented themselves as agriculturists or from the commission agents of the Agricultural Produce Market Committees of the area, who refused to issue declarations under the Act and the Rules. On this plea, the petitioner did not produce any evidence to exempt it from payment of tax on the said turnover under the Act. On an examination of this plea and the books of account produced, the C.T.O. by his assessment order dated 10th July, 1975 found that the petitioner has not discharged the burden placed on it under section 6-A(2) of the Act and therefore, rejected the same and brought the said sum to tax at the rates chargeable thereto under the Act (exhibit A) by expressing thus :

'It is argued that so far as the levy of purchase tax on the groundnuts amounting to Rs. 4,11,535.00 they are not the first purchasers within the State. They say that they are subsequent purchasers and the burden of proving that this firm is the first purchaser is on the assessing authority. It is relevant to mention here that as per section 6 the burden of proving that any transaction or any turnover of a dealer is not liable to tax shall be on such dealer. Further, a dealer in any of the goods liable to tax in respect of the first sale or the first purchase in the State shall be deemed to be first sellers or first purchasers, as the case may be, of such goods and shall be liable to pay tax accordingly on his turnover of sales and purchases relating to such goods, unless he proves that the sale or purchase as the case may be, of such goods had already suffered tax under the Act. This makes it abundantly clear that the burden of proof lies in this case on the assesses firm and not on the assessing authority, as is being claimed. I have to mention here that the assesses firm have not produced any proof to the effect that they are subsequent purchasers of groundnuts and groundnut seeds. Moreover, they have admitted liability to tax on purchase of groundnuts as first dealer in the return and paid tax thereon.'

In Writ Petition No. 5031 of 1975, the petitioner has challenged the said assessment order of the C.T.O. inter alia contending (i) that section 6-A(2) of the Act was beyond the legislative competence of the State Legislature; (2) that rule 26(9)(a) of the Rule was not for purposes of the Act and was ultra vires of the same and (3) that, if the construction suggested by it on section 6-A(2) was not accepted, then the same was violative of article 286 of the Constitution and section 15 of the C.S.T. Act.

4. All the other petitioners are also registered dealers under both the Acts on the files of the respective assessing authorities.

(i) Petitioners in Writ Petitions Nos. 5032 to 5034 of 1975, 5734, 5735 of 1977 and 137 of 1979 are dealers in groundnuts, oil and other seeds.

(ii) Petitioners in Writ Petitions Nos. 13978 of 1978 and 15899 to 15903 of 1983 are dealers in cardamom.

(iii) Petitioner in Writ Petitions Nos. 3124 and 3125 of 1977 is a dealer in coconuts who has challenged the proposition notices issued against it by the assessing authority under the Act.

(iv) Except the petitioner in Writ Petitions Nos. 3124 and 3125 of 1977, all other petitioners have challenged the respective assessment orders made against them. But, all of them have challenged the assessment orders or proposition notices, as the case may be, on grounds raised and contentions urged in Writ Petition No. 5031 of 1975.

(v) In Writ Petitions Nos. 15899 to 15903, the petitioners while challenging the assessment orders made against them, have also sought for striking down section 6-A(2) of the Act and rule 26(9)(a) of the Rules.

5. In a common return filed in Writ Petitions Nos. 5031 to 5034 of 1975 and in the separate but similar returns-filed in Writ Petitions Nos. 3124 and 3125 of 1977, the respondents have refuted the contentions urged by the petitioners. Respondents have justified the proceedings and the assessments.

6. Before we deal with the principle contention urged by Sri K. Srinivasan, learned counsel for the petitioners, we consider it proper to deal with a preliminary objection urged by Sri S. Rejendra Babu, learned Government Advocate, to examine the validity of section 6-A(2) of the Act and rule 26(9)(a) of the Rules and three contentions urged by the petitioners in their writ petitions, which however were not pressed at the hearing.

7. Sri Babu has urged that in all those cases in which the petitioners had not sought for striking down section 6-A(2) of the Act and rule 26(9)(a) of the Rules, this Court cannot examine their validity.

8. Except in Writ Petitions No.15899 to 15903 of 1983, the other petitioners have not sought for striking down section 6-A(2) of the Act and rule 26(9)(a) of the Rules. But, in all the cases, the petitioners have formulated common grounds of challenge to the very provisions and their failure in the other cases to incorporate a specific prayer, though regrettable, had not taken the respondents by surprise of the grounds and had not caused them any prejudice. We, therefore, rejected this objection urged by Sri Babu at the hearing and permitted the concerned petitioners to urge this ground. We, however, emphasise the necessity to seek for appropriate declarations to avoid such objections and enable this Court to accurately mould the reliefs to be granted.

9. The petitioners have urged that section 6-A(2) of the Act was beyond the legislative competence of the State Legislature. But, none of them have elaborated the same and the same was not rightly pursued by their learned counsel also.

10. Section 6-A(2) of the Act is only a machinery provision. The power to make a law for levy of tax on sales and purchases is derived from article 246 of the Constitution read with entry No. 54 of the State List of the Seventh Schedule to the Constitution. That power comprehends in itself the power to enact all incidental and ancillary provisions including machinery provisions for levy and recovery of those taxes. We see no merit in this contention of the petitioners and reject the same.

11. The petitioners have urged that section 6-A(2) of the Act was violative of article 19(1)(g) of the Constitution. But, even here, the petitioners have not elaborated them and the same was not also pursued at the hearing.

12. Article 19(1)(g) of the Constitution does not guarantee immunity from taxation. The power of taxation available to the State comprehends in itself the power to make necessary machinery provisions. We see no merit in this contention of the petitioners and reject the same.

13. The petitioners have challenged the validity of rule 26(9)(a) of the Rules which reads thus :

'26. Nature of accounts to be maintained by dealer and licensees .......

(9)(a) Every dealer in goods taxable at the point of first sale or first purchase in the State, shall, where he is not liable to tax in respect of such goods by reason of his not being the first seller or the first purchaser, furnish to the assessing authority a declaration in form 32 obtained from the registered dealer who sold the goods to him and for this purposes, the seller of each goods shall issue the declaration to the buying dealer.'

This rule requires a 'dealer', which term is exhaustively defined in section 2(k) of the Act, at the point of first sale or purchase in the State, if he is not liable to tax by reason of his not being the first seller or purchaser to furnish a declaration in form No. 32 to the assessing authority under the Act.

14. Section 38(1) of the Act empowers Government to make rules to carry out the purposes of the Act. The power conferred by section 38(1) is in general terms. Section 38(2) empowers Government to make rules on certain matters specified therein which are all for purposes of the Act.

15. Rule 26(9)(a) clearly falls within the scope of the matters specified in section 38(2)(j-2), (k) and (1) of the Act. Even otherwise, the rule has been framed by Government to carry out the purpose of the Act and is intra vires of the Act. We see no merit in this challenge of the petitioners which was not also pursued at the hearing. We, therefore, reject the same.

16. Sri Srinivasan has urged that the burden of proof on every taxable transaction including all first purchases from unregistered dealers or legal burden to tax was always on the Revenue and the same never shifts on the assessee even under section 6-A(2) of the Act, as ruled by Malimath, J. (as his Lordship them was), in B. J. Jeevandriah v. state of Mysore [1975] 35 STC 104.

17. Sri Babu in refuting the contention of Sri Srinivasan has urged that the construction placed by Venkataramiah, J. (as His Lordship then was), on section 6-A(2) of the Act in Sha Pannalal Pemraj & Co. v. Commercial Tax Officer, Hassan Circle, Hassan [1975] 35 STC 109; (1975) 1 Kar LJ 350 was the correct construction.

18. The term 'burden of proof', on the import of which there is considerable controversy [vide Articles on 'Burden of proof and the judicial process' (60 LQR 262) and 'Presumptions and burdens' (61 LQR 379, 62 LQR 135 and 12 MLR 273)] with which aspect, it is unnecessary to focus our attention, we consider it useful to briefly notice as to how that concept itself is dealt in the general law of our country.

19. In our country the law of evidence has been codified in the Indian Evidence Act (Act 1 of 1872) ('the Code'). The Code virtually reproduces the principles of law of evidence that was then prevailing in England (vide AIR 1961 SC 526).

20. Part III of Chapter VII of the Code deals with 'the Burden of proof'. Section 101 of the Code defines the term 'burden of proof' thus :

'101. Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.

When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.'

On the scope and ambit of that provision Sarkar states thus :

'Principle and scope : This section is based on the rule, ei incumbit predations qui dicit, non qui negate - the burden of proving a fact rests on the party who substantially asserts the affirmative of the issue and not upon the party who denies it; for a negative is usually incapable of proof. 'It is an ancient rule founded on consideration of good sense and should not be departed from without strong reasons' (per Lord Maugham in Constantine Line v. I. S. Corporation 1941 2 All ER 165, 179). This rule is derived from the Roman Law, and is supportable not only upon the ground of fairness, but also upon that of the greater practical difficulty which is involved in proving a negative than in proving an affirmative (Hals. 3rd Ed., Vol. 15, para 488).'

Sections 102 to 104 elaborate the same. Section 105 that deals with the burden of proving that the case of an accused comes within the exception of law, is not material for our purpose. But, section 106 that deals with the burden of proving a fact especially within the knowledge of a person, which is material reads thus :

'106. When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him.'

On the scope and ambit of this section, Sarkar states thus :

'Principle and scope : This section like the preceding one, states an exception to the general rule laid down in section 101, that the burden of proving a fact rests on the party who substantially asserts the affirmative of the issue. Section 106 is not intended to relieve any person of that duty or burden. It says that when a fact to be proved (whether affirmative or negative) is peculiarly within the knowledge of a party, it is for him to prove it. It embodies the rule states in Taylor, section 379 thus : 'The second expression (to the abovenamed general rule) is thus, that where the subject-matter of the allegation lies peculiarly within the knowledge of one of the parties, the party must prove it, whether it be of an affirmative or a negative character, and even though there be a presumption of law in his favour (Diskson v. Evans 6 TR; R. v. Turner 5 M & Sel 206) :' Thus, when an action for penalties was brought, under an old statute against a person for practising as an apothecary without a certificate, the plaintiff would, independent of this exception, have been bound to prove the want of a certificate, for first, though the allegation was in a negative form, its proof was essential to the plaintiff's case; and next, the law might fairly presume that the defendant would not transgress the provision of a statute; still, as the defendant was peculiarly cognisant of the fact, whether or not he had obtained a certificate, and if he had obtained one, could have no difficulty in producing, it, the law, which is founded on general convenience, compelled him to do so (Apoth Co. v. Bentley 1824 Ry & M 159).'

21. In H. E. H. Nizam's Religious Endowment Trust, Hyderabad v. Commissioner of Income-tax, Andhra Pradesh, Hyderabad : [1966]59ITR582(SC) and Lakshmiratan Cotton Mills Co. Ltd. Kanpur v. Commissioner of Income-tax, U.P. : [1969]73ITR634(SC) , the Supreme Court has applied the above principles to proceedings arising under the Income-tax Act.

22. On the burden of proof and the rule of exception incorporated in section 106 of the code, Taylor in his classic treatise on the 'Law of Evidence' (Eleventh Edition published in 1920) states thus :

'364. A THIRD RULE, which governs the production of evidence, is, that the burden of proof lies on the party who substantially asserts the affirmative of the issue. This rule of convenience, which in the Roman Law is thus expressed, ei incumbit probations qui dicit, non qui negate, has been adopted in practice, not because it is impossible to prove a negative, but because the negative does not admit of the direct and simple proof of which the affirmative is capable and moreover, it is but reasonable and just that the suitor who relies upon the existence of a fact, should be called upon to prove his own case. In the application of this rule, regard must be had to the substance and effect of the issue, and not to its grammatical form; for in many cases the party, by making a slight alteration in the drawing of his pleadings, may give the issue a negative or affirmative form, at his pleasure. (vide para 364 at page 273)

* * * 376. In several of the instances above given, the Legislature has adopted a principle which the common law also recognises, and which may here be noticed as a second exception to the general rule, that the burden of proof lies on the party who substantially alleges the affirmative. The exception is this, that where the subject-matter of the allegation lies peculiarly within the knowledge of one of the parties, that party must prove it, whether it be of an affirmative or a negative character, and even though there be a presumption of law in his favour. Thus, where an action for penalties was brought, under the old law against a person for practising as an apothecary without a certificate, the plaintiff would, independent of this exception, have been bound to prove the want of a certificate; for first, though the allegation was in a negative form, its proof was essential to the plaintiff's case; and next, the law might fairly presume that the defendant would not transgress the provisions of a statute; still, as the defendant was peculiarly cognisant of the fact, whether or not he had obtained a certificate, and if he had obtained one, could have no difficulty in producing it, the law, which is founded on general convenience, compelled him to do so.' (vide para 376 at pages 284 and 285)

On the same subject Phipson on 'Evidence' (Twelfth Edition) states thus :

'91. The burden of proof lies upon the party who substantially asserts the affirmative of the issue.

Principle :- The burden of proof in any particular case depends on the circumstances in which the claim arises. In general the rule which applies is ei qui affirmative non ei qui negate incumbit probations. It is an ancient rule founded on considerations of good sense and should not be departed from without strong reasons, per Lord Maugham in Constantine Line v. Imperial Smelting Corporation [1942] AC 154, 174. This rule is adopted principally because it is but just that he who invokes the aid of the law should be the first to prove his case; and partly because, in the nature of things, a negative is more difficult to establish than an affirmative ............

92. Meaning and scope of rule : As applied to judicial proceedings the phrase 'burden of proof' has two distinct and frequently confused meanings : (1) the burden of proof as a matter of law and pleading - the burden, as it has been called, of establishing a case, whether by preponderance of evidence or beyond a reasonable doubt; and (2) the burden of proof in the sense of adducing evidence.

(1) Burden of proof on the pleadings. The burden of proof, in this sense, rests upon the party, whether plaintiff or defendant, who substantially asserts the affirmative of the issue. It is fixed at the beginning of the trial by the state of the pleadings, and it is settled as a question of law, remaining unchanged throughout the trial exactly where the pleadings place it, and never shifting in any circumstances whatever. If, when all the evidence, by whomsoever introduced, is in, the party who has this burden has not discharged it, the decision must be against him .........

* * * (1) The effect of statutory provisions upon the burden of proof :

106. (a) Where a statute expressly casts the burden upon the defendant. The Legislature has in many cases relieved the prosecution of its original onus by casting the proof of authority, consent, lawful excuse, etc., upon the defendant. Instances of this have already been cited. Further examples are the Explosive Substances Act, 1883, s. 4; Coinage Offences Act, 1936, ss.6(1), 7(1), 8, 9, 10; Food and Drugs Act, 1955, ss. 6, 115.

It is now usual to find a provision, as to statutory offences, that where a body corporate commits an offence, directors and other officers of that body are also liable unless such persons prove that the offence was committed without their knowledge and that they have been reasonably diligent, having regard to their positions and the circumstances of the case.'

Halsbury's Laws of England, Fourth Edition, Vol. 17, explains the meaning and general incidents of burden of proof in these words :

'13. Meaning and general incidence of the burden of proof : There are at least two distinct senses in which burden of proof is used, and charity over which sense is relevant at any given time is essential. The legal burden is the burden of proof which remains constant throughout a trial; it is the burden of establishing the facts and contentions which will support a party's case. If at the conclusion of the trial he has failed to establish these to the appropriate standard, he will lose. The incidence of this burden is usually clear from the pleadings, it usually being incumbent upon the plaintiff to prove what he contends. The evidential burden, however, may shift from one party to another as the trial progresses according to the balance of evidence given at any particular stage; this burden rests upon the party who would fail if no evidence at all, or no further evidence, as the case may be, was adduced by either side.'

On the same subject J. B. Thayer in his 'Preliminary treatise on evidence at the common law' states thus :

'(i) The peculiar duty of him who has the risk of any given proposition on which parties are at issue, who will lose the case if he does not make this proposition out, when all has been said and done; (ii) the duty of going forward in argument or in producing evidence, whether at the beginning of a case, or any later moment throughout the trial or discussion.' (vide page 67 'Evidence by Cross', Third Edition)

With this general legal back drop of the 'burden of proof' it is first necessary to notice the rules of construction that should guide the construction of section 6-A(2) of the Act.

23. A machinery provision in a fiscal statute should be so interpreted as to make the charging provision of that statute effective is well-settled.

24. In C. Arunachalam v. Commissioner of Income-tax ILR (1984) 2 Kar 1387 (FB), a Full Bench of this Court, as late as on 26th October, 1984 in interpreting the scope and ambit of section 64 of the Income-tax Act, 1961 noticing all the important cases and text books, has explained the principles of construction in these words :

'11. We shall presently consider these decisions, but before we do so, it will help the exposition which follows, if we explain the Court's functions with respect to statutes lumping under the single term 'interpretation'. We know of no statute which merely declares a rule, with no purpose or objective behind. Every statute whether addressed to individuals or institutions has an aim and purpose. That could be gathered only by a rational study of the law. The rational study of law is to a large extent, the study of its history or the path of the law. History must be a part of the study because without it, we cannot know the precise scope of rules we cannot find out why a rule of law has taken its particular shape. Such a study should be the first step towards an enlightened scepticism.

In every country and more so in a developing country the old laws yield place to new and so too the creative powers of Courts in the art of interpretation of statutes. The strict constructions which go by the letter of law dominated the legal scene in the 19th Century. The strict constructionists stood by the 'golden rule' laid down in Grave v. Barrison (1857) 6 HL Cas 61. The Lord Chancellor said there, that Court should 'adhere as rigidly as possible to the express words that are found and to give those words their natural and ordinary meaning.' But, the modern trend has been not all that way. The art of interpretation has undergone modification. The Courts now look to the purpose or intend; scheme or design of the legislation and add its own contribution by filling in gaps.

Professor Reed Dickerson in his book 'The interpretation and application of statutes' (at page 15) :

'.............. Whether the statute is clear or obscure, whether or not it adequately resolves the current issue, and whether it can be applied as it came from the legislative oven or must be remoulded, the Court should first examine it in its proper context to discover, if possible, what it most probably means. Then, after measuring the legislative contribution, the Court, where necessary, may add its own contribution.' 'A judge should not be a servant of the words' says Lord Denning (The Discipline of Law, page 56) and he went of to add, 'The Judges should not be a mere mechanic in the power house of semantics. He should be a man in charge of it.' In his recent book 'The Closing Chapter', Lord Denning has something more to state (at page 98) :

'Look at the spirit': During the last 50 years 'golden rule' has been abandoned. The Judges always say that they look for the 'Intention' of the Legislature. That is the same thing as looking for its 'purpose'. They do it in this way; they go by the words of the section. If they are clear and cover the situation in hand, there is no need to go further. But, if they are unclear or ambiguous or doubtful, the Judges do not stop at the words of the section. They call for help in every direction open to them. They look at the statute as a whole. They look at the social conditions which gave rise to it. They look at the mischief which it was passed to remedy. They look at the 'factual matrix.' They use every legitimate aid. By this means they clear up many things which would be unclear or ambiguous or doubtful.' This is how the Courts with their creative powers have recently responded to what we may call it a ground clearing exercise where the words of a statute are not so plain and unambiguous. To put it shortly, the Judges should not follow a blinkered way to lay down the law. They should use their hindsight as well.

So far as the fiscal statutes are concerned, we must remember one more principle. The provisions in a fiscal statute are not to be so construed as to furnish a chance of escape and a means of evasion. In case of doubt, the fiscal statute should be construed in favour of and beneficial to the subject.'

25. The Karnataka Sales Tax (Amandment) Act of 1963 (Karnataka Act 9 of 1964) that made a large number of amendments to the Act, by section 7 of that Act introduced section 6-A, which reads thus :

'6-A. Burden of proof. - (1) For purposes of assessment of tax under this Act, the burden of proving that any transaction or any turnover of a dealer is not liable to tax shall lie on such dealer.

(2) Notwithstanding anything contained in this Act or in any other law, a dealer in any of the goods liable to tax in respect of the first sale or first purchase in the State shall be deemed to be the first seller or first purchaser, as the case may be, of such goods and shall be liable to pay tax accordingly on his turnover of sales or purchases, relating to such goods, unless he proves that the sale or purchase, as the case may be, of such goods had already been subjected to tax under this Act.'

Section 6-A introduced by section 7 of the Amending Act came into force on 27th February, 1964 [vide section 1(2) of the Karnataka Act 9 of 1964].

26. Section 6-A is only a machinery provision and is not a charging provision.

27. Section 6-A(1) on which there is no controversy, provides that whoever claims that any transaction or any turnover was not liable to tax, the burden of proving the same was on such dealer. The burden of proving the exemption under the Act was on the person claiming such exemption and not on the Revenue.

28. Sub-section (2) declares that notwithstanding anything contained in all other provisions of the Act or any other law, a dealer in any of the goods liable to tax in respect of the first sale or first purchase in the State shall be deemed to be the first seller or first purchaser as the case may be of such goods and shall be liable to pay tax accordingly on his purchase and turnover relating to such goods, unless he proves that the sale or purchase as the case may be of such goods had already been subjected to tax under the Act. A dealer who claims that he is the second purchaser or seller and not the first purchaser or seller of declared goods and claims exemption from payment of purchase tax or sales tax under the Act has to prove that those goods had already been subjected to payment of tax under the Act. The exemption claimed under the Act by the dealer on the ground that he was the second purchaser or second seller can be allowed only if he proves that such goods had already been subjected to tax and not otherwise. But, when the dealer does not prove the same, he is treated as the first seller or first purchaser and is made liable to pay tax on those purchases or the sales as is the case.

29. Section 6-A(2) has direct nexus with the C.S.T. Act and the restrictions placed by that Act on the taxing power of the States on declared goods, subject to a single point levy and at a rate not exceeding the maximum rate stipulated by section 15 of that Act. After all, it is almost impossible for any authority under the Act to prove that the purchase or sale by a dealer was the first, second or subsequent purchase or sale. We are of the view that section 6-A(2) of the Act has been enacted only to avoid evasion of taxes under the Act by a dealer on a specious or a very convenient plea that he was the second purchaser or seller.

30. We are of the view that what has been incorporated in section 6-A(2) is in accord with the well-recognized principles of burden of proof recognised by our Supreme Court in taxation provisions noticed by us earlier.

31. In Jeevendriah's case [1975] 35 STC 104, this Court was primarily concerned with the true scope and ambit of section 6-A(1) and not section 6-A(2). But, having so held, Malimath, J. (as his Lordship then was), however expressed on the scope and ambit of section 6-A(2) in these words :

'Sub-section (2) of section 6-A provides that a dealer in any of the goods liable to tax in respect of the first sale or first purchase in the State shall be deemed to be first seller or first purchaser, as the case may be, of such goods and shall be liable to pay tax accordingly on his turnover of sales or purchases, relating to such goods. But, the assessee can rebut that presumption by proving that the sale or purchase, as the case may be, of such goods had already been subjected to tax under the Act.'

We are of the opinion that this observation of His Lordship, with respect, is only a casual observation and is not a pronouncement or declaration of the law.

If it declares the law on the point, it must, with great respect, be said that it states the proposition too broadly and does not, in our opinion, accord with the true scope and ambit of section 6-A(2) of the Act.

32. In Sha Pannalal Pemraj and Company's case [1975] 35 STC 109, Venkataramiah, J. (as his Lordship then was), expressed thus :

'15. It is lastly urged by Sri Srinivasan relying upon a decision of Malimath, J., in B. J. Jeenvendriah v. State of Mysore [1975] 35 STC 104, W.P. No. 2023 of 1971 and connected writ petitions, decided on 9th November, 1973 that sub-section (2) of section 6-A should receive the same interpretation placed by his Lordship on sub-section (1) of section 6-A of the Act, namely, that whereas the burden of proving necessary ingredients regarding the liability of a dealer is always on the Revenue, the onus of certain special facts exclusively within the knowledge of the assessee to claim the benefit of any exemption under the statute is alone on the assessee. I do not think that such a construction can be placed on sub-section (2) of section 6-A. Sub-section (2) of section 6-A clearly states that in the absence of any acceptable evidence adduced on behalf of the dealer who is liable to pay tax on the first sale or first purchase, his turnover in respect of the declared goods in question should be presumed to be taxable under the relevant provisions of the statute. The authorities are bound to give effect to the said presumption while passing orders of assessment notwithstanding the fact that ordinarily the burden of proof regarding the liability of tax under a fiscal statute is on the revenue.'

But, it is urged by Sri Srinivasan that this decision is no longer good law as the same was not approved by the Division Bench in appeal filed against that decision since reported in [1976] 38 STC 350; (1976) 2 Kar LJ 139 (Sha Pannala Pemraj & Co. v. Commercial Tax Officer).

33. In the appeal filed by the petitioner, this Court expressed the view that the decision rendered by his Lordship on the validity of section 6-A(2) was unnecessary on the facts of that case and the same was therefore left open. We are of the view that the Division Bench had not dissented from the construction placed by Venkataramiah, J. (as his Lordship then was), on section 6-A(2) of the Act. In any event, it can only be taken that the Division Bench left the question open. We are however, of the opinion that the construction placed by Venkataramiah, J. (as his Lordship then was), which accords with what we have earlier expressed, is the correct view to take in the matter.

34. Sri Srinivasan contended that section 6-A(2) of the Act was violative of article 286 of the Constitution and section 15 of the C.S.T. Act. In support of his contention Sri Srinivasan has strongly relied on the ruling of the Supreme Court in Bhawani Cotton Mills Limited v. State of Punjab : [1967]3SCR577 .

Sri Babu has urged that section 6-A(2) does not contravene either article 286 of the Constitution or section 15 of the C.S.T. Act.

35. (i) Article 286 of the Constitution, on which reliance is placed reads thus :

'286. (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place -

(a) outside the State; or

(b) in the course of the import of, the goods into, or export of the goods out of, the territory of India.

(2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1).

(3) Any law of a State shall, in so far as it imposes, or authorises the imposition of a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify.'

As pointed out by the Supreme Court in Modi Spinning and Weaving Mills Co. Ltd., v. Commissioner of Sales Tax, Punjab : [1965]1SCR592 , article 286 of the Constitution only places certain restrictions on the taxing power of the State and does not completely destroy the taxing power to levy tax and make machinery provisions for levy and collection of taxes.

(ii) Section 6-A(2) does not purport to authorise levy of any tax on sales or purchases which take place outside the State or in the course of import or export of goods; nor does it purport to deem any such sale or purchase hit by article 286 to be an intra-State sale or purchase. The provision merely provides a rule of evidence to determine the nature of the transaction, it being always open to the assessee to show that the nature of the transaction is such or would fall under categories envisaged in article 286. The provision actually regulates the process by which a sale or purchase is to be determined as not partaking of the character of sales or purchases in the contemplation of article 286. This is not a contravention of article 286; but by implication is a process of ensurement of the conditions of that article.

(iii) On the above discussion, it follows that the contention of the petitioners that section 6-A(2) of the Act is violative of article 286 of the Constitution is without any merit.

36. Section 15 of the C.S.T. Act on which strong reliance was placed reads thus :

'15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. - Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely :-

(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent. of the sale or purchase price thereof, and such tax shall not be levied at more than one stage;

(b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, and tax has been paid under this Act in respect of the sale of such goods in the course of inter-State trade or commerce, the tax levied under such law shall be reimbursed to the person making such sale in the course of inter-State trade or commerce in such manner and subject to such conditions as may be provided in any law in force in that State.

(c) where a tax has been levied under that law in respect of the sale or purchase inside the State of any paddy referred to in sub-clause (i) of clause (i) of section 14, the tax leviable on rice procured out of such paddy shall be reduced by the amount of tax levied on such paddy;

(d) each of the pulses referred to in clause (vi-a) of section 14, whether whole or separated, and whether with or without husk, shall be treated as a single commodity for the purposes of levy of tax under that law.'

Section 15 which carries out the purposed of article 286 of the Constitution only places certain restrictions enumerated in that provision, one of them being that the rate of tax shall noe exceed the rates specified in that provision and such levy shall not be levied at more than one stage. Section 15(a) ensures that in the case of declared goods they should in all circumstances bear only a single burden at a specified stage and at the prescribed rate. In other words, the effect of the provisions of section 15(a) is that the State law cannot impose a sales or purchase tax on the sale inside the State at a rate higher than (now) four per cent. of the sale or purchase price and that it cannot be levied at more than one stage. We are therefore of the view that section 6-A(2) only regulates the burden of proof or mode of proof does not contravene section 15 of the C.S.T. Act.

37. In Kishan Chand v. Ram Babu : AIR1965All65 (FB) a Full Bench of the Allahabad High Court dealing with the power of the legislature to locate or shift the burden of proof has expressed thus :

'5. The power of a legislature to regulate the allocation of the burden of proof in the Courts is undisputed; see Smith v. California (1959) 4 Law Ed (2nd) 205. It is open to it to impose the burden of proving one fact upon one party and to shift the onus of subsequently proving another fact upon the other party.'

We are in respectful agreement with this statement of law. At the highest what has been done in section 6-A(2) is only to locate the burden, which is also in accord with the general law of the land.

38. In Bhawani Cotton Mills Limited's case : [1967]3SCR577 the facts in brief were these : An amendment made to the Punjab Sales Tax Act in 1958 levied tax on both purchases and sales on declared goods under the C.S.T. Act like cotton which was invalidated by the Punjab High Court. But, in a series of amendments made thereafter, the same was virtually sought to be maintained, the validity of which was again challenged by Bhavani Cotton Mills Limited as contravening section 15 of the C.S.T. Act, before the High Court, which rejected the same (vide pages 292-320). On appeal, the Supreme Court by majority disagreeing with the view expressed by the Punjab High Court, held that the amending provisions made to the Punjab Act were contrary to section 15 of the C.S.T. Act and were invalid. But, that is not the position here. Section 6-A(2) does not impose tax in excess of the rate provided by section 15 of the C.S.T. Act nor imposes tax on more than one occasion. Section 6-A(2) only provides for the mode of proof and the consequences flowing from such failure only. From this it follows that we cannot hold that section 6-A(2) of the Act contravenes section 15 of the C.S.T. Act. We are, therefore, of the view that the ratio in Bhavani Cotton Mills Limited's case : [1967]3SCR577 does not really bear on the point and assist the petitioners.

39. On the correctness of the assessments completed against the petitioners, no contention was urged before us. Even otherwise, we do not find any substantial ground to interfere with the assessments completed against the petitioners.

40. On the proposition notices challenged in Writ Petitions No. 3124 and 3125 of 1977, it is open to the petitioners in those cases to appear before the assessing authority and urge all such objections as are available to them except those matters that are concluded by our order. Before that there is no justification for us to interfere with them.

41. In the light of our above discussion, we dismiss these writ petitions and discharge the rule issued in all these cases. But, we however, grant three weeks' time from this day to the petitioners in Writ Petitions Nos. 3124 and 3125 of 1977 to file their objections, if any, to the proposition notices already received by them, if not already filed, except on matters that are concluded by our order and on such objections being filed or otherwise also, the assessing authority-respondent No. 2 in those writ petitions shall complete his proceedings with expedition in accordance with law and the observations made in this order.

42. Writ petitions are disposed of in the above terms. But, in the circumstances of the cases, we direct the parties to bear their own costs.

43. Let this order be communicated to the respondents within 10 days from this day.

Order on the oral applications made by the petitioners for certificate of fitness to appeal under articles 133 and 134-A of the Constitution and for stay.

1. After we pronounced our order dismissing these writ petitions, Sri S. G. Shivaram, learned counsel for the petitioners, makes oral applications seeking for a certificate of fitness to appeal to the Supreme Court of India under articles 133 and 134-A of the Constitution and for stay of the operation of our order for two months. Sri Shivaram urges that the questions raised and decided in these cases are substantial questions of law of general importance and they need to be decided by the Supreme Court of India.

2. Sri S. Rajendra Bahu, learned Government Advocate appearing for the respondents, opposes the applications.

3. We are of the view that the questions raised and decided in these cases are all concluded by the Supreme Court and do not involve substantial questions of law of general importance that needs to be decided by the Supreme Court. We, therefore, reject the applications made by the petitioners for the certificate of fitness to appeal to the Supreme Court.

4. We are of the view that these are not fit cases to stay the operation of our orders. We, therefore, reject the oral applications for stay of the operation of our orders.


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