A. Banerji, J.
1. This is a reference under the Sales Tax Act. In this reference the following question has been referred to this court:
Whether, on the facts and circumstances of the present case, the transactions of cotton yarn in question are inter-State transactions and are exempt from sales tax?'
2. The facts of the case briefly stated are as follows:
3. The petitioner M/s. Raza Textile Limited (hereinafter referred to as the assessee) manufactures cotton, hosiery, mosquito nets, etc., at Rampur. For the assessment year 1961-62 a dispute arose as to whether the assessee made an inter-State sale of cotton yarn amounting to Rs. 22,11,171.34. The case of the assessee was that the sales had not taken place at Rampur but had taken place at Delhi and the sales were made through one Messrs. Rama Shanker Company of Delhi. The case for the revenue was that there was no inter-State sale and the alleged sales at Delhi were a colourable transaction and the goods were actually sold in U.P. It was further alleged by the revenue that the assessee had taken such a stand to evade tax.
4. The case of the assessee was not accepted by the assessing authority who imposed the tax of Rs. 44,223.44 on the turnover of Rs. 22,11,171.34, the alleged sale in favour of Messrs. Rama Shanker Company of Delhi.
5. The assessee filed an appeal and the appellate authority by its order dated 19th May, 1967, allowed the appeal and set aside the assessment made by the Sales Tax Officer, Rampur. The appellate authority held that the sales were made in Delhi.
6. The Commissioner of Sales Tax thereafter filed a revision before the revisional authority and urged that the sales were not made in Delhi for the motor trucks in which the goods were alleged to have been loaded never crossed over to Delhi and, as such, the goods never left the territorial limits of U.P. The case for the revenue was further that these trucks in which goods were loaded in Rampur had not even passed through the towns of Moradabad, Hapur and Ghaziabad and no entry of carrying cotton yarn was to be found in the, municipal records or at the octroi barriers. The revisional authority largely depended upon the report filed by the Sales Tax Officer, Special Investigation Branch (STO/SIB). The revisional authority held that the yarn was sold in U.P. and the assessee was liable to tax at 2 per cent on the turnover of Rs. 22,11,171.34. Consequently, he allowed the revision and reimposed the tax of Rs. 44,223.44. The assessee aggrieved by the above order made an application under Section 11(1) of the U.P. Sales Tax Act for a reference to the High Court.
7. By an order dated 29th December, 1971, the Additional Judge (Revisions), Sales Tax, has referred the question mentioned above.
8. It would thus be seen that while the contention of the assessee has been that the sales did not take place in U.P. and, as such, he was exempt from payment of U.P. sales tax on the sale of the cotton yarn in dispute, the case of the revenue was that the sales had taken place in U.P. and, as such, the assessee was not entitled to the exemption of sales tax. The assessee sought exemption on the ground that there was an inter-State sale of cotton yarn through Messrs. Rama Shanker of Delhi and, as such, he was not liable to pay any sales tax. The stand taken by the revenue, on the other hand, is that since the alleged sales did not take place in Delhi it should be presumed that the sales took place in U.P. and, consequently, the assessee was liable to pay sales tax as determined by the Sales Tax Officer.
9. The assessee's case was that under an agreement the assessee was bound to sell all cotton yarn produced by it to Messrs. Rama Shanker of Delhi and in pursuance of that agreement the assessee despatched bales of cotton yarn from time to time to the Delhi party by road. The Sales Tax Officer, Special Investigation Branch, conducted an enquiry and found that the trucks in which the cotton yarn was alleged to have been despatched never passed through barriers of various towns which are en route from Rampur to Delhi. The assessee explained that as the transport company had a road permit valid for U.P. only the goods were unloaded at the barriers and reloaded in other trucks having transport permit for Delhi and it was for this reason that the trucks in which the goods were originally loaded did not reach Delhi. This explanation was not accepted by the revising authority and he held that the goods in question never reached Delhi territory.
10. The finding that the cotton yarn in question never reached Delhi is a finding of fact and no question has been referred to us as to whether this finding is without any material. As such, we have to accept this finding. But that does not resolve the controversy. The next question which immediately arises is as to whether there is any evidence to show that the cotton yarn in question was sold in U.P. The tax under the U.P. Sales Tax Act is leviable only when a sale inside the State takes place and it is not an inter-State sale as defined in Section 3 of the Central Sales Tax Act. Onus lies on the department to prove it. In the instant case, the assessee had denied the sale of cotton yarn in U.P., his case being that all cotton yarn produced by it was to be sold to the Delhi dealer under an agreement of selling agency. When the department did not accept the sale of cotton yarn in Delhi, it was incumbent upon it to prove that the sale took place in U.P. The department does not seem to have addressed itself to this question at all. There is no finding as to when, where and to whom the sale was made. A sale in U.P. cannot be presumed if it is denied. It must be proved by evidence and relevant material. This has not been done in the present case. The question that really arose in this case was not whether there was any inter-State sale, but whether there was any sale in U.P. The question which has been referred to us is not the question which really arises in the case. We, therefore, reframe the question as under:
Whether, on the facts and in the circumstances of the case, the turnover of cotton yarn in dispute was liable to tax under the U.P. Sales Tax Act
11. Since there is no material whatsoever for a finding that the cotton yarn in question was sold in U.P., the question as reframed by us has to be answered in the negative in favour of the assessee and against the department.
12. The assessee is entitled to costs which we assess at Rs. 100.