Full Judgment Text
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PETITIONER:
SODHI TRANSPORT CO. & ANR. ETC. ETC.
Vs.
RESPONDENT:
STATE OF U.P. & ANR. ETC. ETC.
DATE OF JUDGMENT20/03/1986
BENCH:
VENKATARAMIAH, E.S. (J)
BENCH:
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 checkposts 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
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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
JUDGMENT:
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
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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.
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[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
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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
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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)
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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
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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
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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
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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
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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
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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
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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
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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
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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."
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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.
961