SRINIVASA TRADERS Vs. COMMERCIAL TAX OFFICER CHINTAMANI CIRCLE

JUDGEMENT

(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 Committiees 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 chargable 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 lthe 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 assessee-firm and not on the assessing authority, as is being claimed. I have to mention here that the assessee-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.