1959 (11) TMI 49 - HC - VAT and Sales Tax

Issues Involved:
1. Whether an assessee dealing in hides and skins who has obtained a licence and paid a provisional fee can later refuse to pay the balance of the licence fee and insist on being treated as an unlicensed dealer.
2. Whether purchases made by the assessee from sellers in shandies without disclosed names and addresses can be treated as purchases from unlicensed dealers.

Detailed Analysis:

Issue 1: Refusal to Pay Balance Licence Fee and Treatment as Unlicensed Dealer
The court examined whether an assessee, after obtaining a licence and paying a provisional fee, could later refuse to pay the balance of the licence fee and insist on being treated as an unlicensed dealer. The assessee argued that he should be taxed as an unlicensed dealer because he had not paid the balance of the licence fee and did not maintain accounts as per the licence conditions. The court noted that the assessee had initially applied for and obtained a licence, intending to benefit from exemptions available to licensed dealers. The court emphasized that the scheme of the Madras General Sales Tax Act and the rules framed thereunder aimed to encourage dealers to apply for licences by offering various tax benefits.

The court held that once a dealer opts to be assessed under the licencing scheme, he cannot later change his mind and demand to be treated as an unlicensed dealer. The court stated, "Normally no man is allowed to benefit by his own default but with regard to a licence under the provisions of the taxing statute the only consequence contemplated by the default appears to be to tax him on the footing that he had not taken a licence at all and when the defaulter himself courts that consequence or penalty there seems to be no apparent reason why his fault should be condoned simply because he voluntarily prays for it."

The court further clarified that the statute provides for the cancellation of the licence or treating the dealer as an unlicensed dealer in case of non-compliance with the licence conditions, but this does not imply that the dealer has the option to be treated as an unlicensed dealer at his discretion. The court concluded that the assessee could not withdraw from the licencing scheme after having engaged in business under the licence terms.

Issue 2: Purchases from Unlicensed Dealers in Shandies
The court examined whether the purchases made by the assessee from sellers in shandies, whose names and addresses were not disclosed, could be treated as purchases from unlicensed dealers. The assessee contended that he should not be liable for sales tax on these purchases as they were made from unlicensed dealers. The Tribunal had given the assessee an opportunity to prove his claim but found that the assessee could not substantiate his purchases from unlicensed dealers.

The court noted that the onus of proof was on the assessee to establish that his purchases were from unlicensed dealers. The court stated, "It is well established that the onus is upon the person claiming the exemption." The court observed that merely establishing that purchases were made in shandies does not satisfy the requirement of proof for obtaining tax exemption. The court emphasized that both licensed and unlicensed dealers could operate in shandies, and it was incumbent upon the assessee to prove that his purchases were exclusively from unlicensed dealers.

The court upheld the Tribunal's finding that the assessee had failed to prove that his purchases were from unlicensed dealers and concluded that the assessee could not be granted the claimed exemption.

Conclusion
The court dismissed the revisions and upheld the Tribunal's decision, concluding that:
1. The assessee could not refuse to pay the balance of the licence fee and insist on being treated as an unlicensed dealer.
2. The assessee had failed to prove that his purchases from shandies were from unlicensed dealers, and therefore, he was not entitled to the claimed exemption.

The court also addressed the issue of recovering the balance licence fee, stating that it becomes a debt payable to the State and can be recovered under the provisions of the Madras Revenue Recovery Act. The petitions were dismissed with costs.

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