Holding

Section 28-B of the Uttar Pradesh Sales Tax Act and Rule 87 of the Rules are constitutionally valid, fall within the State’s legislative competence, and the presumption they create is rebuttable, not conclusive.

Summary

The petitioners, transporters of goods across Uttar Pradesh, challenged Section 28-B of the Uttar Pradesh Sales Tax Act, 1948 and Rule 87 of the Uttar Pradesh Sales Tax Rules, 1948, arguing that the provisions were beyond the State's legislative competence, infringed Articles 301 and 19(1)(g) of the Constitution, and imposed an unreasonable restriction on trade. The provisions require a transit pass for vehicles passing through the State; failure to produce the pass creates a presumption that the goods were sold within the State, attracting sales tax. The Supreme Court held that the provisions are within Entry 54 of List II, are merely machinery to prevent tax evasion, and the presumption is rebuttable, not conclusive, allowing transporters to prove no sale occurred. Consequently, the Court upheld the High Court's decision, finding the provisions constitutionally valid. The Court also directed the withdrawal of ex parte assessments made before 1‑June‑1979 and ordered fresh assessments with due opportunity to rebut the presumption.

Issues considered

The validity of Section 28-B of the Uttar Pradesh Sales Tax Act and Rule 87 of the Rules under Entry 54 of List II of the Seventh Schedule.
Whether the presumption of sale within the State, triggered by failure to produce a transit pass, infringes Articles 301 and 19(1)(g) of the Constitution.
Whether the presumption is rebuttable or conclusive and its impact on constitutional rights.
Whether the provisions constitute an unreasonable restriction on the freedom of trade.

Legislation cited

Constitution of Indias. Article 19(1)(g), s. Article 301, s. Entry 54 of List II
Indian Evidence Act, 1872s. Section 4
Uttar Pradesh Sales Tax Act, 1948s. 28, s. 28-B
Uttar Pradesh Sales Tax Rules, 1948s. Rule 87

Subjects

sales taxinterstate transportrebuttable presumptionconstitutional validityfreedom of tradeEntry 54Uttar Pradeshtax evasioncheck-posttransit pass

Judgment

939

A
SODHI TRANSPORT CO, & ANR, ETC. ETC,
V•
STATE OF U.P, &ANR. ETC, ETC.

MARCH 20, 1986
B
[E.S. VENKATARAMIAH AND M.P. 1l!AKKAR, JJ.]

Uttar Pradesh Sales Tax Act, 1948/ Uttar Pradesh Sales
Tax Rules, 1948: s. 28-B/r.87 - Constitutional Validity of -
Goods - Transit qf through the State - Failure to surrender
transit pass at check-post - Presumption of sale of goods
within the State - Whether arises. c
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, D
Indian Evidence Act/s.28-B Utcar Pradesh Sales Tax Act, 1948.

Section 28 of the Uttar Pradesh Sales Twi: Act, 1948
authorises the State GoverD11ent to establiah checl<posts and
barriers with a view to preventing evasion of twi: or other
dues payable under the Act in respect of sale of goods in the E
State. Section 28-B, added by the U.P. Act I of 1973, llllkes
provision for the procedure to be followed by persons who
intend to transpc>rt goods from outside the State by road
through the State to destinations outside the State. It
provides that when a vehicle COiiing froa any place outside the
State and bound for any other place outside the State pas0es F
through the State, the driver or the other person in-charge of
such vehicle shall obtain in the.prescribed manner a transit
pass froa the officer in-charge of the first checkpost or
barrier after bis entry into the State and deliver it to the
officer in-charge of the checl<post or barrier before md.t fro.
the State. If he fails to do so it shall be prealQ!led that the G
goods carried thereby have been sold within the State by the
Q!Wller or person in-charge of the vehicle. Rule 87 of the Uttar
Pradesh Sales Tax Rules 1948, inserted by the U,P, Sales 'r.-:
(First Amendment) Rules, 1974 provides that a person who
wishes to obtain a transit· pas• shall make an applicatic>n in
H
•
940 SUPREME COURT REPORTS [1986] 1 s.c.R.

A 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 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
B the course of their business have to carry goods fro• 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, (11) that they infringed freedOll of trade,
connerce and intercourse guaranteed under Art. 301 of the I
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
E 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 conmencement.

Disposing of the appeals and writ petitions, the Court,
F
HELD : 1. The decision of the High Court upholding the
constitutionality of s. 28-B of the Utter Pradesh Sales Tax
Act, 1948 and r.87 of the Uttar Pradesh Sales Tax Rules, 1948
does not call for any interference. [957 D]

G 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 A
scope of the power to levy the tax itself. When the '.::--""'
legislature has the power to make a law with respect to any
H
SODHI TRANSPORT v, STATE 941

A
subject it has all the ancillary and incidental powers to make
that law effective. [949 D; 950 E; 949' E]

Sardar llaldev Sillgh v. Comnf.saioner of 1ncom Ta: Delhi
&Aj...r [1961] 1 s.c.R. 482 referred to.
B
2. Taxation laws usually consist of three parts - charg-
ing 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 theDBelves. They ensure that a person
who has brought goods inside the State and who has made a
declaration that the gooda are brought into the State for the
purpose of carrying them outside the State should actually
c
take them outside the State. If he hands over the transit pass
while taking the goods outside the State then thera would be
no liability at all. [949 F; 950 C; 949 D; 950 C-D]

Whitney v. Coamssioner of Inland Revenue (1925) 10 T.C.
D
88 and Q:raahai Saigal v. eo-lssioner of :rnc--ta:i<, Panjab
[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 E
raise a rebuttable presumption that the goods 1111St have been
sold in the State if the transit pass is not handed over to
the officer at the checkpoat or the barrier near the 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
F

concerned are required to rely upon the rule of presumption in
s. 28-B of the Act. [951 E; 95~ B, D]

A presumption is not in itself evidence but only makes a
prims facie case for the party in whose favour it exists. It
G
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
I the par.ty on whom lies the duty of going forward with evidence
on the fact presumed, and when that party has produced H
942 SUPREME COURT REPORTS [1986] 1 s.c.R.

A evidence fairly and reaaonably 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]

Vooclroffe &Alll.r All's Ln of Evidence, Vol. I 14th Edn.
B
299, w.s. Bolds11orth's 'A Bistol'J of J!aglish i.. • Vol. IX,
140 and Ish.ar Abud Khan v. Union of India [1962] Supp. 3
s.c.a. 235, referred to.
4. The words 'shall presume' require the Court to draw a
presumption ref erred to in a law unless the fact is disproved.
They contain a rule of rebuttable presumption in respect of
c matters with reference to which they are used, and do not lay
down a rule of conclusive proof. Theae 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 r·'
D 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
E 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 1
.,.
F 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
G 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
H assessments ex=parte in some cases proceeding on the basis
that s. 28-B contains a rule of conclusive presumption. The
SODHI TRANSPORT v. STATE 943

A
asseasees 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 1111ny cases liable for large amunts of /
.tax which they could have avoided if the authorities and the B
asseaaees had realised the true effect of the provisious.
[957 E-G]

[To meet the ends of justice the Court approved the
scheme evolved by the State providing for withdrawal and
re-exaaination by the respondents·of all the assessment orders
ex-parte or otherwise in respect of the period prior to C
1.6.1979, issuance of fresh notices to the assessees/appel-
lants/petitionere and finalisation of assessment proceedings
by the authorities keeping in mind the rebuttable presumption
contained in s. 28-B, w1 thdrawal of ex-perte orders of
assessment passed after 1.6.1979 and issuance of fresh notices
giving opportunity to trausportere/asseasees to present their D
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. E

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.
F
~ G.L. Sanghi, S.N. Kecker, 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. G
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 : H
944 SUPREME COURT REPORTS [1986] 1 S.C.R.

A
VENKATARAMlAH, 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 Prsdesh Sales Tax Act, 1948 (U. P.
Act No. 'YJJ of 1948) (hereinafter referred to as 'the Act') and
B 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
c 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.

D The appellants who claim to be engaged in the business y •
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
E 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
F 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 out~
side the State of Uttar Pradesh into that State the Legis-
G lature 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 barrier.s. It was substituted by an amerujed
section 28 by U,P, Act 11 of 1972 which inter alia provided , '·
for the establishment of check-posts and barriers at the boun-
H daries of the State and also for inspection of goods while in
SODHI TRANSPORT v. STATE [VENKATARAMIAH, J. ] 945

A
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-U to deal with
the problems of evasion arising out of transac~ions in which
goods imported into the State from outside were involved. B
Section 28-A deals with the provisions governing a person who
·'i 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-,\ and 28-C in these cases. Similarly section 28-D
·is not material for us as it deals with cases governed by C
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 D
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 E
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 F
• 'r 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 G
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."
H
Rule 87 of the Rules which was inserted into the Rules by
A 946 SUPREME COURT REPORTS [1986) 1 S.C.R.

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
B 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
any, established near the point of entry into the
c 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
D 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.
E
(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
F goods in order to ensure that the consignments
being taken out of the State are the same for which
pass had been obtained. 'l'he Officer-in-charge of
1
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-
G 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)."
H
The relevant part of Form No. XXXIV which is issued in
triplicate reads thus :
SODHI TRANSPORT v. STATE [VENKATARAMIAH, J. ] 947

"TRIPLICATE A

FORM XXXIV
Application for iaeue of Transit Pase
(To be submitted in triplicate)

(See rule 87(1) of the U.P. Salee Tax Rules, 1948) B

SIR
I ••••••••••• ,,,,,,,,,,,,,s/o Sri,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
r/o,,,,,,,,,,,,,,,,(full address),,,,,,,,,,,,,hereby declare
that I em the owner/driver of vehicle/truck No ••••••••••••••••
belonging to,,,,,,,,,,,,,,,,,,(Naine and address of the owner/ C
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. D

3. My vehicle/truck will cross Uttar Pradesh,,,,,,,,,,,,,,,,
(name of the other State).,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Border at •• ,,,,,,,,,,,,check post on or before
(date) by ••• ~ •••••••• hours(time),,,,,,,,,,,,,,,,,,,,,,,
1!
Date ••••• ,,,,,,
Time,,,,,,,,,,, Signature
Place,,,,,,,,,, statue

Transit Pass F
Serial No. ,,,,,,,,,

Vehicle/truck no. • •••••••• , •• , •• , , , • , cari'ying the
consignments mentioned overleaf ie permitted to cross the
Uttar Pradesh • , •••• , ••••••••••• , , (Name of the other State)
Border at ••••••••••••••••••••••• Check Post by •••••••••••••••• G
hours •••••••••••••••••••••••on or before ••••••••••••(date)

Place ..............
Date .....•........
Time ..............
H
948 SUPREME COURT REPORTS [1986] 1 S.C.R.

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 agaitist 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
SODHI TRANSPORT v. STATE [VENKATARAMIAH, J.] . 949

A
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, conaign-
ments and goods to ensure that the statements made are true.
B
The validity of sectiona 28, 28-B and rule 87 was
questioned by the petitioners who filed the writ petitiona in
the High Court on various grounds. Broadly the contentiona
were that (i) the provisiona were outside the scope of Entry
54 of List II of the Seventh Schedule to the Conatitution;
(ii) they infringed freedom of trade, co111111erce and intercourse
guaranteed under Article 301 of the Constitution; and (iii) c
they imposed unreasonable restrictions on the freedom of trade
guaranteed under Article 19(l)(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. D

Now the impugned provisions are just machinery provi-
sions. 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. E
Taxes on the sale or purchase of goods other than newspapers
subject to the provisions of entry 92A of List I'. It is well-
settled 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, F
machinery provisions, and provisions proViding for recovery of
the tax. We may ref er here to the observations of Lord Dunedin
in lihit:ney v. Comd.ssioner of Inland Revenue [1925] 10 T.C •. 88
( 110). The learned Lord said :

''My Lords, I shall now permit myself a general G
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 H
950 . SUPREME COURT REPORTS [1986] 1 S.C.R.
A
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.
B Liability does not depend on assessment. That, ex
hypothesi, 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."

c 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
D that a person who has brought the ·goods inside the State and
who has made a declaration that the goods are brought into the y-
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
E not deliver the transit pass at the exit check post as under-
taken by him, the question of raising a presumption against
him would arise. We shall revert to the question of presump-
tion 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
F 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 lla1clev Singh v. '
Comaissioner of I.ncome Tax, Delhi & Ajmer [1961] l s.c.R. 482
at page 493 thus :

G "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
H
his own income. As is well-known the legislative
entries have to be read in a very wide manner and
1
SODHI TRANSPORT v. STATE [VENKATARAMIAH, J,] 951
A
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, B
then the admitted power to tax a person on his own
income might of ten be made inf ructuous 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
preswnption contained in section 28-B of the Act. It is seen c
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 p.resumed 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 D
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 E
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 F
difference between the two sets of words set out above. '!he
meaning of these words would become clear if we read the defi-
nitions of the words 'may presume', 'shall presume', and 'con-
clusive 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 : G

"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;
H
'Shall presume'. Whenever it is directed by this
Act that Court shall presume a fact, it shall
952 SUPREME COURT REPORTS [1986] 1 1 S.C.R.
A \..

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
B 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
c 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 : -
D "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
E 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
F motives of public policy, for the sake of greater
certainty, and the promotion of peace and quiet in i
the co1111l!lnity; 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').
G
...................................................
Rebuttable presumptions of law are, as well as the
former,

H 'the result of the general experience of a
connection between certain facts or things, the one
SODHI TRANSPORT v. STATE [VENKATARAMIAH, J.] 953
A

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 B
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 artd 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; artd
if no opposing evidence is offered, the jury are c
bourtd to firtd 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
CODIDOn consent from motives of public policy artd
for the promotion of the general good; yet not as D
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 E
presume', it is open to a court where they are used in its
discretion either to draw a presumption ref erred 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 Irtdian judicial lore F
for over a century to convey that they lay down a rebuttable
presumption in respect of matters with reference to which they
are used artd we should exi>ect that the U. P. Legislature also
has used them in the same sense in which Indian courts have
urtderstood them over a long period artd not as laying down a
rule of conclusive proof. In fact these presumptions are not G
peculiar to the Irtdian 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 : H
954 SUPREME COURT REPORTS [1986] 1 s.c,R.

A
"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 probable
inferences of fact; and it is possible, though by
no means certain, that in the remote past mst
presumptions originated as mere presumptions of
B
fact. Just as in the case of judicial notice, the
courts, as a matter of ·cot11DOn 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.
c 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 coTI1110nest of the presumptions known to
D
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
E
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 presump-
F
tions •••.•. "

A presumption is not in itself evidence but only makes a
prima ~ case for party in whose favour it exists. It is a
rule concerning evidence. It indicates the person on whom the
G
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 reasonably
H
tending to show that the real fact is not as presumed the
SODHI TRANSPORT v. STATE [VENKATARAMIAH, J,] 955

A
purpose of presumption is over. Then the evidence will deter-
mine the true nsture of the fact to be established. The rules
of presumption are deduced from enlightened. human knowledge
and eKjlerience and are drawn from the connection, relation and
coincidence of facts, and circumstances.
B
ln Izhar Ahmad Khan v. Union of India, [1962] Suppl. 3
S.C.R. 235 @ 257 Gajendragadkar, J. (as he then was) eKJllains
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 C
about the rebuttable presumption really means. A
fact A which has relevance in the proof of fact B
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 B is D
proved or not. When the law of evidence makes a
rule providing for a rebuttable presumption that on
proof of fact A, fact B 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 E
that the said appreciation will draw the inferenc~
from the proof of fact A that fact B 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 F
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 G
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 H
956 SUPREME COURT REPORTS [1986] 1 s.c.R.

A
the effect of shifting the burden of proof and it is hard to
see how it ls unconstitutional when the person concerned has
the opportunity to dlsplace the presumption by leading
evidence.

We are of the view that the words contained in section
B 28-B of the Act only require the authoritles 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
c have not been actually sold inside the State. It is still open
ta him to establish that the goods had been disposed of in a
different way. He may establish that the goods have been deli-
vered 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
D the State etc. It is only where the presumption is not
successfully rebutted the authorities concerned are required
ta 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 ta sales
tax. The authority concerned before levying sales tax arrives
E at the conclusion by a judicial process that the goads 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 wham action is
taken under section 28-B of the Act. When once a finding is
recorded that a person has sold the goads which he had brought
F inside the State, then he would be a dealer even according ta
the definition of the word 'dealer' as it stood from the very
commencement of the Act subject to the other conditions pres-
cribed 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
G amendments made in 1959, 1961, 1964, 1973 and 1978 to the said
definition. lb.ere is, therefore, no substance in the conten-
tion 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
H inside the State though with the help of the presumption which
is a rebuttable one.
SODHI TRANSPORT v. STATE [VENKATARA.'llAH, J,) 957

A
The levy of sales tax on goods which are held to have
been sold inside the State cannot be considered as
contravening Article 301 of the Constitution. The restrictions
imposed ate not also shown to be ltnreasonahle. They do O!Jt
unduly hamper trade. On the other hand they are imposed in the
pnblic interest. The contentions based on ~rticle 301 and B
Article 19( l) (g) of the Constitut lon are, therefore, 1;ithout
sub~tance.

The foregoing discussion disposes of the contentions
regarding legislative competence or unreasonable character :Jf
the provisions contained in section 28-B of the Act and rl1le
87 of the Rules. They are introduced, as stated earlier, to c
check evasion and to provide a machinery for levying tax from
persons who dispos~ of goods inside the State and a\•old tas.
which they are otherwise l lable to pay. The law provide~
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 constltutlonallty of \)
section ·za-B of the Act aod rule 87 of the Rule• 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 E
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 presump·rton
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 fa l led to F
realise the meaning of that section and do not appear to have
made any attempt to rebut the presump~ion. It is noticed that
in ~J,Uany 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 G
authorities and the assessees had realised the true effect of
the provisions contained ln section 28-B of the Act. This has
led to serious prejudlce 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
Cormnissioner of Sales Tax thus : H
958 SUPRFliE COURT REPORTS [1986] l S,C,R,
A
"Whereas it was observed by the Hon' ble Court in
·the course of the discussion thst the presuqition
J
~
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
B 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.
c 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
D Pradesh. Now, therefore, the Commissioner of Sales t
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
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
F 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
G 1.6. 79. This 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.
H difficulties and.hardships were being faced by the
SODHI TRANSPORT v. STATE [VENKATARAMIAH, J.] 959

A

l 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 B
harshly against~~ 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 llon'ble
Court in the interim order). Counsel states that c
all assessment orders .!!! parte or otherwise, shall
be withdrawn.

5. A fresh notice containing as far as possible
relevant particulars, would be issued to the
ass.essees/appellants/petitioners. The authorities o
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 wou1d
be presumed that the goods carried have been sold E
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, a~sessee, to
displace this presumption by producing adequate
material or evidert~e.
F
6. In respect of the assessments after 1.6.79, the
department will withdraw any .!!! parte orders of
assessment which may have been passed. A fresh
notice giving an opportunity shall be given to the
transporier/assessee to ·pres~n·t his case. The
assessments made after 1.6. 79. after affording an G
opportunity .to the transporter I 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 H
960 SUPRFME COURT REPORTS [19861 1 s.c.R.

A
this order may be completed within a period of 5
m:inths 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.
B
9. It may be clarified that Sec. 21 of the U.P.
Sales Tax Act will not be a bar to the instant 4
re-assessments."

On going through the above proposal we feel that it would
C meet the ends of justice if the cases of the appellants and
petitioners are permitted to be dealt with accordingly. lie
give our approval to the said proposals end 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
D the Act. lie 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 ti..... lie also direct
that if any of the appellants or petitioners has, depending
upon the pendency of these appeals or petitions, not filed any
E appeal or revision against any order passed under the Act,
such appellant or petitioner may pref er 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.
F
These appeals and writ petitions are disposed of
accordingly. There shall be no order as to costs.

P.s.s.