The burden of proof is on the Assessing Authority to establish that the assessee is liable to payment of penalty under Section 10(7) of the Punjab General Sales Tax Act, and that the penalty proceedings are quasi-criminal in nature.

Harbans Singh, J.

1. This appeal under Clause 10 of the Letters Patent is directed against the judgment of the learned single Judge, dismissing the writ petition filed by the appellant, Messrs. Khosla Rice Mills, Sarna (hereinafter referred to as the dealer) against the imposition of a penalty by the Assessing Authority to the tune of Rs. 1,25,000 for filing a false return under Section 10(7) of the Punjab General Sales Tax Act (Act No. 46 of 1948) (hereinafter referred to as the Act), which penalty was subsequently reduced by the Sales Tax Tribunal to Rs. 20,000.

2. With effect from 15th January, 1968, both paddy and rice were included in Schedule C to the Act and thus became articles on which purchase tax was payable by the last purchaser. The dealer apparently purchased large quantities of paddy and, after shelling the same, sold the resultant rice mostly to the State Government. On 30th January, 1969, a return was filed by the dealer for the third quarter ending 31st December, 1968, in which the purchases were shown as "nil". Along with his return, the dealer sent a covering letter giving his reasons for non-liability for payment of tax and for his filing a "nil" return. In this, inter alia, he stated as following:

(a) The paddy had been acquired by the dealer through commission agents with whom his relationship was that of principal and agents and, consequently, the purchases made by him from the agents were not on the basis of a contract of purchase and sale.

(b) The bulk of the purchases were not made in the normal course of business but in the course of enforcement of Essential Supplies Act/ Punjab Procurement Price Control Order and in view of this compulsory acquisition of rice by the Government, the purchase could not be said to be made in the normal course of business and, therefore, is not purchase within the meaning of the Act.

(c) Rice and paddy is one commodity under Section 5(2)(a)(ii) of the Punjab General Sales Tax Act, 1948 and as the tax is leviable on the last purchaser, the dealer is not liable, because the entire quantity of rice had been sold to somebody else.

(d) The entire stock of paddy had not yet been exhausted and thus qua such quantity the dealer has not acquired the character of the last purchaser.

(e) Even if the compulsory acquisition of rice by the Food and Supplies Department is treated as sale, the entire quantity of rice having been sold to the Food Corporation of India or the Food and Supplies Authorities, who are registered under the Act, the dealer is entitled to deductions under Section 5(2)(a)(vi).

3. On 10th February, 1969, the Assessing Authority under the Act issued a notice under Section 10(7) of the Act calling upon the dealer to show cause why penalty be not imposed for filing a false and inaccurate return. On 12th February, 1969, a reply was put in, in which mostly the grounds mentioned above were reiterated and details given. On 13 th February, when the dealer appeared in pursuance of the notice, he was asked to bring the accounts on the following day, i.e., on 14th February, 1969. On 14th February, 1969, nobody appeared on behalf of the dealer. It is stated that a telegram was given and a letter was also sent per registered post expressing inability of the dealer to appear on 14th February and asking for an adjournment. As the telegram and the registered letters did not reach the Assessing Authority before the end of the working hours on 14th February, the impugned order imposing penalty was passed ex parte. A copy of this order is annexure B.

4. With regard to point (a), i.e., as to whether the purchases were made through the commission agents and relationship between the dealer and the commission agents was that of principal and agent, the learned Assessing Authority observed as follows:

In so far as the alleged source of purchases by the dealer from commission agents, etc., is concerned, no evidence has been led nor any account books produced. In the circumstances