1996 (9) TMI 515 - SC - VAT and Sales Tax

Non maintenance of stock register - Held that - Appeal allowed. Unable to uphold the view that a defect in non-maintenance of stock register is only technical and so the turnover disclosed in the account books should be accepted. On the facts of a particular case, it is for the assessing authority to consider along with other materials disclosed in the case, to what extent the account books can be relied on for determining the turnover. In normal circumstances, the rejection of account books call for the estimation of the turnover to the best of judgment of the assessing authority. Having upheld that the account books of the assessee were liable to be rejected, the learned Judge of the High Court was wrong in holding that the defect is of a technical nature and the account books should be accepted.

Summary

Issues:
1. Appeal against judgment of the learned single Judge of the Allahabad High Court regarding turnover assessment.
2. Rejection of account books by the Revenue and acceptance by the High Court.
3. Interpretation of Section 12(2) of the Uttar Pradesh Sales Tax Act, 1948 regarding maintenance of stock register by a manufacturer.

Analysis:
The Supreme Court heard an appeal filed by the Commissioner of Sales Tax, Uttar Pradesh, against the judgment of the learned single Judge of the Allahabad High Court in a turnover assessment case. The respondent-assessee was engaged in the business of silver ornaments, utensils, and scraps. The Sales Tax Officer initially enhanced the turnover, which was later reduced in appeal. However, the Revenue challenged the order before the High Court, which held that while the account books of the assessee should be rejected due to non-maintenance of a stock register as required by Section 12(2) of the Act, the disclosed turnover should still be accepted, deeming the defect as "technical."

The Supreme Court observed that the High Court's approach was erroneous as the non-maintenance of a stock register is crucial, especially for manufacturers, to ensure the reliability of account books. Section 12(2) mandates the maintenance of stock books for raw materials and products at every production stage. If such records are not kept, it raises doubts about the accuracy and verifiability of the accounts. Consequently, the rejection of account books necessitates the estimation of turnover by the assessing authority. The Court emphasized that the defect in maintaining a stock register is not merely technical, and the assessing authority must determine the turnover based on the available evidence, including the reliability of account books.

In conclusion, the Supreme Court set aside the High Court's decision, directing that the estimated turnover of the dealer, as upheld in the appeal, should be restored. The appeal was allowed, and no costs were awarded considering the circumstances of the case. This judgment clarifies the importance of maintaining accurate records, especially stock registers, for tax assessment purposes and highlights the assessing authority's role in estimating turnover when account books are rejected due to non-compliance with statutory requirements.