1961 (12) TMI 68 - HC - VAT and Sales Tax

Summary

Issues:
- Exemption claim on turnover of bullion sales.
- Requirement of maintaining separate accounts for taxable and exempt sales.
- Interpretation of second sales for exemption from tax.
- Presumption in favor of non-taxable transactions.

Exemption Claim on Turnover of Bullion Sales:
The assessee, a dealer in bullion and jewellery, claimed exemption on a turnover of Rs. 3,80,918 representing sales of bullion as second sales. The assessing authority rejected the claim due to lack of separate accounts for gold and silver sold. The Appellate Assistant Commissioner partly allowed exemption, and the Tribunal further reduced the exempted amount. The High Court found the reasoning of the lower authorities flawed and allowed the exemption claim on the turnover related to purchases from other dealers.

Requirement of Maintaining Separate Accounts:
The dispute revolved around the necessity of maintaining separate accounts for bullion sales to distinguish between taxable first sales and exempt second sales. The authorities insisted on separate accounts, but the High Court opined that such a requirement would be artificial and unnecessary. The Court emphasized that the nature of goods sold did not change based on the source of purchase, and maintaining separate accounts would lead to fabrication of accounts.

Interpretation of Second Sales for Exemption:
The assessee contended that sales of bullion from purchases made from other dealers should be considered as second sales exempt from tax. The Tribunal rejected this argument, leading the assessee to approach the High Court. The High Court held that if the total quantity of bullion sold exceeded the quantity purchased from other dealers, the excess quantity could be deemed as second sales exempt from tax.

Presumption in Favor of Non-Taxable Transactions:
The High Court emphasized the natural presumption that a person engaged in transactions would follow a course leading to non-taxable transactions. The Court criticized the lower authorities for setting artificial standards and ruled in favor of the assessee, allowing the petition with costs and counsel's fee. The judgment highlighted the need to prevent tax evasion without imposing unnecessary burdens on dealers.