1976 (5) TMI 90 - HC - VAT and Sales Tax

Summary

Issues:
1. Rejection of accounts and best judgment assessment under U.P. Sales Tax Act.
2. Taxation of articles sold as motor parts at a specific rate.

Analysis:

Issue 1: Rejection of Accounts and Best Judgment Assessment
The case involved the rejection of account books by the assessing authority based on non-maintenance of a production register and rejection by the income-tax department. The primary contention was whether rejection of accounts and best judgment assessment were permissible for alleged non-compliance with rule 72(2) under section 12 of the U.P. Sales Tax Act. The Judge (Revisions) held that mere non-compliance with rule 72(2) is not sufficient to discredit the accounts of the assessee. The assessing authority must establish that the account books are not maintained in an intelligible form, hindering the determination of business nature and quantum. The purpose of maintaining accounts is both commercial and departmental, requiring authenticity and intelligibility. The court relied on the principle established in a previous case to rule against best judgment assessment solely based on non-compliance with rule 72(2).

Issue 2: Taxation of Articles Sold as Motor Parts
The second question revolved around the taxation of articles sold by the assessee as motor parts at a rate of 10 per cent in 1968-69. The relevant notification categorized spare parts of motor vehicles into those solely used for motor vehicles and those used for other purposes as well. The burden was on the assessee to prove that the spare parts manufactured were used for purposes other than as parts of motor vehicles to avoid taxation at 10 per cent. In this case, the assessee failed to provide evidence supporting alternate use of the spare parts. Consequently, the courts upheld the assessment of the turnover at the 10 per cent rate for spare motor parts. The judgment favored the department on this issue.

In conclusion, the High Court answered the first question against the department and in favor of the assessee, emphasizing the need for substantive grounds to reject accounts. On the second issue, the court ruled in favor of the department, upholding the taxation of articles sold as motor parts at the specified rate. As a result of the divided success of the parties, each was directed to bear their own costs.