1987 (9) TMI 391 - HC - VAT and Sales Tax

Summary

Issues:
Whether the account books of a dealer engaged in the manufacture and sale of exempted items can be rejected under section 12(2) of the U.P. Sales Tax Act, 1948.

Analysis:
The case involved a dealer engaged in the business of manufacturing and selling wooden carving goods, which are exempted items under section 4 of the Act, 1948. The assessing officer rejected the dealer's book version and made a best judgment assessment, claiming concealed sales of timber and sokhta. The main contention was whether the dealer, exempted from tax on the manufactured items, was required to maintain a manufacturing account under section 12(2) of the Act.

The court analyzed section 12 of the Act, which mandates every dealer to maintain true and correct accounts of goods sold and bought, with a special obligation on a manufacturer-dealer to maintain stock books for raw materials and products. The court emphasized that the obligation to maintain a manufacturing account under sub-section (2) of section 12 applies only to manufacturers liable to pay tax. Since the dealer was not liable to pay tax on the exempted items, the court held that he was not required to maintain a manufacturing account.

The court rejected the argument that not maintaining a manufacturing account could allow sales of raw materials outside the books, stating that the law only requires maintenance of accounts for goods sold and bought. It clarified that while a dealer in timber could have his book version rejected for not maintaining accounts under sub-section (1) of section 12, a manufacturer-dealer of exempted items could not have his accounts rejected for not maintaining a manufacturing account.

Ultimately, the court allowed the revision, set aside the Tribunal's order rejecting the dealer's book version, and sent the case back to the Tribunal to accept the book version of the assessee. The judgment highlighted the distinction between dealers liable to pay tax and those dealing in exempted items, emphasizing the specific obligations regarding account maintenance under the Act.