2008 (8) TMI 851 - HC - VAT and Sales Tax

Rejection of account books - suppression of production and sale - Held that - Non-production of the books of account at the time of survey is a relevant factor which can be considered by the assessing authority. It has been further laid down that the burden is upon assessee to give plausible explanation as to why no adverse inference should be drawn. On the facts and circumstances of the present case, the explanation given by the dealer having not been accepted, thus find that the rejection of the account books is perfectly justified. But there is some substance in the argument of the learned counsel for the applicant that there is no material in possession of the Department to show that the brick-kiln was fired on April 1, 1987, therefore, hold that the brick-kiln was fired on April 11, 1987. The period from April 1, 1987 to April 10, 1987 should be deducted from 91 days of the firing as was determined by the Tribunal.The firing period is reduced to 81 days. The Tribunal shall calculate the production of bricks for 81 days and pass consequential order accordingly. The revision succeeds and is allowed in part as indicated above.

Summary

Issues:
1. Rejection of account books and justification for the same
2. Estimation of firing period by the assessing authority
3. Determination of production and sale of bricks based on the firing period
4. Rejection of claims of distribution of bricks for self-use
5. Determination of average sale rate of bricks

Analysis:

Issue 1: Rejection of Account Books
The Tribunal justified not accepting the account books due to their non-availability during surveys. The explanation provided by the dealer regarding the absence of partners during the surveys was not accepted. Citing a relevant judgment, it was held that non-production of account books during surveys is a significant factor that can be considered by the assessing authority. The burden lies on the assessee to provide a plausible explanation for the absence of account books, which, in this case, was not accepted. Therefore, the rejection of the account books was deemed justified.

Issue 2: Estimation of Firing Period
The Tribunal had initially fixed the firing period at 91 days, which was challenged as lacking a basis. The applicant argued that the firing could not have started on April 1, 1987, as claimed by the Tribunal, due to the quantity of baked bricks found in the kiln on April 11, 1987. The court agreed that there was no substantial evidence to support the firing starting on April 1, 1987. Consequently, the firing period was reduced to 81 days, and the Tribunal was directed to recalculate the production of bricks based on this revised period.

Issue 3: Determination of Production and Sale
The production and sale of bricks were being determined based on the firing period. As the firing period was revised to 81 days, the Tribunal was instructed to recalculate the production of bricks accordingly. This adjustment would impact the assessment of the business for the relevant period.

Issue 4: Rejection of Claims of Distribution
The Tribunal was criticized for not addressing the claims of distribution of bricks for self-use by partners, despite certificates from relevant authorities being on record. This issue was not directly resolved in the judgment, but it was highlighted as a point of contention that needed further consideration.

Issue 5: Determination of Average Sale Rate
The Tribunal's determination of the average sale rate of bricks at Rs. 400 per thousand was questioned for not considering the quality of bricks produced and relying on unspecified exemplars. The judgment did not provide a definitive resolution to this issue but raised concerns about the methodology used in determining the sale rate.

In conclusion, the revision was partially allowed, with adjustments made to the firing period and instructions given to recalculate the production of bricks. The judgment addressed various legal and factual aspects related to the assessment of the business, highlighting the importance of accurate record-keeping and justifiable estimations in tax matters.