1988 (3) TMI 450 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Rejection of account books.
2. Determination of turnover assessed.
3. Basis for additions to disclosed turnover.

Detailed Analysis:

1. Rejection of Account Books:
The account books of the assessee were rejected by the Assessing Authority on several grounds, including discrepancies between the turnover as per the account books and the returns filed, unaccounted hire charges, evasion of tax, unverifiable sales and purchases, and non-maintenance of stock registers as per Section 12(2) of the U.P. Sales Tax Act. The court noted that Section 12 of the Act mandates the maintenance of true and correct accounts by dealers, and for manufacturers, additional stock books for raw materials and production stages are required. The assessee, being a manufacturer of oil, failed to comply with these mandatory provisions. The learned counsel for the assessee did not dispute these findings. Consequently, the court upheld the rejection of the account books, stating that non-compliance with Section 12(2) justified the rejection, making it unnecessary to examine other grounds for rejection.

2. Determination of Turnover Assessed:
Upon rejection of the account books, the assessment was made on an estimated turnover. The assessee disputed the estimate, particularly concerning the sale of oil and the purchases of oil-seeds (Tilhan). The Sales Tax Officer based his estimate on the consumption of electricity, noting that the assessee's consumption of 10985 units was disproportionate to the oil produced. Using a benchmark of 30 units of electricity per quintal of oil, the Officer estimated the production at 366 quintals, significantly higher than the 226.83 quintals disclosed by the assessee. This led to an addition of Rs. 1,36,829.16 to the disclosed turnover, which was confirmed by the Tribunal. The turnover of Tilhan was similarly estimated at Rs. 2,50,000, later reduced to Rs. 2,00,000 by the Tribunal.

3. Basis for Additions to Disclosed Turnover:
The assessee challenged the additions on four grounds:
(a) High electricity consumption alone was not a legal basis for additions.
(b) The 30 units per quintal formula was not inflexible.
(c) The Tribunal did not fairly consider the assessee's case.
(d) The additions were not justified even by the Sales Tax Officer's reasoning.

The court cited precedents, noting that while high electricity consumption alone cannot justify rejecting account books, it becomes relevant once the books are found unreliable. The court criticized the Sales Tax Tribunal for confirming additions without detailed examination and noted that the Assessing Authority must consider various factors affecting oil yield and electricity consumption. The court found the addition of Rs. 1,37,000 disproportionate to the estimated production and lacking justification.

Conclusion:
The court concluded that both the addition to the disclosed production of oil and the turnover thereof could not be sustained. The matter was remanded to the Sales Tax Tribunal for fresh consideration of the production and turnover of oil, as well as the turnover of oil-seed purchases. The Tribunal was directed to restore the assessee's appeal to its original number and decide it afresh in light of the court's observations.

Final Judgment:
The revision was allowed in part, with no order as to costs. The Sales Tax Tribunal was instructed to reconsider the production of oil and turnover thereof, and the turnover of oil-seed purchases, in accordance with the court's observations and the law.