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2013 (11) TMI 405 - HC - VAT and Sales TaxNon maintenance of stock register - Exemption under second sales - Held that - the assessee had not maintained any accounts either relating to first sales or second sales, but however, claimed second sales exemption. Even though learned counsel for the assessee made grievance as regards Rs.61,01,040/-, the Assessing Officer admitting only 27% as for second sales exemption, the only course available under the stated circumstances was to take note of the purchase of raw skins from inter-State and local purchase of tanned skins, sale of tanned skins locally and of export. Thus, on an analysis of the facts available, the Joint Commissioner sustained the method of accounting adopted by the Assessing Officer. - There is no violation in the order of the Joint Commissioner in approving the proportion guiding the best of judgment assessment. Keeping of a stock register by the manufacturer is of importance to verify the assessee s account for a quantitative tally of different goods attracting different rates; if such a stock book is not maintained, there being no other material to identify the different goods, it leads to the conclusion that the account books are not reliable or that particulars are not properly verifiable. Thus, we do not find that there is any arbitrariness in fixing second sales exemption based on the formula - Decided against assessee.
Issues:
Assessment of turnover for the assessment year 1989-90, Discrepancies in stocks found during inspection, Claim of exemption on second sales, Disallowance on the claim, Revision of Appellate Assistant Commissioner's order by Joint Commissioner-III (SMR), Justification of formula for exemption on second sales, Maintenance of accounts as per Rule 26 of TNGST Rules, Reliability of account books without stock register, Best judgment assessment based on available details. Analysis: The judgment involves an appeal by the assessee against the order of the Joint Commissioner III (SMR) of Commercial Taxes, Madras for the assessment year 1989-90. The assessee, a dealer in hides and skins, faced issues related to discrepancies in stocks found during an inspection by Enforcement Wing Officers. The Assessing Officer restricted the claim of exemption on second sales based on a formula due to the lack of stock account maintenance as required under Rule 26 of the Tamil Nadu General Sales Tax Rules. The Appellate Assistant Commissioner confirmed estimates on sales turnover and made additions to meet the ends of justice. However, the Appellate Assistant Commissioner allowed the assessee's claim for entire turnover as second sales exemption by setting aside the Assessing Officer's order. The Joint Commissioner-III (SMR) issued a notice to revise the Appellate Assistant Commissioner's order, justifying the formula adopted for second sales exemption based on the decision in State of Madras Vs. Narayana Nadar & Co. The Revisional Authority considered the details of purchases and sales, ultimately restoring the assessment order based on a turnover of Rs.44,53,760/-. The assessee contended that the adoption of the formula was unwarranted as there was no misclassification of goods, and the Revenue should not have rejected the plea for exemption. The judgment delves into the importance of maintaining accounts as per Rule 26 of the TNGST Rules and the Supreme Court's stance on the reliability of account books without a stock register. The Apex Court highlighted that failure to maintain a stock register affects the verifiability of account particulars. The judgment emphasizes the necessity of maintaining separate books of accounts for goods liable to tax at different rates and stages, especially for manufacturers. The Court upheld the Joint Commissioner's decision to approve the best judgment assessment based on available details. It rejected the contention that mere failure to maintain a stock register is insufficient to reject the return, emphasizing the need for proper maintenance of accounts for different goods attracting varying tax rates. The judgment concludes by dismissing the Tax Case Appeal, affirming the Joint Commissioner's decision on second sales exemption based on the formula.
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