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TMI Blog1980 (12) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 12(2) of the Act. The effect of not complying with the provisions of section 12(2) of the U.P. Sales Tax Act was considered by one of us in the case of Haleem Brothers, Allahabad v. Commissioner of Sales Tax1979 U.P.T.C. 761., and it was held that the provisions of section 12(2) were mandatory, and if the assessee's account books were not maintained as required by section 12(2), the assessing authority could refuse to rely on them. The learned single Judge desired the matter to be considered by a larger Bench, as he appears to disagree with the reasonings of Haleem Brothers' case(1). The reasons which weighed with the learned single Judge for making the reference were these: The basic purpose of section 12 was the verifiability of sales and purchases, and so long as sales and purchases made by a dealer were vouched, the account books could not be rejected on the consideration that a manufacturing register as required by section 12(2) was not maintained. He was also impressed by the fact that while section 12-A incorporated certain presumptions, in cases of default on the part of an assessee, no presumption arising from a breach of section 12(2) was incorporated in that sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for verification of the accuracy of his turnover. (2) A manufacturer liable to pay tax under the Act shall maintain stock books in respect of raw materials as well as products at the various points of production." Thus, rule 72(2) required an assessee, who was a manufacturer, to maintain stock books in respect of raw materials as well as products at the various points of production. Rule 72(2) was pressed by the department on innumerable occasions for rejecting account books of an assessee, who was a manufacturer, and who had not maintained stock books in respect of raw material as well as products at the various points of production. These attempts failed, for this Court in Devi Charan Sri Mohan Dass v. Commissioner, Sales Tax[1974] 33 S.T.C. 547; 1973 U.P.T.C. 519., and in Commissioner of Sales Tax v. Khera Shoe Co., Agra[1975] 36 S.T.C. 220; 1974 U.P.T.C. 326., and a large number of other cam, held that if account books have been maintained by an assessee in the ordinary course of business, and entries made therein were verifiable, and reliable, the accounts could not be rejected solely on the ground that rule 72(2) had not been complied with. It was held that rule 72 only pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion has been held fatal to its validity. In others, such prescriptions have been considered as merely directory, the neglect of them involving nothing more than liability to a penalty, if any were imposed, for breach of the enactment." This passage illustrates the fact that no hard and fast rule can be laid down for holding in what circumstances a provision of the statute is to be treated as imperative or directory. In Montreal Street Rly. Co. v. Normandin[1917] A.C. 170. it was similarly stated that it was impossible to lay down any general rule for determining whether a provision is imperative or directory. The general rule for adjudging as to whether a statute is imperative or directory was broadly stated in the case of Liverpool Borough Bank v. Turner[1860] 2 D.G.F. J. 502., where Lord Campbell, L.C., said: "No universal rule can be laid down for the construction of statutes, as to whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobdience. It is the duty of Courts of Justice to try to get at the real intention of the legislature by carefully attending to the whole scope of the statute to be construed." Lord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of complying with the provisions in question is avoided, the circumstance, namely, that the statute provides for a contingency of the non-compliance with the provisions, the fact that the non. compliance with the provisions is or is not visited by some penalty, the serious or trivial consequences that flow therefrom, and, above all, whether the object of the legislation will be defeated or furthered." Now let us adjudge the provisions of section 12(2) by reference to these tests. Section 12(2) uses the word "shall" which indicates that it is mandatory, but that by itself is not conclusive. Breach of section 12(2) makes an assessee liable to penalty under section 15-A(1)(r). But that too, remembering Maxwell, would not tilt the balance. Let us then examine the intention of the legislature behind enacting section 12(2), and the impact of the other provisions of the Act in the event of interpreting section 12(2) one way or the other. While considering this we must also address ourselves to the question as to which interpretation will further the object of the legislature. The Sales Tax Act is a taxing statute, and its purpose is to charge tax on sales and purchases. In order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies on an exception, the burden of proof of all facts which are necessary to entitle him to the exemption or exception or any special relief is upon the assessee, and if he fails to do so, he will not be entitled to those privileges. Section 12-A only embodies the general principle of evidence, that a fact which is in the special knowledge of a particular person has to be proved by him, and the normal rule regarding exemptions, exceptions and special reliefs, and does not impinge on the interpretation of any other provision of this statute. Now, coming to section 12(2), sub-section (2) requires that in addition to the accounts maintained under section 12(1), an assessee, who is a manufacturer should also maintain stock books of raw materials as well as products obtained at every stage of production. Like section 12(1) the language is imperative, and non-maintenance of the stock register is punishable under section 15-A(1)(r). What is the object with which the legislature enacted this provision? Is it not purposeless to have such a provision in case the other accounts of the assessee show the true value of goods sold and bought by the assessee? To us it appears that the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re were multiple defects, which led to the rejection of accounts. But, we have referred to these cases for another purpose to show that although section 12(1) does not specifically require corroborative evidence to be kept by an assessee in the form of purchase vouchers, cash memos, stock registers, the court has treated the absence of such corroborative evidence as relevant for rejection of accounts. We may also refer to a decision of the Supreme Court under the Indian Income-tax Act of 1922, the case being Chhabildas Tribhuvandas Shah v. Commissioner of Income-tax, West Bengal[1966] 59 I.T.R. 733 (S.C.); 1 S.C.T.J. 186. In that case the Income-tax Officer had applied the proviso to section 13 of the Act and held that the true profits could not be deducted from the accounts because (1) no stock register was maintained while it was easy to maintain it as the assessee was a wholesale dealer; (2) that he had an import licence of rupees eight lacs, which would enable him to make a handsome profit. The Supreme Court upheld the rejection of accounts on these considerations. Now, the Indian Income-tax Act, 1922, did not specifically require that stock register should be maintained by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash books, ledgers, etc., but also to see the corroborative evidence before coming to the conclusion that the accounts are true and correct. Therefore, the necessity of meeting the requirements of section 12(2) have to be met before the assessing authority can hold that the accounts maintained give a correct picture of the value of goods bought and sold by an assessee. If that is deficient, a conclusion in favour of assessee under section 12(1) cannot be reached. There is antithesis between section 12(1) and section 12(2), for requirements of section 12(2) have to be complied with before a finding that the assessee has maintained a true and correct account of the value of goods sold and bought by him can be recorded (sic). We feel that the only way to give effect to the legislative intent, which was to provide a mandatory mode of corroboration of his accounts maintained under section 12(1) is to hold that section 12(2) is mandatory. Any other view would result in frustrating the object of the legislature which, by section 12(2), lays down a mandatory mode of corroboration of accounts maintained under section 12(1). We accordingly hold that section 12(2) of the U.P. Sales Tax Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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