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IN THE HIGH COURT OF ALLAHABAD
Om Prakash, J.
ANSAR TRADERS - Appellant
Versus
COMMISSIONER OF SALES TAX - Respondents
S. T. R. 647 Of 1986
Decided On : 09/09/1987
U. P. SALES TAX ACT, 1948 - SECTION 12(1), 12(2) - MANUFACTURING ACCOUNT - MAINTENANCE - EXEMPTED ITEMS - NOT REQUIRED:
Fact of the Case:
The assessee, a manufacturer and seller of wood carving goods, challenged the rejection of his account books under Section 12(2) of the U. P. Sales Tax Act, 1948, for not maintaining a manufacturing account. The assessee argued that since the wood carving items were exempted from tax, he was not liable to pay tax and therefore not required to maintain a manufacturing account under Section 12(2).
Finding of the Court:
The court held that the assessee, who was a manufacturer-dealer of exempted items, was not required to maintain a manufacturing account under Section 12(2) of the Act, as he was not liable to pay tax on the exempted items.
Issues: Whether a manufacturer-dealer of exempted items is required to maintain a manufacturing account under Section 12(2) of the U. P. Sales Tax Act, 1948.
Ratio Decidendi: The court interpreted Section 12(1) and 12(2) of the Act and held that while every dealer, including those exempted from tax, must maintain true and correct accounts of goods sold and bought under Section 12(1), only manufacturers liable to pay tax are required to maintain a manufacturing account under Section 12(2). Since the assessee's wood carving items were exempted from tax, he was not liable to pay tax and therefore not required to maintain a manufacturing account.
Final Decision: The court allowed the revision, set aside the Tribunal's order rejecting the assessee's book version, and remanded the case back to the Tribunal to pass a conforming order accepting the assessee's book version.
( 1 ) RAISING a short question 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 (for short "the Act, 1948"), this revision is filed by the dealer for the assessment year 1978-79 against the Tribunals order dated 24th April, 1986.
( 2 ) THE assessee engaged in the business of manufacture and sale of wooden carving goods purchases timber against form 31 from outside the province and after having done the carving he manufactures several items for sale. Admittedly no manufacturing account has been maintained by the assessee, but he maintained the other accounts, namely, rokar, khata, ledger, purchase and sale register, form register, cash book, etc. No survey was conducted during this year on the assessees premises.
( 3 ) THE assessing officer, however, rejected the book version of the assessee and enhanced the total turnover. He however accepted the sales effected within the State of U. P. The assessing officer held that the concealed sales of timber and sokhta had been made by the assessee. The best judgment assessment was made after having rejected the book version on the ground that no manufacturing account as envisaged by Section 12 (2), was maintained by the assessee. The rejection of the books for this reason was sustained by the Tribunal as well.
( 4 ) AGGRIEVED, the assessee has come up in revision. The scheme of Section 12 is clear and concise. Sub-section (1) of Section 12 enjoins upon any dealer including the dealer exempted from tax to keep and maintain true and correct account showing the value of the goods sold and bought by him. The proviso to Sub-section (1) says that the mandate envisaged by Sub-section (1) shall not apply to such dealers as are not liable to taxation under this Act. Sub-section (2) of section 12 casts a special obligation on a manufacturer liable to pay tax under this Act to maintain stock book in respect of raw material as well as the products obtained at every stage of the production, in addition to the accounts referred to in Sub-section (1 ). In short, Section 12 requires that every dealer unless he is not liable to taxation under this Act is under legal obligation to maintain true and correct account showing the value of the goods sold and bought by him and a manufacturer-dealer liable to pay tax has extra burden on himself to maintain stock books in respect of raw materials as well as the products besides the accounts referred to in sub-section (1 ). The wood carving items in which the assessee deals, are exempted under section 4 of the Act, 1948. It is, therefore, contended on behalf of the assessee that it is not necessary for the assessee to maintain the manufacturing account under Sub-section (2) of section 12, as he is not liable to pay tax. The question is whether the assessee who is a manufacturer-dealer is liable to pay tax. It is not denied that wood carving items manufactured by the assessee are exempted from tax and that being so, the assessee cannot be said to be liable to pay tax within the meaning of Sub-section (2) of Section 12 of the Act, 1948. When he is not liable to pay tax on the exempted items, will he be required to maintain a manufacturing account ? I quite agree with the assessee that he not being liable to pay tax on the items which he manufactures and sells, is not required to maintain account under Sub-section (2 ). If he is found to be a dealer in timber then his book version can be rejected, if he fails to maintain account of sales and purchases under Sub-section (1) of Section 12. The Sales Tax Officer has not rejected the book version of the assessee on the ground that he fails to keep accounts as required by sub-section (1) of Section 12, but the book version has been rejected for violation of Sub-section (2) of Section 12. The Tribunal failed to consider the case of the assessee in the right perspective inasmuch as it held : hence
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