G. SIVARAJAN, J. -
(1.) THESE two revisions are filed by the State against the common order of the Sales Tax Appellate Tribunal in T. A. Nos. 376 and 377 of 1998 in respect of the assessment years 1993-94 and 1994-95. The respondent-assessee in both the revisions is one and the same person, who is a jeweller at Thrissur. The assessment years, as already noted, are 1993-94 and 1994-95. For the assessment year 1993-94 the assessee filed a return disclosing a total and taxable turnover of Rs. 4,08,591. 98. Similarly for the assessment year 1994-95 the assessee filed a return disclosing a total and taxable turnover of Rs. 8,00,063. 31. The assessing authority proposed to reject the returns and the books of accounts for the aforesaid two years and to estimate the turnover to the best of judgment. The reasons stated by the assessing authority for rejecting the books of accounts for the year 1993-94 are as follows : 1. The assessee has not maintained a manufacturing account in form 25b as provided in the Kerala General Sales Tax Act and Rules. 2.When considered the average running stock held by the dealer, the sales turnover conceded is very low. The sales turnover conceded is only 1/3 of the running stock. 3.The sales accounted by the dealer during the year is only 134 days and purchase accounted is only 30 days. This is unbelievable when considered the location of the business place. 4.Maximum sales conceded in a day is only 12,500 gross. It is hardly believable that the dealer has no items of ornaments having weight above it and get sales during the entire year. 5.Wastage of remaking claimed is too high. The manufacturing wages accounted is too low. 6.The opening stock value is Rs. 330 per gram and closing is Rs. 371 per gram. But the sales value is Rs. 462. This shows that the dealer undervalued the opening and closing stock in order to deflate the actual running stock. The assessee filed a reply objecting to the proposal. The assessing authority rejected the said objection stating that they are of general nature. The assessment for the year 1993-94 was accordingly completed fixing a total and taxable turnover of Rs. 32,40,470. The reasons for rejecting the return for the assessment year 1994-95 are almost similar to the one stated for the assessment year 1993-94. In that case also the objection filed by the assessee was rejected and total and taxable turnover for the year 1994-95 was fixed at Rs. 49,69,420. In appeal filed by the assessee against the two assessment orders the first appellate authority had upheld the rejection of accounts, but modified the assessment as follows : " The sales turnover of the gold ornaments for the year 1993-94 is determined at two times of the returned sales turnover of Rs. 3,45,431, i. e. , at Rs. 6,90,862. The purchase turnover is ordered to be estimated at 80 per cent of the sales turnover estimated. The purchase turnover liable to levy of sales tax will be estimated at one fourth of the total purchase turnover estimated. The sales tax assessment of the appellant for the year 1993-94 is reduced. The assessing authority will revise the assessment as per this appellate order. " Similarly for the assessment year 1994-95 the first appellate authority had modified the assessment for the year 1994-95 and ordered as follows : " Due to the failure to maintain manufacturing accounts and other defects in the books of accounts the sales turnover of gold ornaments is ordered to be determined at two times of the sales turnover of Rs. 4,45,136. 43 returned by the appellant, i. e. , at Rs. 8,90,272. 86. The purchase turnover is determined at 80 per cent of the sales turnover estimated. The assessing authority will revise the sales tax assessment of the appellant for the year 1994-95 as directed in this appellate order. "
(2.) NOT satisfied with the said appellate orders, the assessee filed two appeals before the Sales Tax Appellate Tribunal, Additional Bench, Palakkad, as T. A. Nos. 376 and 377 of 1998. The Tribunal had set aside the assessment orders and the two appellate orders and directed the assessing authority to accept the accounts and returns filed by the assessee and to complete the assessments as per the books of accounts maintained by the assessee. Being aggrieved by the common order of the Tribunal the department has filed these two revisions.
Learned Government Pleader appearing for the revision petitioner submits that the accounts of the assessee were rejected on various grounds including non-maintenance of manufacturing accounts. He further submitted that the honourable Supreme Court in Commissioner of Sales Tax, U. P. v. Girja Shanker Awanish Kumar  104 STC 130 highlighted the importance of maintaining manufacturing accounts and observed that it is a ground for rejection of the accounts. The Government Pleader further submitted that the Tribunal without bearing in mind the importance of the maintenance of the manufacturing account had observed that non-maintenance of the manufacturing account is a technical defect and that the accounts cannot be rejected for the said reason. The Government Pleader further submitted that the Tribunal has also failed to consider the various other reasons stated by the assessing authority for the rejection of the accounts. He further submitted that the first appellate authority has estimated the turnover keeping in mind the turnover fixed by the assessing authority for the year 1995-96 which aspect was also not borne in mind by the Tribunal.
We have also heard the learned counsel appearing for the respondent-assessee. Though the counsel appearing for the respondent-assessee has sought to justify the order of the Tribunal, we are unable to agree with the findings of the Tribunal. Though the assessing authority in the assessment for the year 1993-94 had stated six reasons for the rejection of the accounts, the Tribunal had noted that the reason for the rejection of the accounts is the non-maintenance of manufacturing account. According to the Tribunal the acceptance of the accounts is the general rule and the rejection is the exception and, therefore, in the absence of any material to reject the return and books of accounts of the assessee the returns and books of accounts have to be accepted. We are unable to agree with the aforesaid findings of the Tribunal. As already noted, one of the reasons stated by the assessing authority for the rejection of the returns and books of accounts of the assessee is the non-maintenance of manufacturing account in form 25b as provided under sub-rule (15a) of rule 32 of the Kerala General Sales Tax Rules, 1963. The Supreme Court in Commissioner of Sales Tax, U. P. v. Girja Shanker Awanish Kumar  104 STC 130 considered the question as to whether the accounts can be rejected for failure to maintain stock register. This is what the Supreme Court has stated in regard to the importance of maintaining the stock register and the rejection of books of accounts : " The keeping of a stock register, especially in the case of a manufacturer, is of great importance. It is a means of verifying the assessee's accounts by having a quantitative tally. Section 12 (2) of the Act mandates the dealer to maintain stock books in respect of raw materials as well as products obtained at every stage of production. If such a stock book is not maintained, it leads to the conclusion that the account books are not reliable or that particulars are not properly verifiable. If the account books are rejected, the turnover has to be determined to the best of judgment of the assessing authority concerned. We are unable to uphold the view that a defect in non-maintenance of stock register is only technical and so the turnover disclosed in the account books should be accepted. On the facts of a particular case, it is for the assessing authority to consider along with other materials disclosed in the case, to what extent the account books can be relied on for determining the turnover. In normal circumstances, the rejection of account books call for the estimation of the turnover to the best of judgment of the assessing authority. Having upheld that the account books of the assessee were liable to be rejected, the learned Judge of the High Court was wrong in holding that the defect is of a technical nature and the account books should be accepted. We set aside the decision of the High Court and direct that the estimated turnover of the dealer as upheld in appeal, shall stand restored. "
(3.) THIS Court also had occasion to consider the mandatory nature of the rule providing for maintenance of the manufacturing account and the rejection of accounts for the failure to maintain the manufacturing account in Thamarappally Bros. v. State of Kerala  103 STC 504. The relevant portion reads thus : " With regard to question No. 3 regarding the provisions of rule 32 (15) of the Kerala General Sales Tax Rules, learned counsel relied on the earlier decision of this Court (T. R. C. No. 1 of 1970 dated March 18, 1971 ). On going through the judgment it would appear at once that this Court has already held that under rule 32 (15) of the Sales Tax Rules every manufacturer of goods has to maintain daily production accounts showing quantitative details of the various raw materials used for the manufacture and the quantitative details of the goods so manufactured and the assessee has not maintained any accounts of this nature. Learned counsel submitted that the rule should not be considered as mandatory. Going through the contents of the rule when the rule makes it obligatory on the assessee to maintain accounts with regard to the production giving necessary quantitative details of the various raw materials used for the manufacture as well as the quantitative details of the goods so manufactured it is difficult to accept the submission more so in view of the fact that earlier also in the judgment placed before us the court proceeded to consider the explanation in regard to non-maintenance and passed orders in regard thereto. Independently also it is not possible to accept the submission that the rules are directory in nature when the rule makes provision for so many details in regard thereto. "
The division Bench in the said case has upheld the rejection of accounts of the assessee and the estimation of the turnover for non-maintenance of manufacturing account. In view of the aforesaid authoritative decision of the Supreme Court and of this Court, we are of the view that the Appellate Tribunal was not justified in directing the acceptance of the books of accounts of the assessee particularly in view of the fact that the assessee had no case that he had maintained the manufacturing account as contemplated under rule 32 (15a) of the Kerala General Sales Tax Rules. That apart, it must be noted that the assessing authority has also got a case that the assessee had held very huge stock of gold ornaments during the relevant period and that the sales turnover returned by the assessee relates to the sales effected only for the 134 days during the year 1993-94. The Tribunal had also not considered the fact that in the assessment for the year 1994-95 the taxable turnover of the assessee was fixed at Rs. 8,19,060 as noted by the first appellate authority. According to us, the Tribunal was not justified in brushing aside the various reasons stated by the assessing authority for rejecting the accounts and for estimating the turnover and in directing the acceptance of the accounts. The direction is clearly against the decision of the Supreme Court referred to above. In the above circumstances, we set aside the common order of the Tribunal for the two assessment years under revision and direct the Tribunal to dispose of the appeals afresh in accordance with law keeping in mind the observations made in this judgment. These two tax revision cases are allowed as above. Petitions allowed. .;