Adverse inference from missing contracts fails where accounts show consistent export dealings and preservation rules are satisfied.

An adverse presumption cannot be drawn to assess sales tax on disputed turnover merely because two export contracts were not produced, where the assessee's accounts show a consistent pattern of dealings with the same exporting agent and contracts for the substantial remainder support the export-sale claim. The preservation rule required retention of accounts for only five years, so the missing documents were not enough, by themselves, to justify an inference of deliberate suppression. On that basis, the assessment on the disputed turnover was held unsupported in law and was set aside in favour of the assessee.

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Issues: Whether the turnover of Rs. 39,000 and odd could be assessed to sales tax on the basis of an adverse presumption drawn from non-production of the relevant contracts, notwithstanding the assessee's accounts, the uniform pattern of dealings with the exporting agent, and the rule requiring preservation of accounts for five years.

Analysis: The disputed turnover formed part of a larger and uniform course of dealings with the same exporting agent. The assessee's accounts, which were not challenged, showed the same pattern for the entire transactions, and contracts produced for the major portion supported the claim of export sales. The non-availability of two contracts, by itself, could not justify an adverse inference when Rule 26(16) of the Madras General Sales Tax Rules, 1959, required preservation of accounts only for five years and there was no basis to treat the missing documents as deliberately suppressed. The finding of the lower authorities was therefore unsupported in law.

Conclusion: The adverse presumption was unwarranted, and the assessment on the disputed turnover was set aside in favour of the assessee.

Ratio Decidendi: An adverse inference cannot be drawn merely from non-production of contracts where the assessee's accounts disclose a consistent transaction pattern, supporting material exists for substantially similar dealings, and the documents are no longer required to be preserved under the applicable accounts-preservation rule.

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