Second-sale exemption requires proof of an earlier taxable sale; best judgment cannot replace evidence on first-sale liability.

An assessee claiming exemption on the basis that its sales were second or subsequent sales must prove the existence of an earlier taxable sale; it is not enough to rely on its own account entries, and the department need not prove that the earlier sale actually suffered tax. Best judgment assessment may be used to estimate turnover, but it cannot replace evidence on the distinct question whether the turnover represents first sales chargeable to tax. Because the assessee was entitled to an opportunity to adduce evidence on the earlier sale issue, the matter was remanded for fresh consideration.

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Issues: (i) whether an assessee claiming that his sales were second sales exempt from tax must prove that there was an earlier taxable sale; (ii) whether the Tribunal could sustain the finding on first sales and probable omissions on the basis of best judgment without proper evidence, and whether the matter required remand for fresh consideration.

Issue (i): whether an assessee claiming that his sales were second sales exempt from tax must prove that there was an earlier taxable sale.

Analysis: Liability to sales tax cannot be tested merely from the assessee's own account entries. Once the sale by the assessee is established, exemption on the ground that it is a second or subsequent sale depends on proof that there was an earlier taxable sale. The assessee need not prove that the earlier sale actually suffered tax, but must establish the existence of an earlier taxable sale as the basis for exemption.

Conclusion: The burden lay on the assessee to prove an earlier taxable sale, and the contention that the department had to prove a taxable first sale was rejected.

Issue (ii): whether the Tribunal could sustain the finding on first sales and probable omissions on the basis of best judgment without proper evidence, and whether the matter required remand for fresh consideration.

Analysis: Best judgment assessment may be used to estimate turnover, but the estimate must rest on material and not on suspicion. The question whether the turnover represented first sales chargeable to tax required evidence and could not be concluded merely from best judgment. As the assessee had proceeded on the footing that the entries showed purchases from local dealers, fairness required an opportunity to adduce evidence to establish an earlier taxable sale.

Conclusion: The order of the Tribunal was set aside and the matter was remanded for fresh consideration with opportunity to the assessee to produce further evidence.

Final Conclusion: The revision succeeded to the extent of securing a remand, while the substantive burden on the assessee to establish the exempt character of the sales was affirmed.

Ratio Decidendi: A claim to exemption on the footing of second sale fails unless the assessee proves an earlier taxable sale, and a best judgment estimate cannot substitute for proof on the distinct question whether the turnover is a first sale chargeable to tax.

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