Commercial substance controls classification of melted silver goods; proper books cannot be rejected without a real accounting defect.

Properly maintained books of account cannot be rejected or a best judgment assessment invoked merely because no separate account of molten silver was kept, where no falsity or statutory defect in the records was shown. Silver ornaments purchased for immediate melting and resale were held to fall outside the expression "silver ornaments of personal wear" in the relevant sales tax entry, because their commercial substance was bullion rather than ornaments meant for use. On that basis, the goods attracted the lower rate, and the higher-rate assessment was not sustained.

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Issues: (i) Whether the books of account could be rejected and best judgment assessment resorted to merely because no separate account of molten silver was maintained; (ii) whether silver ornaments purchased for melting and resale were to be treated as bullion or as silver ornaments of personal wear liable to tax at the higher rate.

Issue (i): Whether the books of account could be rejected and best judgment assessment resorted to merely because no separate account of molten silver was maintained.

Analysis: The books were found to be properly maintained and no false entries were discovered. There was no statutory requirement compelling the assessee to maintain a separate account of molten silver. In the absence of any legal defect in the accounts, rejection of the books was unjustified and best judgment assessment could not be invoked.

Conclusion: The rejection of the books of account and resort to best judgment assessment were improper.

Issue (ii): Whether silver ornaments purchased for melting and resale were to be treated as bullion or as silver ornaments of personal wear liable to tax at the higher rate.

Analysis: The ornaments purchased were broken, unsuitable for wear, immediately melted, and the melted silver was sent for sale. On those facts, the expression "silver ornaments of personal wear" in entry 2, Part V of Schedule II to the Madhya Pradesh General Sales Tax Act, 1958, was confined to ornaments meant for use as ornaments. Since the transactions were in substance purchases and sales of silver and not of personal wear ornaments, the goods fell outside the higher-rate entry.

Conclusion: The goods were rightly treated as bullion and taxable only at the lower rate.

Final Conclusion: The reference was answered in support of the assessee on both questions, and the higher-rate assessment was not sustained.

Ratio Decidendi: Where goods are purchased not for ornamental use but for immediate melting and resale as silver, they are not "silver ornaments of personal wear" and must be classified according to their commercial substance; a best judgment assessment cannot rest on the mere absence of a separate account when the books are otherwise proper and truthful.

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