Second-sale exemption requires proof of bogus purchases; cancelled registration alone does not defeat the exemption.

A second seller is entitled to exemption where the turnover relates to goods previously sold in the State by a dealer liable to tax, and the assessee need not prove that the first seller actually remitted tax. Cancellation of the first seller's registration, or closure of its business during the assessment year, does not by itself negate the character of the earlier sale as a taxable sale. To deny the second-sale exemption, the revenue must establish that the alleged purchases were not genuine or that the bills were bogus; mere assumptions or presumptions are insufficient. On the facts stated, the assessee proved second sales and the turnover could not be taxed as first sales.

---

---

Issues: Whether the assessee was entitled to exemption as a second seller in respect of purchases from dealers whose registration had been cancelled or whose business had closed during the assessment year, and whether the revenue could deny exemption without proving that the alleged purchases were not genuine or that the bills were bogus.

Analysis: The governing principle is that a subsequent seller need only establish that the turnover represents a later sale of goods whose earlier sale in the State was a taxable sale by a dealer liable to tax; the assessee is not required to prove that the first seller had actually paid the tax. The cancellation of a seller's registration certificate, or the closure of business during the year, does not by itself destroy the character of the earlier sale as a taxable sale. If the revenue seeks to deny the second-sale exemption, it must investigate and establish that the alleged transactions were not genuine or that the bills were bogus; assumptions and presumptions are insufficient.

Conclusion: The assessee succeeded in showing that the turnover represented second sales and was entitled to exemption. The revenue failed to displace that position by proving that the transactions were fictitious, so the turnover could not be brought to tax as first sales.

Ratio Decidendi: A second seller is entitled to exemption where the goods were previously sold in the State by a dealer liable to tax, and the revenue cannot deny that exemption merely because the first seller's registration was later cancelled or the business had closed, unless it proves that the alleged purchases were not genuine.

---