Exempt goods and account books: manufacturing accounts under section 12(2) alone could not justify rejection of books.

A dealer manufacturing and selling fully exempt goods was not required to maintain manufacturing accounts under the manufacturer-specific obligation in section 12(2) of the U.P. Sales Tax Act merely for that reason, and rejection of the books on that ground alone was unsustainable. The court distinguished this from the separate duty under section 12(1) to keep true and correct trading accounts, and left any further challenge based on alleged defects in those accounts or other factual issues for fresh consideration by the fact-finding authority.

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Issues: Whether, in the case of a dealer manufacturing and selling fully exempt goods, the account books could be rejected merely for maintenance of manufacturing accounts under section 12(2) of the U.P. Sales Tax Act.

Analysis: Section 12(1) requires every dealer to maintain true and correct accounts of goods bought and sold, while section 12(2) imposes an additional obligation on a manufacturer to keep stock books of raw material and products at every stage of production. The decisive question was whether failure to comply with section 12(2), by itself, justified rejection of the books when the manufactured goods were wholly exempt from tax. The controlling legal position was that a dealer dealing in exempt goods is not required to maintain manufacturing accounts under section 12(2) merely for that reason, and the account books cannot be rejected on that ground alone. At the same time, the question whether the books could be rejected for failure to maintain proper accounts under section 12(1), or on other factual grounds relating to the alleged sale of angle iron, was not finally determined and was left for fresh consideration by the fact-finding authority.

Conclusion: Rejection of the books solely for non-maintenance of manufacturing accounts under section 12(2) was held unsustainable; the matter was remitted for reconsideration on the remaining factual issues.

Ratio Decidendi: Where a dealer is engaged in the manufacture and sale of fully exempt goods, non-maintenance of manufacturing accounts under the additional manufacturer-specific requirement cannot by itself justify rejection of the accounts.

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