Best judgment assessment must rely on record material, and exemption may still apply to locally purchased goods later used in assembly.
Even where account books are rejected for non-maintenance of required manufacturing records, the taxing authority must still base the best judgment assessment on material available on record, and the turnover will not be interfered with if the determination is not arbitrary. The note also states that exemption was available on the sale of locally purchased electric motors supplied to Government departments, and the claim could not be denied merely because the motors were later used with other parts in assembling centrifugal pumps. The assessment was otherwise sustained, while exemption was allowed only on the electric motors.
Issues: (i) Whether rejection of the account books and the best judgment assessment required interference for failure to consider the material on record in determining taxable turnover; (ii) Whether the assessee was entitled to exemption on the sale of locally purchased electric motors supplied to Government departments.
Issue (i): Whether rejection of the account books and the best judgment assessment required interference for failure to consider the material on record in determining taxable turnover.
Analysis: The account books were rejected for non-maintenance of manufacturing accounts as required by the relevant provision, but the assessing authorities were still bound to consider the material evidence available for working out taxable turnover. The Tribunal had considered the audit report, survey reports and other records, and the turnover finally determined was not shown to be arbitrary or unsupported by the record.
Conclusion: The challenge to the assessment on this ground failed and the finding was upheld against the assessee.
Issue (ii): Whether the assessee was entitled to exemption on the sale of locally purchased electric motors supplied to Government departments.
Analysis: The dispute concerned exemption on locally purchased electric motors, not the validity or performance of the supply contract. The assessee had supplied electric motors, and there was no basis to deny exemption merely because the motors, along with other parts, were later assembled into centrifugal pumps. On the facts found, local purchase followed by intra-State sale attracted the claimed exemption.
Conclusion: The assessee was entitled to exemption on the sale of the electric motors and succeeded on this issue.
Final Conclusion: The revision succeeded only to the extent of granting exemption on the sale of electric motors, while the assessment based on rejection of the books and consideration of the available material was otherwise sustained.
Ratio Decidendi: Even after rejection of account books in a best judgment assessment, the taxing authority must determine turnover on the basis of material on record, and exemption cannot be denied where the taxable sale is of locally purchased goods merely because they were later used in a different assembled product.
TaxTMI 
AI Drafter ✕
TaxTMI 
