Cross-examination of third-party seller required before tax liability can rest on statements and accounts under sales tax law.

Assessment based on third-party statements and accounts could not be sustained where the seller whose material was relied on had not been produced for cross-examination. Section 54 of the Tamil Nadu General Sales Tax Act, 1959 conferred powers akin to a civil court to summon and examine persons and compel document production, and those powers had to be used effectively to secure the seller's presence. A mere formal attempt at summons was insufficient. The Madras HC therefore set aside the assessment orders and required fresh proceedings with effective enforcement of section 54 and an opportunity for cross-examination before liability was fixed.

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Issues: Whether the assessment orders could be sustained when the seller whose statements and accounts were relied upon had not been produced for cross-examination, and whether the matter required fresh consideration after effective exercise of powers under section 54 of the Tamil Nadu General Sales Tax Act, 1959.

Analysis: Section 54 of the Tamil Nadu General Sales Tax Act, 1959 vested the assessing authority with powers akin to a civil court for summoning and examining persons and compelling production of documents. The impugned order showed only a formal attempt to issue summons, followed by a conclusion that no further course was available when the dealer did not appear. In such a situation, the authority was required to exercise the statutory powers fully to secure the presence of the seller for cross-examination. Without examination of the concerned dealer, reliance on the materials relating to that dealer for fastening tax liability on the assessee would be improper.

Conclusion: The assessment orders could not be sustained on the existing material and were set aside, with a to redo the proceedings after effectively enforcing section 54 and affording cross-examination of the seller.

Ratio Decidendi: Where assessment is founded on third-party material, the assessing authority must effectively exercise statutory summons powers to secure the witness for cross-examination before relying on such material to determine tax liability.

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