Purchase tax exemption for inter-State resale and verified books of account prevented tax and rejected accounting.

Purchase tax under Section 3-AAAA was not exigible on timber bought on commission for ex-U.P. principals where the Tribunal noted that the resale had inter-State character and the statutory proviso exempted goods resold in inter-State trade or commerce in the same form and condition. Rejection of the books of account was also unjustified because the assessing authority found the records produced, scrutinised, and supported by verified sales and purchases, with no adverse material to discredit them. The assessment and appellate orders were set aside, and refund of the amount deposited under the interim order followed in accordance with law.

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Issues: (i) Whether the assessee was liable to purchase tax under Section 3-AAAA on timber purchased on commission basis for ex-U.P. principals, and whether the inter-State character of the resale attracted the statutory exemption; (ii) Whether the rejection of the assessee's books of account was justified.

Issue (i): Whether the assessee was liable to purchase tax under Section 3-AAAA on timber purchased on commission basis for ex-U.P. principals, and whether the inter-State character of the resale attracted the statutory exemption.

Analysis: A farmer selling produce grown by himself is excluded from the definition of dealer by the proviso to Section 2(c). Under Section 3-AAAA, purchase tax is attracted only where the purchasing dealer acquires taxable goods from a person other than a registered dealer, but the proviso exempts the transaction where the goods are resold within the State, in the course of inter-State trade or commerce, or exported out of India in the same form and condition. The Tribunal itself recorded that the purchases were liable to be characterized as an inter-State sale.

Conclusion: The assessee was not liable to purchase tax under Section 3-AAAA.

Issue (ii): Whether the rejection of the assessee's books of account was justified.

Analysis: The assessing authority recorded that the relevant books and records were produced, scrutinized, and that the declared sales and purchases were verified and supported by the accounts. It also noted that an earlier penalty for another assessment year had been set aside. On that record, no adverse circumstance existed to reject the books of account.

Conclusion: The rejection of the books of account was unjustified.

Final Conclusion: The revision succeeded and the assessment and appellate orders were set aside, entitling the assessee to refund of the amount deposited under the interim order in accordance with law.

Ratio Decidendi: Where the statute grants an express exemption from purchase tax for goods resold in the course of inter-State trade or commerce, tax cannot be sustained merely on the original purchase, and books of account cannot be rejected in the absence of adverse material contradicting the verified accounts.

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