Best judgment tax assessment and CST on branch transfers turn on proof of stock discrepancies and sale-linked inter-State movement.

Best judgment enhancement of local sales tax was upheld where seized diaries, loose papers and unexplained stock discrepancies justified an adverse inference and the dealer failed to produce a credible stock reconciliation. CST liability, however, required proof that inter-State movement of goods was occasioned by a prior contract of sale or purchase; mere branch transfer or stock movement was insufficient. On the record, the material did not adequately link the goods movement with actual sale transactions, so the CST demand was set aside and remanded. The tribunal's refusal to direct supply of documents was also sustained because the application was belated and no prejudice or due diligence was shown.

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Issues: (i) whether the local tax demand based on discrepancies in stock and books of account could be sustained on a best judgment basis; (ii) whether the levy under the Central Sales Tax Act on the footing that branch transfers were inter-State sales was legally sustainable; and (iii) whether dismissal of the application seeking supply of documents under the appellate tribunal rules called for interference.

Issue (i): whether the local tax demand based on discrepancies in stock and books of account could be sustained on a best judgment basis.

Analysis: The assessment was founded on seized diaries, loose papers and unexplained variations between physical stock and recorded stock. The burden lay on the dealer to explain the discrepancies and establish that the disputed sales were not taxable. No satisfactory stock reconciliation or credible explanation was furnished, and the material on record justified the drawing of an adverse inference. In such circumstances, enhancement of sales on a best judgment basis was held to be a reasonable exercise of assessment power.

Conclusion: The local tax demand was upheld and the challenge to the best judgment assessment failed.

Issue (ii): whether the levy under the Central Sales Tax Act on the footing that branch transfers were inter-State sales was legally sustainable.

Analysis: The decisive test was whether the movement of goods from one State to another was occasioned by a prior contract of sale or purchase. Mere movement of goods to branches, depots or storage facilities did not by itself establish an inter-State sale. The record showed only a few gate passes and did not disclose adequate material linking the movement with actual sale transactions, invoices, delivery details or proof of purchase orders from outside Delhi buyers. The burden on the dealer to justify stock transfer was not discharged in a manner sufficient to sustain the CST levy.

Conclusion: The CST demand was set aside and the matter was remanded for fresh consideration on that aspect.

Issue (iii): whether dismissal of the application seeking supply of documents under the appellate tribunal rules called for interference.

Analysis: The application was found to be belated, and no prejudice from non-supply of documents was demonstrated in the manner required for interference. The objection was not shown to have been raised at the appropriate stage before the assessing authority, and the tribunal's view on absence of due diligence was sustained.

Conclusion: The dismissal of the application for supply of documents was affirmed.

Final Conclusion: The appeal succeeded only in relation to the CST component, while the local sales tax demand and the order rejecting the document-supply application were maintained.

Ratio Decidendi: Movement of goods to another State becomes exigible to CST only when it is shown to be pursuant to a contract of sale or purchase, and a mere branch transfer or stock movement does not attract inter-State sale liability absent supporting evidence.

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