R.L. Gulati, J.
1. This is a reference under Section 11(1) of the U.P. Sales Tax Act which has been submitted by the Additional Judge (Revisions) Sales Tax, Agra, inviting the opinion of this court on the following three questions of law:
(1) Whether in the circumstances of this case as found in revision the accounts of the dealer for the year 1964-65 could be legally rejected ?
(2) Whether on the facts and circumstances of the case as pointed out in revision the alleged transfer of stock amounting to Rs. 2,85,773 to Jullundur branch of the dealer could be legally regarded as inter-State sale ?
(3) Whether the material found on record supports the fixation of the turnover in the case of U.P. sales at Rs. 12,60,000.
2. In respect of the assessment year 1964-65 which is the assessment year in dispute, the assessee disclosed a turnover of Rs. 11,10,017 in its returns filed under the U.P. Sales Tax Act. Likewise it disclosed a turnover of Rs. 26,10,990 of inter-State sales in its returns filed under the Central Sales Tax Act. The books of accounts produced by the assessee in support of its returns were rejected and the Sales Tax Officer estimated the U.P. sales at Rs. 15,00,000. On appeal the Assistant Commissioner (Judicial) confirmed the finding of the Sales Tax Officer with regard to the rejection of accounts and also confirmed the estimate of the turnover. As regards the inter-State sales the Sales Tax Officer estimated the turnover at Rs. 30,00,000. The appellate authority upheld the estimate of the turnover at Rs. 30,00,000, but remanded the case to the Sales Tax Officer, because in his opinion the Sales Tax Officer had rejected the assessee's claim relating to the deductions worth Rs. 2,24,843 on insufficient grounds. The assessee then filed two separate revision applications, one against the order relating to the assessment under the U.P. Sales Tax Act and the other against the order relating to the Central sales tax. The Judge (Revisions) upheld the rejection of the assessee's account books. With regard to the estimate of sales he allowed some relief by reducing the estimate of the turnover of the U.P. sales tax. As regards the assessment under the Central Sales Tax Act, he set aside the order of remand passed by the appellate authority as in his opinion the claim of the assessee could be accepted on the material already on the record. He, however, maintained the enhancement made in the turnover of the inter-State sales at Rs. 30,00,000. The assessee then applied for a reference under Section 11(1) of the U.P. Sales Tax Act. The Judge (Revisions) has granted that application and has submitted the present statement of the case.
3. Coming to the questions which have been referred to us, we find that question No. (1) has not been properly framed. Whether in a particular case the account books should be accepted or rejected is essentially a question of fact and does not give rise to any question of law. The only question that can arise in such a case is whether there was any material for rejecting the assessee's accounts. We accordingly reframe the question to read:
Whether the rejection of the assessee's books of accounts is supported by any material on the record ?
4. It appears that the Sales Tax Officer had rejected the accounts on several grounds some of which did not find favour with the Judge (Revisions). He, however, found the assessee's books of accounts liable to rejection on the following grounds:
(i) That the assessee had not maintained a proper manufacturing account. The stock register maintained by the assessee did not show the issue of raw material and receipt of finished goods itemwise and from day to day with the result that no proper checking and verification was possible.
(ii) That for the past three years the assessee's sales as disclosed by it were much lower than its total purchases which, according to him, was an abnormal circumstance for which there was no satisfactory explanation.
(iii) That the assessee's claim that it had sold goods worth Rs. 2,85,773 to its Jullundur branch had not been proved. He found that there was no entry in the books of accounts with regard to the transfer of stocks to the Jullundur branch.
5. We are of opinion that the material and the circumstances relied upon by the Judge (Revisions) for rejecting the assessee's account books cannot be said to be irrelevant and as such the findings of the Judge (Revisions) rejecting the assessee's accounts cannot be said to be arbitrary or without any material.
6. Learned counsel for the assessee stated that the stock register maintained by it was in accordance with Rule 72 of the U.P. Sales Tax Rules. That rule provides as to how the accounts should be maintained by a dealer. Sub-clause (2) of the rule provides that a manufacturer liable to pay tax under the Act shall maintain stock books in respect of raw materials as well as products at the various points of production. It is obvious that the stock register contemplated by this Rule 72(2) is a stock register which should contain particulars of day to day consumption of each raw material and of the finished products at different stages. The overall stock register of the kind produced by the assessee could not be said to be in conformity with the requirements of the rule. The defect in the stock register coupled with the other two defects pointed out by the Judge (Revisions) in our opinion constituted good material for rejecting the assessee's account books. We, therefore, answer question No. (1) as refrained by us in the affirmative in favour of the department and against the assessee.
7. Coming now to question No. (2), it appears that the Sales Tax Officer treated the sum of Rs. 2,85,773 being the value of stock, which according to the assessee, had been transferred to its Jullundur branch as inter-State sales and on that basis he made an addition of Rs. 4,00,000 to the total turnover of the inter-State sales. Now, when one turns to the revisional order, one finds that the Judge (Revisions) refused to accept the plea of the assessee that the goods in question had been transferred to the Jullundur branch because he found no entry in that respect in the assessee's account books. Upon this finding it was not possible to hold that the sum of Rs. 2,85,773 represented inter-State sales. In order that a sale should be held to be an inter-State sale, two things have to be proved, (1) that there was a contract of sale involving inter-State sale and (2) that the goods had in fact moved from one State to another as a result of such a contract. Now, when the Judge (Revisions) had refused to accept the assessee's plea that the goods worth Rs. 2,85,773 had been transferred, to its Jullundur branch, there was no movement of the goods from one State to another. Secondly, there is no finding that there was any contract of sale between two persons. Even if the assessee's plea that it had sold some goods to its Jullundur branch is accepted, it would not mean a sale because no one can sell his own goods to himself. If Jullundur is the branch of the assessee, obviously tha business at Jullundur and Hathras belongs to the same entity and there can be no question of any sale between the head office and the branch. We are accordingly of the opinion that there was no material for holding that the sum of Rs. 2,85,773 represented the turnover of inter-State sales. We accordingly answer question No. (2) in the negative in favour of the assessee and against the department.
8. Coming now to question No. (3), it appears that the assessee had shown its turnover of U.P. sales at Rs. 11,00,000 and odd which was enhanced by the Sales Tax Officer to Rs. 15,00,000, but was reduced to Rs. 12,60,000 by the Judge (Revisions). Thus there was an enhancement of Rs. 1,60,000. The Judge (Revisions) has arrived at a figure of enhancement on the ground that enhancement should be in the same proportion as the enhancement in the turnover of the inter-State sales which was 15 per cent. That basis, of course, no longer exists, because we have held that the sum of Rs. 2,85,773 which had been treated to be inter-State sales was without any material. However, that does not mean that the addition made to th U.P. sales is without any material or basis. After having held that the account books of the assessee were not reliable, it would be open to the sales tax authorities to have rejected the return and to have estimated the turnover. The sales tax authorities would have been justified if they had added a sum of Rs. 2,85,773 to the U.P. turnover because that much worth of goods had admittedly been taken out of the assessee's stock, the sale whereof had not been accounted for. It would have been a logical inference for the sales tax authorities to draw that the goods worth Rs. 2,85,773 had been sold in the market and the sale proceeds had not been included in the turnover. As it is, that course has not been adopted and instead an addition of Rs. 1,60,000 only has been made. In our opinion, the addition upto Rs. 2,85,773 would have been fully justified and the sum of Rs. 1,60,000 being less than that amount, it cannot be said that such an addition was not permissible or was without any legal justification.
9. We accordingly answer question No. (3) in the affirmative in favour of the department and against the assessee.
10. In the circumstances we make no order as to costs. Counsel's fee is assessed at Rs. 100.