Turnover inclusion for timber purchased on State-consumption declarations was upheld when goods were diverted outside the State.
Where timber was purchased on declarations that it would be resold by actual delivery in Madhya Pradesh for consumption in the State, section 4(6) applied only if that stated condition was satisfied. Because the contract and intended destination showed the timber was to be sent outside the State, the statutory basis for excluding the purchase price failed and the amount was includible in turnover. A later sale said to form part of inter-State trade did not defeat liability, since the original local purchases were taxable and the declarations merely postponed recovery; once the purchaser acted contrary to those declarations, he could not avoid inclusion by relying on the subsequent movement of goods.
Issues: (i) Whether the purchase price of timber bought on declarations for resale by actual delivery in Madhya Pradesh for consumption in the State could be included in turnover under section 4(6) when the timber was exported outside the State. (ii) Whether the assessee could avoid liability on the ground that the subsequent sale to the railway authorities formed part of inter-State trade.
Issue (i): Whether the purchase price of timber bought on declarations for resale by actual delivery in Madhya Pradesh for consumption in the State could be included in turnover under section 4(6) when the timber was exported outside the State.
Analysis: Section 4(6) of the 1947 Act applied where goods purchased on the footing that they would be resold by actual delivery in Madhya Pradesh for consumption in the State were in fact utilised for another purpose. The timber was purchased on such declarations, but the contract showed that the consignee was outside the State and the timber was intended to be sent to Jodhpur. The statutory condition of use for consumption in Madhya Pradesh was therefore not satisfied, and the purchase price was liable to be included in turnover.
Conclusion: The inclusion of the purchase price in turnover was justified and the finding was against the assessee.
Issue (ii): Whether the assessee could avoid liability on the ground that the subsequent sale to the railway authorities formed part of inter-State trade.
Analysis: The reliance on the inter-State trade principle was misplaced because the original local purchases were themselves taxable transactions. Tax had not been collected initially only because the assessee's declarations deferred recovery to the stage contemplated by section 4(6). Once the assessee acted contrary to the declarations and prevented that recovery, he could not avoid liability by characterising the later movement as inter-State trade.
Conclusion: The inter-State trade objection failed and the finding was against the assessee.
Final Conclusion: The reference was answered in favour of the Revenue, and the assessee's liability to have the purchase price included in turnover was upheld.
Ratio Decidendi: Where goods are purchased on a declaration that they will be resold by actual delivery in the State for consumption there, but are in fact used or intended for another destination or purpose, section 4(6) authorises inclusion of the purchase price in turnover and the purchaser cannot escape liability by relying on a later inter-State movement.
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