State sales tax exemption limited to intra-State resale; outside-Delhi sales fall outside the registered dealer exemption.

A State sales tax exemption for goods purchased tax-free by a registered dealer was construed as applying only where the contemplated resale or post-manufacture sale occurred within Delhi. The provision was read in the context of the Act's territorial operation, its definitions of dealer and registered dealer, and its single-point levy scheme, which aimed to ensure that the exempt first sale was followed by a taxable second sale inside the State. A sale outside Delhi was treated as outside the dealer's capacity as a registered dealer under the Act. The Court also noted that any wider reading would undermine the statutory classification and raise Article 14 concerns.

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Issues: Whether goods purchased tax-free by a registered dealer under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, could be resold or, after use as raw material, sold outside Delhi without attracting the second proviso, and whether a construction permitting such outside-Delhi sales would be consistent with the Act and Article 14 of the Constitution of India.

Analysis: The provision was construed in the setting of a State sales tax law which could operate only territorially within Delhi. The words "for resale" and "for sale" in section 5(2)(a)(ii) were read in the light of the scheme of the Act, the definition of dealer and registered dealer, the single point levy structure, and the object of ensuring that the exempt first sale would be followed by a taxable second sale within Delhi. A sale by a registered dealer outside Delhi was held not to be a sale by him in his capacity as a registered dealer under the Act. The Court also held that a contrary construction would destroy the classification between registered dealers and ordinary dealers and would render the exemption discriminatory and unconstitutional under Article 14. The long administrative practice allowing outside-Delhi sales was rejected as resting on a mistaken reading of the section.

Conclusion: The resale or post-manufacture sale contemplated by section 5(2)(a)(ii) had to be made in Delhi, and purchases tax-free were rightly included in the taxable turnover when the goods were sold outside Delhi. The challenge failed.

Ratio Decidendi: In a State sales tax statute, an exemption granted to a registered dealer for the first sale is valid only if the contemplated second sale is taxable within the State and is effected in that State; a sale outside the State is not a sale by the dealer as a registered dealer for the purposes of the exemption.

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