Tax-free purchase use in execution of contract excluded from net turnover where goods matched registered purpose.

Tax-free goods purchased for use in execution of a contract could not be added to net turnover where the registration certificate authorised such use and the goods were in fact used to make articles such as iron gates and water tanks to customer specifications. The governing proviso to section 15(1)(b) of the Assam Sales Tax Act, 1947 applied only when tax-free goods were diverted to purposes outside the registered use. Because the statutory definition of "contract" covered preparation or construction of movable property for consideration, the use remained within the authorised purpose. The inclusion of the purchase value in net turnover was therefore unjustified, and the question was answered in favour of the assessee.

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Issues: Whether the value of goods purchased tax-free for use in execution of contract could be included in the dealer's net turnover under the proviso to section 15(1)(b) of the Assam Sales Tax Act, 1947, when those goods were used in preparing goods to customers' specifications.

Analysis: The governing proviso applied only where tax-free goods were used for purposes other than those specified in the registration certificate. The certificate authorised purchase for use in execution of contract, and the statutory definition of "contract" covered agreements for the preparation or construction of movable property for consideration. On the facts found, the materials were used in making iron gates, water tanks and similar articles pursuant to orders and specifications, which brought the use within execution of contract as defined by the Act. In those circumstances, the proviso was not attracted, and the amounts could not be added to the net turnover on the footing that the goods were used for an unauthorised purpose.

Conclusion: The inclusion of the value of the tax-free purchases in the dealer's net turnover was not justified, and the question referred was answered against the department and in favour of the assessee.

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