Recognition certificate limits on taxable goods failed where raw materials were used for exempt ice-cream sales, justifying purchase tax.

Raw materials purchased under a recognition certificate in form 15 were restricted to manufacture of taxable goods for sale, and that condition was not met where the resulting ice-cream sales were exempt under Entry 14 of Schedule A. The court treated taxability as dependent on the relevant sale or purchase, not merely the abstract character of the finished product, and held that materials used for exempt sales-linked production fell outside the certificate's permission. Purchase tax under section 14 was therefore leviable to the extent the raw materials were used for exempt sales of ice-cream.

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Issues: Whether raw materials purchased under a recognition certificate issued in form 15 were liable to purchase tax when they were used in manufacturing ice-cream that was sold wholly or partly under an exemption under Entry 14 of Schedule A to the Bombay Sales Tax Act, 1959.

Analysis: The expression "taxable goods" in section 2(33) is defined with reference to goods the sale or purchase of which is not exempt from tax. The certificate in form 15 required the goods to be purchased for use in the manufacture of taxable goods for sale. The relevant enquiry therefore turned on whether the goods manufactured from those raw materials were, in the circumstances of their sale, taxable goods. Since the ice-cream sold at less than the prescribed price was exempt under Entry 14 of Schedule A, the raw materials used in producing that portion of the ice-cream were not used in the manufacture of taxable goods for sale. The exemption attached to the sale itself, and the statutory scheme treats taxability by reference to sale or purchase, not by reference only to the character of the finished article in the abstract.

Conclusion: The use of raw materials in the manufacture of exempt sales of ice-cream amounted to a contravention of the form 15 recital, and purchase tax under section 14 was leviable to that extent.

Final Conclusion: The reference was answered against the assessee and the Revenue's claim for purchase tax was upheld to the extent of the exempt sales-linked raw materials.

Ratio Decidendi: Where a recognition certificate permits purchases for use in the manufacture of taxable goods for sale, goods used to manufacture products whose relevant sales are exempt from tax do not satisfy that condition, and purchase tax can be levied for the resulting contravention.

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