Declared-use breach in sales tax: converting paper into exercise books made the goods taxable in turnover.

Paper purchased on declaration for resale as such was held to be diverted from the declared purpose when it was converted into exercise books, because the proviso to section 5(2)(A)(a)(ii) read with Rule 27 treated use for a different purpose as attracting liability. The court treated the conversion as creating a commercially different commodity, not a mere continuation of the same goods, and distinguished authorities relied on by the assessee. The value of the paper so utilised was therefore includible in taxable turnover, and the issue was decided for the Revenue.

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Issues: Whether the sales tax authority was justified in treating the conversion of paper purchased on declaration into exercise books as a breach of the declaration and in including the value of the goods so utilised in the assessee's taxable turnover under the proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act.

Analysis: The declaration furnished under the registration scheme permitted purchase of paper for the specified purpose of resale as such, and the scheme of the proviso read with Rule 27 of the Orissa Sales Tax Rules attracted liability when the goods were used for a different purpose. The conversion of paper into exercise books was treated as a change into a commercially different commodity, not as a mere continuation of the same goods. Authorities holding that paper converted into letter pads, bill books, or exercise books remains paper were distinguished or followed against the assessee's contention, while decisions based on exemption of the same species of goods were found inapplicable.

Conclusion: The declaration was violated by converting the paper into exercise books, and the price of the goods so utilised was rightly included in taxable turnover. The question was answered in favour of the Revenue.

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