Distinct commodity test: converting tax-free paper into exercise books breached the resale declaration and triggered taxable turnover inclusion.

Paper and exercise books made from paper were treated as distinct commercial commodities because paper has multiple uses, while exercise books after conversion and sizing have a different identity and a limited use. The conversion created a separate marketable article, so the two goods were not the same commodity. Where a registered dealer purchased paper tax-free on a declaration for resale but converted it into exercise books before sale, the declared purpose was not fulfilled and the paper was used for a purpose other than resale in its original form. The statutory proviso therefore applied, and the value of the goods was includible in the dealer's taxable turnover.

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Issues: (i) Whether paper and exercise books manufactured out of paper are the same commodity or different commodities. (ii) Whether a registered dealer who purchases paper tax-free on a declaration that the goods are intended for resale violates the declaration by converting the paper into exercise books and selling the exercise books.

Issue (i): Whether paper and exercise books manufactured out of paper are the same commodity or different commodities.

Analysis: Paper and exercise books were held to be distinct commercial commodities. Paper has multiple uses, whereas exercise books, after conversion and sizing, are confined to a limited and different use. The distinction was reinforced by the earlier direct decision between the parties and by the general test that conversion of a commodity into a product with a different identity and use creates a separate marketable article.

Conclusion: Paper and exercise books are different commodities.

Issue (ii): Whether a registered dealer who purchases paper tax-free on a declaration that the goods are intended for resale violates the declaration by converting the paper into exercise books and selling the exercise books.

Analysis: The proviso to the relevant turnover provision applied where goods purchased on a declaration for resale were used for any other purpose. Since paper purchased on a resale declaration was converted into exercise books before sale, the goods were not sold in the same form as purchased and the declared purpose was not fulfilled. The conversion amounted to use for a purpose other than resale of the purchased goods as such.

Conclusion: The dealer violated the declaration, and the value of the goods was liable to be included in the taxable turnover of the purchasing dealer.

Final Conclusion: The reference was answered against the assessee, holding that the conversion of tax-free paper into exercise books attracted the statutory consequence under the resale declaration proviso.

Ratio Decidendi: A commodity purchased tax-free on a declaration for resale ceases to retain that character where it is converted into a distinct commercial article with a different identity and use, and such conversion amounts to use for another purpose under the taxing provision.

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