Concessional tax rate on raw materials cannot be denied pro rata merely for mixed-source finished goods transfers

A dealer does not lose the concessional tax rate on raw materials under section 4-B merely because some finished goods made from mixed sources were transferred outside the State. The concessional rate applies only to raw materials purchased against the recognition certificate and to notified goods manufactured from those materials, with the statutory condition focused on the sale of such goods within the State or in inter-State trade. Where the finished goods sold within and outside the State could reasonably have been produced from the certified purchases, the absence of separate accounts does not justify a pro rata disallowance. Goods made from other sources are outside the liability provision.

---

---

Issues: Whether the assessee was liable to lose the concessional rate of tax on purchases of raw materials, on a proportional basis, merely because a portion of the finished goods manufactured from mixed sources was transferred outside the State and not sold within the State or in inter-State trade.

Analysis: The entitlement to the concessional rate under section 4-B was confined to raw materials purchased against the recognition certificate and to the notified goods manufactured from such raw materials. The decisive inquiry was whether the goods produced out of the concessional purchases were sold within the State or in inter-State trade, so as to satisfy the statutory condition. Where the quantity of finished goods sold within the State and in inter-State trade was more than what could reasonably have been produced from the raw materials purchased under the recognition certificate, the absence of separate accounts did not justify a pro rata disallowance. The liability provision in sub-section (6) was held to apply only to notified goods manufactured from raw materials obtained under the certificate, and not to goods produced from other sources.

Conclusion: The concessional rate of tax could not be withheld on a proportional basis in respect of the disputed turnover. The revision was liable to be dismissed, and the assessee succeeded on the issue.

Ratio Decidendi: A dealer does not forfeit the concessional rate under section 4-B of the U.P. Sales Tax Act unless the notified goods manufactured from raw materials purchased against the recognition certificate are not sold as required by the statute; goods manufactured from other sources do not attract a proportional disallowance merely because separate accounts were not maintained.

---