Purchase tax under resale certificates turns on actual resale compliance, but negligible handling loss in ordinary trade is not contravention.

Section 14 of the Bombay Sales Tax Act, 1959 treats purchase tax as leviable when goods bought under form 16 are not resold as certified or are otherwise used contrary to the certificate. Goods destroyed by fire before resale could no longer satisfy the resale condition, so the certificate was contravened and purchase tax was leviable. By contrast, an unavoidable and negligible loss of castor oil occurring during the ordinary course of resale or export, such as sticking to containers or spilling on transfer, did not amount to non-compliance with form 16, and purchase tax was not leviable on that limited quantity.

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Issues: (i) Whether purchase tax under section 14 of the Bombay Sales Tax Act, 1959 was leviable where goods purchased under form 16 were destroyed by fire before resale; (ii) Whether purchase tax was leviable where a small quantity of castor oil purchased under form 16 was lost in the course of normal resale or export by sticking to containers or spilling during transfer.

Issue (i): Whether purchase tax under section 14 of the Bombay Sales Tax Act, 1959 was leviable where goods purchased under form 16 were destroyed by fire before resale.

Analysis: Section 14 is a charging provision that attracts purchase tax when goods purchased under a certificate are used contrary to that certificate or are not resold in the manner and within the period certified. The expression "intended for resale" in section 12(c) and form 16 does not refer to a purely subjective state of mind; it denotes that the goods are purchased for the purpose of resale. When the goods are destroyed by fire, they can no longer be resold and the declared purpose of resale necessarily comes to an end. The inability to resell may arise from circumstances beyond the dealer's control, but that does not prevent the certificate from being contravened. The contrary view taken by the Gujarat High Court was not accepted.

Conclusion: Purchase tax under section 14 was leviable, and the question was answered in the negative and against the assessee.

Issue (ii): Whether purchase tax was leviable where a small quantity of castor oil purchased under form 16 was lost in the course of normal resale or export by sticking to containers or spilling during transfer.

Analysis: Where the assessee is in fact carrying out the certificate by reselling or exporting the goods, an inevitable and insignificant loss inherent in the handling and transfer of the commodity does not amount to a failure to comply with form 16. The loss was only about 0.3% and less than half a per cent, and it occurred during the ordinary process of resale or export. Such a negligible and unavoidable loss does not justify treating the assessee as having contravened the certificate in respect of that small quantity.

Conclusion: Purchase tax under section 14 was not leviable on the quantity lost in the course of resale or export, and the question was answered in the affirmative and in favour of the assessee.

Final Conclusion: The reference concerning goods destroyed by fire failed on the tax liability issue, while the references concerning inevitable incidental loss during resale or export succeeded in defeating purchase tax on that limited quantity.

Ratio Decidendi: Under section 14 of the Bombay Sales Tax Act, 1959, a certificate for resale is contravened when the goods cannot be resold in fact, but an unavoidable and minimal loss occurring in the ordinary course of carrying out the resale or export certificate does not constitute such contravention.

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