Declared manufacturing use shields raw materials from tax merely because manufacture and sale occurred outside Delhi.

Raw materials purchased against a registration certificate for declared manufacturing use cannot be subjected to tax under the second proviso to section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 merely because manufacture took place outside Delhi and the finished goods were also sold outside Delhi. The governing principle, drawn from Polestar Electronic, is that goods acquired pursuant to the certificate and used for the declared purpose remain within that purpose; territorial location of manufacture or sale does not by itself create tax liability under the proviso. The assessment based on such levy was therefore unsustainable.

---

---

Issues: Whether raw materials purchased on the strength of a registration certificate could be subjected to tax under the second proviso to section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 when they were used for manufacture outside Delhi and the finished goods were sold outside Delhi.

Analysis: The governing principle was settled by the Supreme Court in Polestar Electronic (Pvt.) Ltd., which held that raw materials purchased pursuant to the registration certificate and used for manufacture outside Delhi remained within the purpose stated in the declaration. On that basis, the dealer could not be fastened with tax liability under the second proviso merely because the manufacturing activity and sale took place outside Delhi.

Conclusion: The levy under the second proviso was not sustainable against the assessee, and the assessment made on that basis could not stand.

Ratio Decidendi: Raw materials purchased under a registration certificate, when used for the declared manufacturing purpose, cannot be taxed under the second proviso merely because manufacture or sale occurs outside the taxing territory.

---