Interpretation of resale provision under sales tax law led to quashing of an unsustainable taxable addition

The second proviso to section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi, was interpreted as not restricting resale only to the Territory of Delhi by words not enacted in the provision. On that settled interpretation, an addition to the taxable quantum based on treating goods transferred to a Ghaziabad factory as taxable at a higher dealer-specific rate could not be sustained. The addition was quashed, and the matter was remanded only for the Sales Tax Officer to determine whether the goods were sold at all.

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Issues: Whether the second proviso to section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi, applied to the value of goods transferred by the petitioner to its factory at Ghaziabad, and whether the amount added back in the taxable quantum was sustainable.

Analysis: The impugned addition was made on the footing that the transferred goods were taxable at the higher rate applicable to the dealer's items. That approach could not be sustained once the governing interpretation of section 5(2)(a)(ii) was settled by the Supreme Court. The provision was not to be read as confining resale to the Territory of Delhi by words that Parliament had not enacted. On that basis, the addition to the taxable quantum based on the impugned reasoning could not stand.

Conclusion: The addition of Rs. 94,236.11 to the taxable quantum was quashed and the petitioner succeeded on this issue. The matter was remanded to the Sales Tax Officer only to ascertain whether the goods were sold at all.

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