False declaration on purchase goods can trigger turnover inclusion; penalty provisions do not bar assessment under the tax scheme.

Gum purchased on form S.T. 17 was properly included in taxable turnover where the dealer declared intra-State resale but in fact diverted the goods to inter-State sale, so the statutory declaration was not fulfilled. The separate penalty provision for misuse of the declaration did not make assessment exclusive, because penal action under section 16(1)(k) and inclusion in turnover operate in different fields. Section 5A did not defeat the levy, as the tax arose from the charging scheme under the Act and rules rather than from purchase tax under that provision. The reference was answered in favour of the Revenue and the turnover inclusion was upheld.

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Issues: (i) Whether, on the facts, the turnover of gum purchased against form S.T. 17 and not resold within the State was liable to be included in taxable turnover under the second proviso to section 2(s) read with rule 15; (ii) whether the department's only remedy for misuse of form S.T. 17 was action under section 16(1)(k); (iii) whether the dealer was not liable to tax by reason of section 5A.

Issue (i): Whether, on the facts, the turnover of gum purchased against form S.T. 17 and not resold within the State was liable to be included in taxable turnover under the second proviso to section 2(s) read with rule 15.

Analysis: Section 2(s) defines taxable turnover, while section 3 is the charging provision. Rule 15 fixes gum at the last point of sale, and the second proviso to section 2(s) covers cases where goods are purchased on the strength of a declaration but are used for a purpose other than the one declared. As the dealer declared that the gum would be resold within the State but in fact sold it in inter-State trade, the declaration was not fulfilled and the purchase price was properly includible in taxable turnover.

Conclusion: Yes. The turnover was rightly includible, and the finding is in favour of the Revenue.

Issue (ii): Whether the department's only remedy for misuse of form S.T. 17 was action under section 16(1)(k).

Analysis: Section 16(1)(k) provides for penalty where goods purchased on declaration are not used for the declared purpose without reasonable cause. That penal remedy does not exclude assessment proceedings where the purchase price is liable to be added to taxable turnover under the Act and the Rules. The two consequences operate in different fields.

Conclusion: No. The department was not confined to section 16(1)(k), and this issue is decided in favour of the Revenue.

Issue (iii): Whether the dealer was not liable to tax by reason of section 5A.

Analysis: Section 5A is a separate charging provision for purchase tax and was not the correct basis for the levy in the present facts. The liability arose from the inclusion of the purchase price in taxable turnover under section 2(s) read with section 3 and rule 15, not from section 5A. The Board was therefore wrong in treating section 5A as defeating the levy.

Conclusion: No. The dealer was liable to tax notwithstanding section 5A, and this issue is decided in favour of the Revenue.

Final Conclusion: The reference was answered against the dealer-assessee and the inclusion of the gum turnover in taxable turnover was upheld, while the alternative penal remedy under section 16(1)(k) was held not to be exclusive.

Ratio Decidendi: Where goods are purchased on a false declaration as to the intended use and are subsequently diverted to a different purpose, the purchase price may be included in taxable turnover under the charging scheme of the Act and the relevant rules, and the existence of a separate penalty provision does not bar assessment of the turnover.

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