Inclusive iron and steel entry covered rolled products, so raw material use did not trigger diversion liability.

Entry 46 of the Orissa Sales Tax Act was read as an inclusive, not exhaustive, description of iron and steel. Rods, flats and similar products manufactured in rolling mills from raw materials purchased for resale remained within that broad genus despite change in form, so their use did not amount to diversion of the declared goods. On that basis, the second proviso to section 5(2)(A)(a)(ii) was not attracted, and the demand adding back the value of the raw materials to taxable turnover was quashed in favour of the assessee.

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Issues: Whether the raw materials purchased on declaration for resale, when used in rolling mills to manufacture rods, flats and similar iron and steel products, attracted the second proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act, 1947, or whether the finished products continued to fall within entry 46 of the Schedule as iron and steel.

Analysis: The dispute turned on the scope of entry 46, which described iron and steel inclusively and not exhaustively. The manufactured products, though altered in form by the rolling process, remained within the wide genus of iron and steel covered by that entry. Since the goods continued to fall under the notified commodity, the use of the raw materials for manufacturing did not amount to a breach of the declaration or to a diversion attracting the second proviso to section 5(2)(A)(a)(ii).

Conclusion: The demand made by adding back the value of the raw materials to the taxable turnover was unsustainable and was quashed. The issue was decided in favour of the assessee.

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