Scrap iron declaration use for manufacturing iron and steel products did not justify turnover addition under sales tax law.

Purchase of scrap iron on a declaration in Form No. XXXIV for resale, followed by its use as raw material to manufacture M.S. rods, M.S. bars and M.S. plates sold as iron and steel, did not breach the declaration under the Orissa Sales Tax Act. The Court applied its earlier ruling and treated the finished products as covered by entry 46 of the exemption notification for iron and steel. As the declaration was not violated, the second proviso to section 5(2)(A)(a)(ii) could not be used to add the value of the scrap iron to taxable turnover, and the assessment addition was held unsustainable.

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Issues: Whether the purchase of scrap iron against declaration in Form No. XXXIV and its use in manufacturing M.S. rods, M.S. bars and M.S. plates, followed by sale of the finished products, constituted a breach attracting the second proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act and addition of the value of the scrap iron to taxable turnover.

Analysis: The dealer had purchased iron and steel by furnishing the prescribed declaration for resale, and the finished products manufactured from such scrap iron were themselves covered by entry 46 of the notification issued under section 5(1) of the Act as iron and steel. The Court followed its earlier decision on the same point and held that use of scrap iron as raw material for manufacturing M.S. rods, M.S. bars and M.S. plates, and selling those products, did not amount to violation of the declaration in Form No. XXXIV. On that footing, the second proviso to section 5(2)(A)(a)(ii) could not be invoked to add the value of the scrap iron to the taxable turnover.

Conclusion: The addition made by the assessing officer was unsustainable and the impugned assessment was quashed, with a direction for fresh assessment in accordance with law.

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