Declared iron and steel goods remain within the exemption when scrap is converted into listed rolled products.

Under the Orissa Sales Tax Act, scrap iron purchased free of tax for resale did not lose the benefit of the declaration when it was converted into M.S. rounds, bars and flats, because the notified iron and steel entry expressly covered both raw and processed forms, including rolled products and related cuttings. The declaration did not require resale in the identical physical form, and the processing therefore did not amount to use for another purpose or a diversion outside the declared commodity. The authorities wrongly invoked the second proviso to section 5(2)(A)(a)(ii), and the additional sales tax demands were unsustainable.

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Issues: Whether scrap iron purchased free of tax under a declaration for resale, and thereafter converted into M.S. rounds, bars and flats, ceased to be goods covered by the declared entry and thereby attracted the second proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act, 1947.

Analysis: The relevant notification under section 5(1) of the Orissa Sales Tax Act, 1947 treated iron and steel as a wide commodity and specifically included steel bars, rounds, flats and defectives, rejects, cuttings or end pieces of those categories. The declaration form required the goods to be meant for resale in Orissa and covered by the registration certificate, but it did not insist that the goods must be resold in the identical physical form in which they were purchased. The conversion of scrap into M.S. rounds, bars and flats did not take the goods outside the notified category, because the processed articles still remained within the description of iron and steel. The authorities therefore erred in treating the manufacturing process as a use for any other purpose and in invoking the second proviso to section 5(2)(A)(a)(ii).

Conclusion: The assessee was not in breach of the declaration and the additional sales tax demands were unsustainable.

Final Conclusion: The writ petitions succeeded and the impugned demands were quashed.

Ratio Decidendi: Where the notified entry expressly includes both raw and processed forms of iron and steel, conversion of scrap into listed rolled products does not amount to diversion for another purpose or a change into a different taxable commodity for purposes of the purchase declaration.

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