Concessional purchases for job-work violated statutory use conditions, attracting penalty, while reduced penalty quantum was left undisturbed.

Purchases against form III-B were held usable only where the goods were required for manufacture of notified goods by the dealer and those goods were intended to be sold by him; diversion to job-work did not satisfy these cumulative conditions under section 4-B of the U.P. Sales Tax Act, so penalty under section 4-B(5) was attracted. On penalty quantum, the Court noted the Revenue's objection to non-apportionment of wastage but left the Tribunal's reduced penalty undisturbed, as its factual finding did not justify interference in revision.

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Issues: (i) Whether purchases made against form III-B and used in job-work, instead of being used only in the manufacture of notified goods intended to be sold by the dealer himself, attracted penalty under section 4-B(5) of the U.P. Sales Tax Act, 1948. (ii) Whether, for determining the quantum of penalty, the wastage found relatable to total purchases could be deducted without apportionment to the quantity held to have been used in job-work.

Issue (i): Whether purchases made against form III-B and used in job-work, instead of being used only in the manufacture of notified goods intended to be sold by the dealer himself, attracted penalty under section 4-B(5) of the U.P. Sales Tax Act, 1948.

Analysis: The recognition certificate under section 4-B was held to operate subject not only to the conditions in form XIX but also to the scheme of section 4-B itself. Sub-section (2) was read as requiring two cumulative conditions: the goods must be required for manufacture of notified goods by the dealer, and the notified goods so manufactured must be intended to be sold by him. The Court rejected the argument that manufacture under job-work contract satisfied the provision, holding that the words "intended to be sold by him" could not be treated as redundant. The distinction drawn from section 8(3)(b) of the Central Sales Tax Act, 1956 was found inapposite because that provision used materially different language.

Conclusion: The use of concessional purchases in job-work violated section 4-B(2) and penalty under section 4-B(5) was attracted.

Issue (ii): Whether, for determining the quantum of penalty, the wastage found relatable to total purchases could be deducted without apportionment to the quantity held to have been used in job-work.

Analysis: The Court accepted that, in principle, the Revenue's objection to non-apportionment had force. However, the Tribunal had recorded a factual finding on the basis of the material before it that the penalty was leviable only on the reduced figure, and that finding did not disclose an error warranting interference in revision.

Conclusion: The reduction of penalty made by the Tribunal was left undisturbed.

Final Conclusion: The assessee's challenge to the applicability of penalty failed, and the Revenue's challenge to the reduced quantum also failed, with the Tribunal's order remaining intact.

Ratio Decidendi: Goods purchased under a recognition certificate for manufacture of notified goods are used for a prohibited purpose if they are diverted to job-work, because the statutory condition requires manufacture by the dealer and intended sale by him as cumulative requirements.

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