Resale declaration and manufacturing use: scrap used in making steel rounds did not trigger the sales tax proviso.

Tax-free scrap purchased for resale and later used in the manufacture of mild steel rounds did not, on the Court's reasoning, automatically amount to use for a purpose other than resale. The Court applied its earlier precedent and held that mere utilisation of the purchased scrap in manufacture, without a finding that the goods were diverted to a distinct non-resale purpose, was insufficient to attract the second proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act. The proviso was therefore held inapplicable, and the issue was resolved in favour of the assessee.

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Issues: Whether the second proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act was attracted when tax-free scrap purchased for resale was used in the manufacture of mild steel rounds.

Analysis: The dealer had purchased scrap against a declaration for resale, but a portion of the scrap was used in manufacturing mild steel rounds. The question was whether such utilisation constituted use for a purpose other than resale so as to attract the second proviso and fasten liability. The Court followed its earlier decisions holding that mere use of the purchased scrap in manufacture, in the absence of a finding that the goods were not sold but were diverted for some other distinct purpose, did not attract the proviso. The issue was therefore covered by binding precedent of the same Court.

Conclusion: The second proviso to section 5(2)(A)(a)(ii) was not attracted, and the question was answered in the negative in favour of the assessee.

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