Resale declaration and internal stock transfer: paper moved to another unit for exercise books was not, by itself, a contravention.

Internal transfer of paper from one unit of the same dealer to another for manufacture of exercise books was not, by itself, a contravention of the resale declaration under the Orissa Sales Tax Act. The court treated such movement as an internal shifting of goods, not a sale to a different person; the position on printing of books depended on further factual inquiry because the transaction might be a sale of paper or a job contract. The Tribunal also erred by not deciding the real controversy on the materials already available and by remitting the matter instead of exercising its jurisdiction to determine liability; the assessment issue was therefore directed to be reheard and decided afresh.

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Issues: (i) Whether transfer of paper purchased free of tax for resale in Orissa to the dealer's own manufacturing unit for manufacture of exercise books and printing of books contravened section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act, 1947. (ii) Whether the Tribunal's order could be sustained when it had not applied its judicial mind to the real controversy and had remitted the matter instead of deciding the liability on the materials available.

Issue (i): Whether transfer of paper purchased free of tax for resale in Orissa to the dealer's own manufacturing unit for manufacture of exercise books and printing of books contravened section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act, 1947.

Analysis: The transaction was examined on the footing that the dealer had purchased paper against a declaration for resale and had then transferred it to its own manufacturing unit. On the facts, the movement of goods from one unit of the same dealer to another was treated as an internal shifting of goods and not a sale to a separate person. It was held that manufacture of exercise books from such paper did not amount to contravention of the resale condition. As regards printing of books, the Court noted that further facts would be necessary to determine whether the transaction was truly a sale of paper or a job contract.

Conclusion: Manufacture of exercise books from paper purchased for resale did not amount to contravention of section 5(2)(A)(a)(ii) of the Act. The question regarding printing of books was left dependent on further factual examination.

Issue (ii): Whether the Tribunal's order could be sustained when it had not applied its judicial mind to the real controversy and had remitted the matter instead of deciding the liability on the materials available.

Analysis: The Tribunal was found not to have addressed the real controversy raised by the assessment. The Court held that where the necessary materials were available and no further facts were required for the particular issue, the Tribunal should have proceeded to determine the liability rather than remitting the matter. The failure to do so was treated as a failure to exercise the jurisdiction vested in it.

Conclusion: The Tribunal's order could not be sustained and the matter had to be reheard and finally decided afresh under section 24(5) of the Act.

Final Conclusion: The reference was answered by holding that the Tribunal had not properly adjudicated the real controversy, and the assessment-related issue was sent back for fresh decision by the Tribunal.

Ratio Decidendi: Internal transfer of goods between units of the same dealer is not, by itself, a contravention of a resale declaration, and a tribunal must decide the real controversy on the available material instead of remitting the matter without exercising its jurisdiction.

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