Misuse of registration-based purchases attracts sales tax when goods intended for resale are used for another purpose.

Goods purchased by a registered club on the strength of its registration certificate were treated as misutilised when the club was held not to make sales to its members. The second proviso to section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 applied where goods were bought as intended for resale or for use as raw material but were used for another purpose. On that footing, the purchases were includible in the purchasing dealer's taxable turnover, and tax on those purchases was recoverable by the Revenue. The referred question was answered in the affirmative and against the assessee.

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Issues: Whether the second proviso to section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 applied to purchases made by a registered club on the strength of its registration certificate when the club was held not to be making sales to its members.

Analysis: The club had purchased goods by relying on its registration certificate on the footing that the goods were intended for resale or for use as raw material in goods to be sold to members. Once it was accepted, on the strength of the Supreme Court decision, that there was in law no sale by the club to its members, the foundation on which the purchases had been made disappeared. The second proviso specifically brought within the purchasing dealer's taxable turnover goods purchased as being intended for resale or for use as raw material, but utilised for any other purpose. In these circumstances, the purchases made by the club on the strength of the registration certificate were liable to be treated as misutilised, attracting tax under the proviso.

Conclusion: The second proviso to section 5(2)(a)(ii) was applicable, and the Revenue was entitled to retain the amount representing tax on the purchases. The answer to the referred question was in the affirmative and against the assessee.

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