Resale declaration withdrawal after assessment does not defeat purchase tax liability, but prior tax payment may be adjusted to avoid double recovery.

Withdrawal and replacement of resale declarations after assessment had begun did not undo the prior statutory breach or defeat purchase tax liability under section 16(1) of the Gujarat Sales Tax Act, 1969, because the certificates had existed and been acted on when the transaction was entered into. The liability was therefore attracted against the purchaser. On the same turnover, however, where sales tax had already been paid by the vendor and remitted to the Government, the amount was directed to be adjusted against the purchaser's liability to prevent double recovery in substance. The penalty question was left to be worked out consequentially.

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Issues: (i) Whether purchase tax under section 16(1) of the Gujarat Sales Tax Act, 1969 was attracted when the purchaser withdrew and replaced the declarations in form 17A only after assessment proceedings had commenced; (ii) whether the amount of sales tax already paid by the vendor on the same turnover should be adjusted against the purchaser's liability so as to avoid double taxation.

Issue (i): Whether purchase tax under section 16(1) of the Gujarat Sales Tax Act, 1969 was attracted when the purchaser withdrew and replaced the declarations in form 17A only after assessment proceedings had commenced.

Analysis: A dealer who purchases taxable goods on the strength of a certificate given for resale in the course of inter-State trade becomes liable under section 16(1) if the goods are not ultimately resold in the manner certified. The withdrawal of the declarations after the assessment proceedings had already begun did not efface the fact that the certificates existed and had been acted upon when the transaction was entered into. The breach of the declared condition had already occurred, and the subsequent replacement of forms could not undo the statutory consequence attaching under section 16(1).

Conclusion: The liability to purchase tax under section 16(1) was correctly attracted and this issue was answered against the assessee and in favour of the Revenue.

Issue (ii): Whether the amount of sales tax already paid by the vendor on the same turnover should be adjusted against the purchaser's liability so as to avoid double taxation.

Analysis: On the peculiar facts, the same turnover had already suffered sales tax at the hands of the vendor, and that tax had been recovered from the purchaser and remitted to the Government. The vendor indicated that it would not press any claim for refund in respect of that tax. In these circumstances, the Court considered it just and proper that the amount already paid to the Government on the same turnover be adjusted against the purchaser's liability, so that the same amount was not recovered twice in substance.

Conclusion: The purchaser was entitled to adjustment of the tax already paid by the vendor, and this issue was answered in favour of the assessee.

Final Conclusion: The reference was answered by upholding the purchase tax liability while directing adjustment of the amount already remitted through the vendor against the purchaser's liability, leaving the penalty question to be worked out consequentially.

Ratio Decidendi: Withdrawal of a resale declaration after the statutory breach has occurred and after assessment proceedings have commenced does not defeat liability under section 16(1); however, where the same turnover has already borne tax remitted to the Government, adjustment may be directed to prevent double recovery on the same tax base.

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