Diversion of declared-purpose goods triggers purchase tax, interest, and penalty under the Rajasthan sales tax scheme.

Goods purchased on a declaration for resale within Rajasthan or in inter-State trade became liable to purchase tax when diverted to a head office outside the State instead of being used for the declared purpose. The transfer was treated as not amounting to a sale, and separate registrations or production of C forms did not change that result. Once the purchase price was brought into taxable turnover under the statutory proviso and section 5-A, interest also became payable on the unpaid tax under section 11-B. Failure to use the goods for the declared purpose could additionally attract penalty under section 16(1)(k), subject to reasonable cause on the facts.

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Issues: (i) Whether goods purchased under a declaration for sale within the State or in the course of inter-State trade attracted purchase tax when they were not utilised for the declared purpose but transferred to the assessee's head office outside the State. (ii) Whether interest under section 11-B of the Rajasthan Sales Tax Act, 1954 was payable on the resulting tax liability. (iii) Whether penalty under section 16(1)(k) of the Rajasthan Sales Tax Act, 1954 was leviable for failure to use the goods for the declared purpose.

Issue (i): Whether goods purchased under a declaration for sale within the State or in the course of inter-State trade attracted purchase tax when they were not utilised for the declared purpose but transferred to the assessee's head office outside the State.

Analysis: The declared use contemplated sale of the goods within Rajasthan or in the course of inter-State trade or commerce. Transfer of goods from a branch to a head office outside the State did not amount to a sale because there was no transfer of property from one person to another for consideration. Separate registration of the branch and head office did not alter the nature of the transaction. Production of C forms also did not convert a non-sale into a sale. Since the goods were not used for the declared purpose, the statutory proviso bringing the purchase price into taxable turnover applied, read with section 5-A.

Conclusion: The assessee was liable to purchase tax and the issue was decided against the assessee.

Issue (ii): Whether interest under section 11-B of the Rajasthan Sales Tax Act, 1954 was payable on the resulting tax liability.

Analysis: Interest followed the tax liability created by the proviso to section 2(s) and section 5-A. The argument based on retrospective amendment did not assist the assessee because the liability in the present case arose under the existing statutory framework governing use of goods for the declared purpose. Once the purchase price became includible in taxable turnover, interest became payable on the unpaid tax.

Conclusion: Interest under section 11-B was payable and this issue was decided against the assessee.

Issue (iii): Whether penalty under section 16(1)(k) of the Rajasthan Sales Tax Act, 1954 was leviable for failure to use the goods for the declared purpose.

Analysis: Penalty was attracted where goods purchased on the strength of a declaration were not used for the declared purpose without reasonable cause. The Tribunal had considered the assessee's explanation and reduced the penalty to Rs. 5,000. The question of reasonable cause depended on the facts, and on those facts the reduction already granted was found sufficient.

Conclusion: Penalty under section 16(1)(k) was sustainable as reduced, and this issue was decided against the assessee.

Final Conclusion: The statutory scheme treated diversion of goods from the declared purpose as a taxable event giving rise to purchase tax, interest, and penalty consequences, and the revision failed in entirety.

Ratio Decidendi: Where goods are purchased on a declaration for a specified statutory purpose but are used for a different purpose, the purchase price becomes includible in taxable turnover and the dealer may be subjected to purchase tax, interest, and penalty under the relevant provisions.

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