Purchase tax on manufactured inputs bought from unregistered dealers upheld; omission of taxable turnover also sustained penalty for incomplete returns.

Purchase tax on goods bought from unregistered dealers and used in manufacture was held payable because the decisive test was whether tax had already suffered on the goods, not the seller's registration status. Section 7-A was treated as a charging and remedial provision designed to prevent tax leakage, and the contrary view was rejected as per incuriam. Penalty for incorrect and incomplete returns was also upheld because taxable turnover had been omitted from the returns despite disclosure in the accounts, and reassessment under section 7-A did not bar penalty.

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Issues: (i) whether purchases from unregistered dealers of goods used in manufacture attracted purchase tax under section 7-A of the Tamil Nadu General Sales Tax Act, 1959; (ii) whether penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 was leviable on the basis of incorrect and incomplete returns.

Issue (i): whether purchases from unregistered dealers of goods used in manufacture attracted purchase tax under section 7-A of the Tamil Nadu General Sales Tax Act, 1959

Analysis: The provision was treated as a charging as well as remedial measure intended to prevent leakage of tax. On the facts found, the dealer had purchased taxable goods in the course of business from unregistered dealers and had used them in manufacture. The decisive consideration was whether the goods had suffered tax under the Act, not whether the seller was registered or unregistered. The earlier view in a Division Bench decision was held to be per incuriam in the light of the Supreme Court's construction of the corresponding provision.

Conclusion: The purchases were liable to purchase tax under section 7-A, and the contention that no tax could be levied at the hands of the purchaser failed.

Issue (ii): whether penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 was leviable on the basis of incorrect and incomplete returns

Analysis: The returns had omitted turnover that was liable to tax, while the accounts disclosed the purchases. The reassessment was held to be under section 7-A and not a proceeding excluding penalty. Since the returns were found to be incorrect and incomplete, the penalty provision was attracted, and the revisional authority was not required to give a fresh elaborate discussion where it affirmed the subordinate authority's reasons.

Conclusion: The levy of penalty under section 12(5)(iii) was upheld.

Final Conclusion: The revision failed in full, as the purchase turnover was exigible to tax and the consequential penalty was sustained.

Ratio Decidendi: For purposes of section 7-A, what matters is whether the purchase is of taxable goods on which tax has not suffered in the prescribed circumstances, and the seller's status as registered or unregistered is not decisive; where the return omits such taxable turnover, penalty for incorrect and incomplete returns may also follow.

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