Recognition certificate breach triggers penalty where notified goods are sold on consignment, despite later tax payment.

Contravention of the conditions attached to a recognition certificate under section 4-B is assessed at the time of the concessional purchase, and sale of notified goods on consignment basis falls outside the statutory framework for such purchases. Where the certificate conditions are breached, penalty under section 4-B(6) remains attracted, and later payment of tax on the corresponding raw material does not retrospectively cure the breach or alter the character of the earlier concessional purchase. The Tribunal's view that penalty was displaced by subsequent tax deposit was therefore unsustainable. A limited remand was made only to examine any specific plea that purchases were made from agriculturists without issuance of form III-B, if that plea had in fact been raised.

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Issues: Whether penalty was leviable under section 4-B(6) of the U.P. Sales Tax Act, 1948 for sale of notified goods on consignment basis in contravention of the terms of the recognition certificate, and whether subsequent payment of tax on the corresponding raw material excluded such penalty.

Analysis: Under section 4-B(2), a recognition certificate permits purchase of raw material at concessional rate and obliges its use in manufacture of notified goods to be sold in the manner contemplated by the provision. Sale of the notified goods on consignment basis is outside that framework and attracts the penalty provision in section 4-B(6) where there is contravention of the conditions attached to the certificate. The relevant test is the nature of the purchase at the time it was made; later deposit of tax does not alter the character of an earlier concessional purchase or nullify the statutory breach. The remand was therefore ordered so that the Tribunal could examine any specific plea regarding purchase from agriculturists without issuance of form III-B, if such plea had in fact been raised before the authorities.

Conclusion: Penalty under section 4-B(6) was not ruled out merely because tax on the corresponding paddy had later been deposited, and the Tribunal's order setting aside the penalty was unsustainable.

Ratio Decidendi: Contravention of the conditions of a recognition certificate under section 4-B is judged at the time of the concessional purchase and later payment of tax does not erase liability to penalty for an otherwise prohibited disposal of notified goods.

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