Recognition certificate use in job-work manufacture did not trigger trade tax penalty where end-product stayed within certificate scope.

Penalty under section 4B(5) of the U.P. Trade Tax Act was confined to cases where goods purchased at concessional rate or without tax were used for a different purpose than that covered by the recognition certificate, or were otherwise disposed of. Where raw material obtained against Form IIIB was used in job-work manufacture of cycle parts, and the end-product remained within the scope of the certificate issued for manufacture of cycle and moped parts, there was no diversion to an unauthorised purpose. Penalty was therefore not attracted and was liable to be deleted.

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Issues: Whether penalty under section 4B(5) of the U.P. Trade Tax Act, 1948 was leviable when goods purchased under a recognition certificate were used in manufacture on a job-work basis for the very goods covered by the certificate.

Analysis: Section 4B(5) fastens penalty only when goods purchased at concessional rate or without payment of tax are used for a purpose other than that for which the recognition certificate was granted, or are otherwise disposed of. The recognition certificate in the present case was for manufacture of cycle and moped parts, and the finding accepted by the first appellate authority was that the raw material purchased against Form IIIB was used in the manufacture of cycle parts. Use of the materials for job-work manufacture did not amount to diversion to a different purpose when the end-product remained within the scope of the certificate.

Conclusion: Penalty was not attracted under section 4B(5) and was liable to be deleted.

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