Exempt use of damaged wheat as cattle feed requires independent enquiry before tax can be imposed.

Damaged wheat purchased and processed as cattle feed was treated as prima facie covered by the exemption for cattle feed, because the decisive question was whether the commodity was in fact sold or used for that exempt purpose. Tax could not be sustained merely on the basis that the assessee did not produce documents; the Revenue had to rebut the exempt-use claim through independent enquiry and evidence. In the absence of such enquiry or rebuttal material, the presumption in favour of exempt use remained unrebutted, and the tax and interest demand could not stand on the existing record. The matter therefore required fresh consideration by the assessing authority.

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Issues: Whether damaged wheat purchased and processed as cattle feed was exempt from tax, and whether tax could be sustained without an independent enquiry by the assessing authority.

Analysis: The disputed goods were damaged wheat purchased as cattle feed not fit for human consumption, and cattle feed was covered by the exemption notification. The decisive question was whether the commodity, after processing, was in fact sold or used as cattle feed. That factual issue required evidence or an independent enquiry by the assessing authority. Tax could not be imposed merely because the assessee did not produce relevant documents, since the burden remained on the Revenue to establish a taxable sale. In the absence of any such enquiry or rebuttal material, the presumption that the damaged wheat was purchased as cattle feed could not be displaced. As the earlier appellate and revisional findings did not rest on such enquiry, the matter required reconsideration by the assessing authority.

Conclusion: The imposition of tax and interest could not be sustained on the existing record, and the matter was required to be sent back for fresh decision.

Ratio Decidendi: Where exempt goods are prima facie shown to have been purchased for an exempt use, the Revenue must rebut that position by independent enquiry and evidence before imposing tax, and adverse inference alone is insufficient.

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