Concessional raw material declaration is not false merely because finished goods were stock transferred; specific disposal rules apply.

Section 3-B of the U.P. Trade Tax Act applies only where a false or wrong declaration is made, and not merely because finished goods are later stock transferred. The raw material was used to manufacture the notified goods for the declared purpose, so the concessional Form III-B declaration was not false or wrong and Section 3-B could not be invoked. Where the dealer later disposes of notified goods otherwise than in the prescribed manner, the specific consequence lies under Section 4-B(6). The Supreme Court therefore sustained the view in favour of the assessee and rejected the Revenue's attempt to proceed under Section 3-B.

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Issues: (i) Whether purchase of raw material at concessional rate against Form III-B, followed by stock transfer of the finished goods, attracted liability under Section 3-B of the U.P. Trade Tax Act, 1948. (ii) Whether, on failure to sell the notified goods in the manner contemplated by Section 4-B(2), the proper consequence was under Section 4-B(6) rather than Section 3-B.

Issue (i): Whether purchase of raw material at concessional rate against Form III-B, followed by stock transfer of the finished goods, attracted liability under Section 3-B of the U.P. Trade Tax Act, 1948.

Analysis: Section 3-B applies where a false or wrong certificate or declaration is issued, and the decisive factor is the use made of the goods for the declared purpose. The raw material was admittedly used in manufacture of the notified goods for which the recognition certificate had been granted. The mere fact that the finished goods were later transferred outside the State did not by itself establish that the Form III-B declaration was false or wrong.

Conclusion: Section 3-B was not attracted on these facts.

Issue (ii): Whether, on failure to sell the notified goods in the manner contemplated by Section 4-B(2), the proper consequence was under Section 4-B(6) rather than Section 3-B.

Analysis: Section 4-B(2) governs grant of the recognition certificate for use of goods in manufacture of notified goods intended to be sold in the State, in inter-State trade, or exported. Section 4-B(6) specifically provides the consequence where the dealer, after obtaining concessional benefit, disposes of the manufactured goods otherwise than by the prescribed mode of sale. The two provisions operate in different fields, and a contrary view would render Section 4-B(6) redundant. Harmonious construction required resort to Section 4-B(6) for such cases, not Section 3-B.

Conclusion: The Revenue could not invoke Section 3-B merely because the finished goods were stock transferred; the appropriate provision was Section 4-B(6).

Final Conclusion: The assessee's use of concessional raw material for manufacturing the notified goods was not a false declaration, and the subsequent mode of disposal did not justify penalty under Section 3-B. The appeal failed and the concurrent view in favour of the assessee was sustained.

Ratio Decidendi: Section 3-B of the U.P. Trade Tax Act, 1948 is confined to cases of false or wrong certificate or declaration, while non-compliance with the intended mode of disposal of notified goods after manufacture is governed by the specific consequences in Section 4-B(6).

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