Purchase tax on gold ornaments upheld where alleged deposit was treated as business stock and used in manufacturing.

Gold ornaments treated as part of a dealer's regular stock, without any separate deposit stock register or timely disclosure of a true custody arrangement, could be regarded as purchases for purchase tax purposes under Section 7A of the Tamil Nadu General Sales Tax Act. The court accepted the revenue's view that the alleged deposit theory was unsupported by the accounting treatment and surrounding materials, including use of the ornaments in manufacturing new jewels. On that basis, the levy of purchase tax was upheld and the challenge to the Tribunal's order failed.

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Issues: Whether the levy of purchase tax under Section 7A of the Tamil Nadu General Sales Tax Act on gold ornaments stated to have been received for deposit and later used in manufacture of new jewels was sustainable.

Analysis: The petitioner claimed that the gold ornaments were received only for safe custody and display, and not by way of purchase. The materials showed, however, that the ornaments were entered in the regular stock book, no separate deposit stock was maintained, the alleged deposit was not disclosed at the time of inspection, and the ornaments were treated as part of the dealer's own stock and used for conversion into new jewels. In these circumstances, the theory of deposit was found unacceptable and the receipt of gold ornaments was treated as purchase for the purpose of tax liability under Section 7A.

Conclusion: The levy of purchase tax was upheld and the challenge to the Tribunal's order failed.

Ratio Decidendi: Where goods are brought into the dealer's stock and treated as part of business inventory without a separate and timely disclosure of a true deposit arrangement, the transaction can be treated as a purchase attracting purchase tax.

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