Form IV declarations for log sales cannot be rejected for lack of post-purchase verification by the selling dealer.

Form IV declarations for log purchases were treated as sufficient where they stated that the goods would be used in manufacturing or processing for sale, because the selling dealer was not required to verify the purchaser's actual post-sale use; any enquiry on misuse lay with the assessing authority. On that basis, rejection of the declarations was unjustified. The selling dealer was also not treated as having contravened the fifth proviso to Section 5(1) of the Orissa Sales Tax Act or the relevant Rate Chart entry, because any breach of the declaration undertaking exposed the purchasing dealer to liability, not the seller. The assessment and appellate orders were set aside.

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Issues: (i) Whether the rejection of Form IV declarations furnished by the purchasing dealers for purchase of logs was justified. (ii) Whether the selling dealer had contravened the fifth proviso to Section 5(1) of the Orissa Sales Tax Act, 1947 or Entry 48 of List 'C' of the Rate Chart appended to the Act.

Issue (i): Whether the rejection of Form IV declarations furnished by the purchasing dealers for purchase of logs was justified.

Analysis: The declarations in Form IV stated that the goods purchased would be used in manufacturing or processing for sale. The Court held that it was not for the selling dealer to conduct an enquiry into whether the purchasing saw mill dealers had in fact used the logs in manufacturing or processing. That enquiry, if necessary, was for the assessing authority. The selling dealer was entitled to act on the declarations furnished, and it would place an impossible burden on the dealer to verify the subsequent use of the goods by the purchaser.

Conclusion: The rejection of the Form IV declarations was unjustified and the issue was answered in favour of the assessee.

Issue (ii): Whether the selling dealer had contravened the fifth proviso to Section 5(1) of the Orissa Sales Tax Act, 1947 or Entry 48 of List 'C' of the Rate Chart appended to the Act.

Analysis: Under the fifth proviso to Section 5(1), the purchasing registered dealer undertook to use the goods in manufacture or processing for sale within the State, and any misuse or diversion attracted liability on the purchasing dealer. The Court held that if there was any contravention of that proviso, the Department's remedy lay against the purchasing dealer and not the selling dealer. The same reasoning applied to the Rate Chart entry governing the concessional rate.

Conclusion: The selling dealer had not contravened the fifth proviso to Section 5(1) or Entry 48 of List 'C', and the issue was answered in favour of the assessee.

Final Conclusion: The assessment and appellate orders were set aside and the revision succeeded, with consequential refund to be worked out in accordance with law if payable.

Ratio Decidendi: A selling dealer is not required to verify the actual post-purchase use of goods declared for manufacturing or processing by the purchaser, and liability for misuse of the declaration lies against the purchasing dealer.

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