1987 (11) TMI 354 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of the second proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act regarding the utilization of goods purchased for resale. Reconsideration of earlier Bench decisions in light of the Supreme Court's decision in Devi Dass Gopal Krishnan v. State of Punjab [1967] 20 STC 430.

Analysis:
The judgment involved three writ petitions concerning the interpretation of whether a purchasing dealer, who buys scraps for resale in Orissa and later converts them into rods and rounds, can be deemed to have "utilized the goods for any other purpose" under the second proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act. Previous decisions by different Benches of the Orissa High Court had held that the conversion of scraps into different commercial commodities did not constitute a violation of the proviso as long as the items fell under the definition of "iron and steel" and were subject to the same tax rate. The court reiterated that the second proviso applies when goods purchased for resale are utilized for a different purpose, not necessarily requiring the resale in the same form as purchased.

The Revenue contended that the earlier Division Bench decisions did not adequately consider the Supreme Court's ruling in Devi Dass Gopal Krishnan's case [1967] 20 STC 430, which emphasized the transformation of goods through a manufacturing process. However, the court found no merit in this argument, emphasizing that the second proviso only applies when goods purchased for resale are used for another purpose, not when they undergo a manufacturing process resulting in a different marketable commodity. The court highlighted the importance of adhering to the ordinary meaning of statutory language and refraining from adding interpretations that are not explicitly stated.

The court examined the statutory scheme of the Orissa Sales Tax Act, emphasizing the definition of taxable turnover, the provisions for tax-free goods, and the specific tax rates for different categories of goods, including iron and steel. It clarified that the second proviso to section 5(2)(A)(a)(ii) is triggered when goods purchased for resale are diverted for a different purpose by the dealer. In this case, the conversion of scraps into rods and rounds did not violate the proviso as both items fell under the category of "iron and steel" with the same tax rate. Consequently, the court quashed the additional tax demands raised by the assessing officer and allowed the writ applications.

In conclusion, the court upheld the earlier decisions of the Bench, rejecting the request for reconsideration based on the Supreme Court's decision. The judges unanimously allowed the writ applications, emphasizing that the conversion of scraps into rods and rounds for resale did not constitute a violation of the second proviso to the Orissa Sales Tax Act.