1992 (2) TMI 338 - HC - VAT and Sales Tax

Summary

Issues involved: Assessment of sales tax based on exemption claims for purchases made under the Orissa Sales Tax Act, 1947.

Summary:
The petitioner, a registered dealer, sold graphite ore to a purchaser claiming exemption on raw material purchases for five years. The Sales Tax Officer reopened assessments based on an audit report, disallowing the exemption due to alleged misuse of purchased goods. The petitioner argued that if declarations were issued, they should not be liable for tax if goods were used differently. The department contended that the petitioner needed to prove the utilization of purchased goods.

The dispute revolved around entry 26-A of exempted goods under section 6 of the Act, specifically related to the conditions for exemption on raw materials, machinery, and packing materials. The form I-A declaration, required for deduction of tax, outlined the intended use of purchased goods. The department's stance that the selling dealer must ensure correct utilization of goods purchased by the buyer was deemed impractical by the court. The responsibility for adherence to declared use fell on the purchasing dealer to maintain exemption eligibility.

The court held that taxing the petitioner for any alleged change in the use of goods purchased under form I-A was incorrect. If there was a misuse of goods by the purchasing dealer, the department could levy tax on them instead. The selling dealer could not be penalized for any diversion or change in the use of purchased goods. The writ applications were allowed, with no costs incurred.

*Separate Judgment by S.K. Mohanty, J.:* The writ petition was allowed in agreement with the main judgment.