1996 (7) TMI 539 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the transfer/supply of cement by the applicant-unit to different units within the State of Orissa constitutes a sale?
2. Can a dealer contravene the fifth proviso to section 5(1) of the Orissa Sales Tax Act if finished products are transferred/supplied to its units for consumption, including self-consumption?
3. In case of contravention, should the turnover subject to contravention be the value of finished products or the value of material utilized for manufacturing such goods purchased on the strength of form IV?

Analysis:
1. The case involved a manufacturer of cement, registered under the Orissa Sales Tax Act, who supplied cement to different units within the State of Orissa. The issue was whether these transfers constituted sales. The Tribunal held that these transfers were sales as each sister unit had a separate registration number, indicating commercial transactions. The Court agreed with this interpretation, stating that the transfers were for the purpose of sale, making them taxable transactions.

2. The dealer's grievance was the levy of tax on cement used for own constructions and supplied to sister concerns, arguing that there cannot be a sale to oneself. The Revenue contended that the dealer contravened the fifth proviso to section 5(1) of the Act by using materials purchased for specific purposes for other uses. The Court upheld the levy of tax, stating that the contravention occurred as the goods were not used as declared.

3. The fifth proviso to section 5(1) of the Act was applied to levy tax in this case. The proviso specified that if goods purchased for a specific purpose were used for another purpose, the dealer must pay the tax difference. The Court held that even if goods were manufactured for sale but used for self-consumption, it constituted a contravention as the manufactured articles were not sold as intended.

In conclusion, the Court answered the first two questions in favor of the Revenue and against the dealer, stating that the transfers constituted sales and contravened the tax provisions. The value subject to contravention was determined to be the value of materials utilized for manufacturing goods purchased on the strength of form IV. The judgment was delivered by Pasayat A. and Deb A., JJ., with the reference answered in the affirmative.