The proviso to section 5(2)(a)(ii) of the Orissa Sales Tax Act is a substantive provision which creates a liability to pay sales tax on the part of the purchasing dealer if the goods are used for purposes other than those specified in the certificate of registration.

JUDGMENT

NARASIMHAM, C.J. - The following question of law has been referred to this Court, by the Member, Sales Tax Tribunal, Orissa, under section 24(1) of the Orissa Sales Tax Act.

"Whether on the facts and circumstances of this case the proviso to section 5(2)(a)(ii) of the Orissa Sales Tax Act will not operate unless the purchasing dealer gives a declaration as contemplated under rule 27(2) of the Orissa Sales Tax Rules, 1947."

2. The facts which are unchallenged are these. Messrs Tullock & Co., of Barbil are a firm of registered dealers selling chromium ore in Orissa. Messrs S. Lal & Co., are also another firm of registered dealers in Orissa holding registration certificate No. 1335-BA. In their certificate it was specified that "minerals" were one of the goods which the said firm was entitled to buy in Orissa, free of sales tax, for the purpose of resale in Orissa (see Form III). It is admitted that in the certificate no maximum limit was mentioned for the purchase of minerals by this firm. For the period in question Messrs S. Lal & Co. purchased chromium ore from Messrs Tullock & Co., without paying any sales tax on it, in view of the exemption provided in section 5(2)(a)(ii) of the Act. It was further admitted that the chromium ore so purchased was not resold in Orissa, but was sold in Calcutta by Messrs S. Lal & Co. Thereupon, the Sales Tax Officer assessed Messrs S. Lal & Co., to sales tax in respect of those purchases relying on the aforesaid proviso to sub-clause (ii) of clause (a) of sub-section (2) of section 5. On second appeal, the learned Member, Sales Tax Tribunal, gave an ingenious construction to the provisions of section 5(2)(a)(ii) and held that where the purchases were made by Messrs S. Lal & Co., from Messrs Tullock & Co. for the purpose of resale outside Orissa, the said proviso to sub-clause (ii) of clause (a) of sub-section (2) of section 5 was not attracted even though such purchases were made tax-free.

3. To appreciate the reasonings of the learned Member, Sales Tax Tribunal, it is necessary to refer to the relevant provisions of the Orissa Sales Tax Act, and the rules made thereunder. Sub-section (2) of section 5 of the Act (omitting immaterial portions) is as follows :-

"5 (2). In this Act the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting thereform,

(a) his turnover during that period on

(i) ................................................................

(ii) sales to a registered dealer of goods specified in the purchasing dealer's certificate of registration as being intended for resale by him in Orissa or for use by him in the execution of any contract in Orissa, and on sales to a registered dealer of containers, or other materials for the packing of such goods :

Provided that when such goods are used by the registered dealer for purposes other than those specified in his certificate of registration, the price of goods so utilised shall be included in his taxable turnover.

(iii) ............................................................"

Sub-clauses (i) and (iii) are not material for our purpose. If a natural meaning is given to the words used in sub-clause (ii) the obvious conclusion is that if a registered dealer in Orissa sells goods to another registered dealer in Orissa and in the certificate of registration of the purchasing dealer it is specified that the said goods are intended for resale by him in Orissa, the selling dealer need not include such transactions in his taxable turnover. But the proviso to sub-clause (ii) says that if the purchasing dealer uses such goods "for purposes other than those specified in the certificate of registration" the price of goods so used shall be included in his taxable turnover. This proviso was construed in two decisions of this Court reported in Ahmed Mohinuddin v. Sales Tax Officer ([1956] 7 S.T.C. 645) and Shew Bhagwan Shewratna v. Sales Tax Officer ([1956] 7 S.T.C. 645