R.N. Misra, J.
1. This is a reference made under Section 24(2) of the Orissa Sales Tax Act by the Member, Sales Tax Tribunal, stating a case and referring the following question for opinion of the Court:
Whether, on the facts and in the circumstances of the case, the Sales Tax Officer was justified in applying the proviso to Section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act and demanding the tax payable on the price of the goods so utilised from the assessee?
2. The assessee is a registered dealer under the Orissa Sales Tax Act and carries on business in paper and exercise books. During the period 1970-71, which is relevant for the present purpose, the assessee was working as authorised agent of Titaghur Paper Mills Limited for storage and sale of paper. The Sales Tax Officer, while examining the assessee's accounts, found that the assessee had purchased paper worth Rs. 36,99.2.40 from its principal free of tax by furnishing declarations. The assessee, however, did not sell the paper paper but converted the same into exercise books and sold them as such. The Sales Tax Officer was of the opinion that the assessee had contravened the declarations and as such the purchase turnover was added for determining the taxable turnover in the hands of the assessee. The Assistant Commissioner affirmed the demand.
3. Before the Tribunal, in second appeal, the assessee contended that there was no contravention, and sale of exercise books made out of the paper purchased on the basis of declarations did not invite the liability under the proviso. Alternately, it was contended that tax should have been demanded at the concessional rate of two per cent. The Tribunal relied on the cases of North Bengal Stores Ltd. v. Member, Board of Revenue, Bengal  1 S.T.C. 157, and Commissioner of Sales Tax, U.P., Lucknow v. Harbilas Rai and Sons  21 S.T.C. 17 (S.C.) and held that the contravention of the declaration had been established once paper purchased on the basis of declaration was found to have been converted into exercise books for sale. The Tribunal also negatived the claim of the benefit of concessional rate and upheld the demand.
4. The assessee's application for stating a case having been rejected, this Court was moved under Section 24(2) of the Act and in terms of the direction given on 22nd August, 1977, this reference has been made. Before us, the counsel for the assessee has not argued for the benefit of the concessional rate. The only question for consideration, therefore, is whether by the process of converting the paper into exercise books, the declaration has been violated and liability under the proviso was attracted.
5. The counsel for the assessee strongly relies on a Bench decision of this Court in the case of Radhika v. State of Orissa  39 S.T.C. 93. There, the question for consideration was whether mill-made cloth when converted into bed sheets, towels or napkins ceased to be mill-made cloth. Mill-made cloth was exempt from taxation. The examination in that case, therefore, was from the point of view of whether bed sheets, towels and napkins continued to be of the specie of mill-made cloth or became different commodities by the process of being cut and stitched. This Court held that the conversion did not bring about a change in the specie. The ratio of that decision, therefore, is of no assistance.
6. The other case to which reference has been made during the hearing is of the Allahabad High Court in Laxmi Paper Mart v. State of Uttar Pradesh  35 S.T.C. 164. The question for consideration of the court was the validity of sales tax imposed on goods being brought from outside the State. The court came to a definite conclusion while dealing with that question that exercise books were goods which were commercially different from paper and known in the market as an article different from paper. The conclusion of the Allahabad High Court, therefore, runs against the petitioner's stand.
7. A Bench of this Court in the case of State of Orissa v. Bondia Art Press S.J.C. No. 152 of 1973 decided on 29th October, 1975 (Orissa High Court) clearly held:
The view expressed by the Tribunal that in no case manufacture of letter pads and bill books would constitute contravention is certainly erroneous. The assessee purchased paper on the basis of his certificate of registration and did not pay sales tax because it gave a declaration that the paper w6uld be resold as such within the State of Orissa. It has been found that instead of reselling paper qua paper, the assessee converted the same into letter pads and bill books. There is little scope to contend that bill books and letter pads would still continue to be paper as such. Paper as such is available to be used for several purposes while letter pads and bill books can be used only for certain specified purposes. In the commercial world, letter pads and bill books are not treated to be paper as such. Paper undergoes a process of change to become writing paper or a bill book. After paper is converted into such material, it ceases to be paper as such and in place of paper new commodities intended for specific use appear. The Tribunal was clearly wrong in holding that manufacture by the assessee of paper into letter pads and bill books did not constitute contravention of the declaration so as to attract the proviso.
8. This is a clear authority against the petitioner's stand.
Reliance has also been placed by the assessee's counsel on a Bench decision of the Patna High Court in the case of Minerva Printing Works v. State of Bihar  32 S.T.C. 258, where the question for consideration was whether blank registers, exercise books, letter pads, labels, loose printed forms, envelopes, cards, flat files, etc., were paper and as such exempt from special sales tax. The court justifiably relied . upon item No. 2 in column (2) of the relevant schedule to take note of the fact that all these were catalogued as a class. The decision like the case already referred to dealing with mill-made cloth was looking at the matter from a different angle. At any rate, in the face of direct Bench decision of our own Court, we cannot take a different view.
9. The proviso to Section 5(2)(A)(a)(ii) runs thus:
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.
10. For working out the scheme envisaged in the proviso, Rule 27 of the Orissa Sales Tax Rules has been framed and the rule contemplates a declaration which the assessee had admittedly furnished. When the proviso and the rule are read together, contravention of the declaration would invite the liability contemplated by the proviso. In this view of the matter, the reference has to be answered by holding:
11. On the facts and in the circumstances of the case, the Sales Tax Officer was justified in applying the proviso to Section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act and demanding tax on the sale price.
We make no order as to costs.
P.K. Mohanti, J.