(1) Notwithstanding anything contained in any other provision of this Act, every registered dealer (the purchaser) who purchases such goods as may be notified by the State Government for sale or consumption from another registered dealer, shall deduct input tax from the amount payable by him to the selling registered dealer (the seller) for such purchase.

(2) On deduction of the amount under sub-section (1), the purchaser shall issue a certificate of deduction of tax to the seller in such form and manner as may be prescribed.

(3) The certificate of deduction of tax shall constitute a good and sufficient discharge of the liability of the seller to pay tax in respect of such transaction and the amount so deducted shall be adjusted by him in such manner as may be prescribed, and this certificate shall not be used for discharge of the liability of any other transaction.

(4) No input tax rebate shall be claimed or be allowed in respect of the goods notified under sub-section (1). (5) In the event of disposal of,-

(a) (i) goods purchased; or

(ii) the goods specified in Schedule II, manufactured out of the goods purchased,

otherwise than by way of sale within the State of Madhya Pradesh or in the course of inter-state trade or commerce or in the course of export out of the territory of India; or

(b) the goods specified in Schedule I, manufactured out of the goods purchased, otherwise than by way of sale in the course of export out of the territory of India,

the purchaser shall deposit the amount at the rate of 4 percent of the purchase price, net of input tax, of the goods purchased.

(6) The provisions of Sections 18, 20, 21, 24, 25 and 39 shall mutatis mutandis apply to the amount payable under sub-section (5).

(7) The purchaser shall retain as refund the amount deducted under sub-section (1) which is equal to the amount of input tax rebate notionally admissible under section 14 on such purchases.